Trade deficit of Bangladesh widened by nearly 28 per cent in the just-concluded fiscal year for higher import-payment pressure on the economy amid lower receipts from external trade, officials said.
The trade deficit with the rest of the world crossed US$22.50-billion level to $22.80 billion during the July-June period of FY 2020-21, from $17.86 billion a year before, according to the central bank's latest statistics, released Tuesday.
The Bangladesh Bank (BB) data showed that import expenses jumped by nearly 20 per cent while export earnings recorded over 15 per cent growth in FY '21.
The overall imports cost $60.68 billion in July-June period of FY '21 against $50.69 billion in the same period a year earlier.
"The import-payment obligations increased significantly in the outgoing fiscal year because of lower impact on the Covid-19 pandemic on such foreign trade compared to the previous year," a BB senior official told the FE while explaining the latest situation on import payments.
But the import payments did not increase significantly in FY'21 compared with the pre-Covid fiscal year (FY'19), according to the central banker.
In FY'19, Bangladesh paid $55.44 billion to settle the overall import- payment obligations.
On the other hand, export earnings stood at $37.88 billion in FY '21 against $32.83 billion in the previous fiscal.
Talking to the FE, Khondaker Golam Moazzem, research director of the Centre for Policy Dialogue (CPD), said the overall trade deficit might widen further by the end of this fiscal year.
"The country's overall export earnings will be enhanced further in FY'22 than in the outgoing fiscal year for the opening up of our major markets overseas," Dr Moazzem explained.
Upward trend in food along with fuel-oil prices on the global market may push up the overall import-payment obligations in FY'22, he said.
He, however, said Bangladesh's current-account deficit may improve further by the end of FY'22 while the surplus in overall balance of payments (BoP) is expected to fall slightly.
Meanwhile, the country's current-account deficit improved slightly in FY'21 following higher growth inward remittances despite the ongoing Covid-19 pandemic that left many furloughed on the labour market.
The current-account deficit came down to $3.81 billion in the outgoing fiscal year from $4.72 billion in the previous fiscal. It was $4.72 billion in FY'20.
The flow of inward remittances grew by 36.11 per cent to $24.78 billion in FY'21 from $18.20 billion a year ago despite the ongoing global pandemic.
"We expect that the amount of current-account deficit would be reduced further by the end of the current fiscal year if the higher growth in inward remittances continues," the central banker predicts.
However, the financial account's surplus grew by more than 67 per cent to $13.08 billion during the July-June period of FY'21 from $7.81 billion in the same period of FY'20.
"Higher inflow of net foreign direct investment (FDI) along with net other investments has helped achieve higher growth of the financial- account surplus," another BB official noted.
The amount of net FDI rose by 39.34 per cent to $1.77 billion in FY'21 from $1.27 billion in the previous fiscal year.
As a result, overall balance of payments (BoP) rose to $9.27 billion in FY'21 from $3.17 billion in the previous fiscal, the BB data showed.