Economists see little positive impact as the gap narrows on lower import growth
The country’s trade deficit hit its four-year low at $6.80 billion in the financial year 2013-2014 due to a lower-than-expected import growth in the period.
The gap between export earnings and import payments was $7 billion in FY13, $9.32 billion in the FY12 and $7.74 billion in the FY11. Economists and experts said that the narrowed trade gap would not put positive impact much on the country’s macro-economic situation as the gap had not declined due to an export growth.
Political violence in the last financial year put an adverse impact on the country’s import and it contributed to narrowing of the trade gap, they said.
A BB official told New Age on Sunday that sluggish business activities amid political uncertainty was the main reason for the narrowed trade gap in the last financial year.
The investors and business community are yet to regain their confidence to expand their business resulting that the import financing of the banks maintained a downward trend in accordance with the industrial sector’s requirement in recent months, the BB official said.
The businessmen are still following a cautious policy to importing the industrial raw materials and capital machinery as they think that the political unrest will return soon, he said.
The import registered an 8.92-per cent growth in the FY14 against a negative growth of 0.80 per cent in the FY13.
The import payment stood at $36.57 billion in the FY14 whereas it was $33.57 billion in the FY13.
The country’s export earnings increased by 12.04 per cent in the FY14 compared with that of 10.74 per cent growth in the FY13.
The export earnings stood at $29.76 billion in the FY14 while it was $26.56 billion in the FY13.
The export growth increased in the FY14 due mainly to an increase in the readymade garment exports.
The export figure in the RMG sector stood at $24.49 billion in the last financial year from $21.51 billion in the FY13.
The BB data showed that the trade deficit in the service sector, however, increased by 32.47 per cent to $4.18 billion in the FY14 from $3.16 billion in the FY13.
In the FY14, the country received $3.06 billion from the service sector but it paid foreign sources $7.25 billion for different services in the FY13.
Transportation, travel, communication services, insurance and financial services, information and communications technology services, entertainment, culture and their related services are considered as the service sector.
Former interim government adviser AB Mirza Azizul Islam told New Age that the trade deficit in the FY14 had declined due to lower import and such type of affair was not good enough for a developing country like Bangladesh.
‘A lower trade deficit brings positive impact for a country if it (country) achieves the narrowed gap by registering a higher export growth. But, the trade deficit declined in Bangladesh due to lower import of capital machinery and industrial raw materials,’ he said.
The country has been experiencing a sluggish investment trend in recent periods due to political unrest and uncertainty that have narrowed the trade deficit, he said.
Bangladesh Institute of Development Studies research director Zaid Bakht told New Age that the narrowed trade gap had brought both positive and negative impact on the macro-economic situation.
‘The export growth increased in the FY14 despite different crises. But, the import declined in the last financial year that compelled the country to see idle greenbacks in recent months,’ he said.
For this reason, the exchange rate of the dollar against the local currency taka declined in the period that put negative impact on the export sector and on the inflow of remittance, he said.
The central bank has already purchased significant amount of dollar from the local banks to keep stable the rate of the greenback against the taka.
He feared that the inflation might fuel up due to dollar purchasing by the central bank.
So, the narrowed trade gap has not created a favourable situation for the country’s macroeconomic indicators, he added.
-With New Age input
