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Saturday, May 12, 2018

Current account deficit hits record high

AKM Zamir Uddin


Bangladesh's current account deficit recorded an all-time high of $7.08 billion in the first nine months of the fiscal year as the country's capacity to export is failing to keep up with the appetite for imports.

At this point last fiscal year, the deficit was $1.37 billion. The previous highest deficit was registered in 2015-16 when it stood at $4.26 billion.

Higher import payments and a moderate growth of remittance inflow and export earnings are mainly responsible for the widening deficit.

In July-March, imports surged 24.50 percent year-on-year whereas exports grew 6.98 percent. The record current account deficit has already weakened the local currency against the US dollar.

On Wednesday, the interbank exchange rate was Tk 83.10 per USD, up from Tk 80.50 a year earlier, according to central bank data. The dollar will appreciate further if the deficit is not halted in the months to come, said a central banker.

“The production cost will increase significantly due to the appreciating trend of the greenback as the country has to import a large quantity of industrial raw materials to produce essential goods,” he said.

The higher cost of production will also fuel inflation, which, in turn, will have an adverse impact on the spending capacity of consumers, the central banker said. A good flow of remittance can stem the widening deficit.

In July-March of 2017-18, remittance posted 16.42 percent growth from a year earlier, but it is not sufficient considering the large import payments, according to the central banker. 

The trade deficit widened by 87.55 percent year-on-year to $13.20 billion in the first nine months of the fiscal year, according to data from the BB. The government should take immediate measures to boost the export earnings in order to narrow both the trade deficit and the current account, another BB official said.
  • Courtesy: The Daily Star/ May 11, 2018

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