AB Siddique :
Trade deficit is increasing every year. Import costs are increasing, export income is decreasing. In the financial year 2020-21, the trade deficit was 3,309.73 billion dollars, which increased to 4,717.92 billion dollars in the next financial year (2021-22).
And in the financial year 2022-23 it exceeds 5 billion dollars. Export income is decreasing, import expenditure is increasing.
In the first six months of the current financial year (July-December), the export earnings fell by 8.55 per cent from the target, which was 0.84 per cent higher than the target in the financial year 2022-23. While exports of agricultural products are slightly positive, exports of industrial products are collapsing.
In the first six months of the current financial year, the export of manufactured goods decreased by 8.89 per cent. Among them, the export of the main export product, the garment sector, has decreased by 7.87 per cent and the entire garment sector has decreased by 38.33 per cent. The export sector of jute and jute products has decreased by 11.36 per cent.
According to the report of Bangladesh Bank, in the first six months of the current financial year, the expenditure on the import of goods was 3897 million US dollars, which was 25226 million US dollars in the same period of the previous fiscal. During the discussion period, the growth in product import has been 54 and a half per cent.
But the rate at which the cost of importing goods has increased, the export income has not increased at that rate. From the statistics of Bangladesh Bank, it can be seen that in the first six months of the current fiscal year, the income through the export of goods was 2, 335 million US dollars, while it was 1,835 million US dollars in the same period of the previous year. During the period under discussion, the growth of product exports has been 27 and a half per cent.
Sources at Bangladesh Bank said that the current account balance has also become negative as the trade deficit has increased. Because the current account balance becomes negative if the export income decreases compared to the import. A negative current account balance means that foreign investment may decrease.
According to related sources, if a country’s trade deficit is high and the current account balance is negative, the investment of foreign investors is at risk. This creates uncertainty in getting their investment back. That is why a negative current account balance has a negative impact on foreign investment.
From the statistics of Bangladesh Bank, it can be seen that in the first six months of the current financial year, the deficit in goods trade has increased as well as the deficit in services. According to the Central Bank report, the amount of money spent abroad for various services including salaries of foreign nationals was 633.3 million US dollars, compared to 466.9 million US dollars in the same period of the previous financial year.
During the discussion period, the expenditure in the service sector increased by 35.64 per cent. But on the contrary, in the first six months of the current financial year, the income from foreign services was 4.596 billion US dollars. According to this, in the first six months of the current financial year, the deficit in the service sector has been about 38 per cent.
From the statistics of Bangladesh Bank, it can be seen that the goods trade deficit and service deficit are increasing along with the remittance flow is decreasing continuously. According to the latest statistics, the growth of remittance inflows in the first seven months of the current financial year (July-January) has been around negative 20 per cent, while the growth of remittance inflows in the same period of the previous year was around positive 20 per cent.
According to the report of Bangladesh Bank, on the one hand, the deficit in goods trade and service income is increasing, on the other hand, the inter-flow of foreign exchange i.e. remittance flow is decreasing. Its direct effect falls in foreign exchange current account balance.
From the report of Bangladesh Bank, it can be seen that in the first six months of the last financial year, the balance of the current account was a surplus of 351.50 million US dollars, in the same period of the current financial year, it has become a negative of 818.30 million US dollars. Overall, the current account balance decreased by 1,16,98,00,000 US dollars during the period under discussion.
A negative current account balance means increased pressure on foreign exchange reserves with a negative impact on foreign investment. Due to reduced foreign exchange inflows, banks are not able to raise the required foreign exchange to meet their foreign liabilities.
As a result, they are forced to reach out to the central bank. The central bank is selling dollars from reserves in order to stabilize the foreign exchange market. As a result, the pressure on foreign exchange reserves is increasing. At the same time, the value of money against the dollar is falling. On February 9 of last year, banks had to spend 84 rupees to get every dollar, at the same time this year, banks had to spend 86 rupees to buy dollars from the central bank’s reserves.
But traders have to spend more than that to get dollars to cover the cost of importing goods. Those concerned fear that if the situation does not improve, the price of the dollar will increase further. This will increase the cost of importing goods, and it will also increase inflation. And with that, the overall economy will continue to be negatively affected.
(Writer AB Siddique is a journalist)
