Import expenditure is increasing abnormally but export earring is not increasing in comparison to it. Moreover, due to Russia-Ukraine war prices of all kinds of products including energy have gone up in the world market. Besides these, as a result of down flow in remittance earning Bangladesh is facing record trade deficit. In the just-concluded fiscal year 2021-22 trade deficit exceeded $33 billion which was previously apprehended by Bangladesh Bank. It is also feared that this trend will continue in the current financial year. For this reason trade deficit target has been set $36.70 billion in monetary policy for fiscal year 2022-23.
Bangladesh Bank published the latest report on balance of payment on 1st August. During financial year 2021-22 the amount of trade deficit was $33.25 billion (more than Tk. 314,000 crore) which is the highest in the history of Bangladesh. Similarly, deficit in balance of payment also exceeded $18.5 billion which is also the ever highest the history of Bangladesh. Due to such high trade deficit the country is under huge deficit.
Statistical analysis shows that growth rate of export earnings increased by 33.45% in 2021-22 financial year. On the other hand, imports increased by 35.95%. During this period, earnings from export were 49.25 million dollars from but expenditure for import was 82.50 billion dollars. So trade deficit stands at 33.25 billion dollars.
As evinced in monetary policy, growth rate in commodity export will be 32% in fiscal year 2021-22 but cost of import will increase by 35%. Expatriate income i.e. remittance will decrease by 14% percent. In total, balance of payments will be 17.73 billion dollars.
Growth rate in exports of goods will come down to 13% in new financial year i.e 2022-23. Import costs will increase by 12%. Remittances will increase by 15%. Deficit in balance of payments will be 16.54 billion dollars. Along with the rise in imports trade deficit is increasing due to unusual increase in prices of all types of products including food items and energy in the world market.
Trade deficit in service sector also increased during financial year 2021-22. In that period Bangladesh earned 9.98 billion dollars from this sector. On the other hand, the country has spent 13.85 billion dollars resulting in a deficit of $387 crore. Amount of deficit was $302 crore in financial year 2020-21.
In financial year 2021-22 deficit in Bangladesh has faced a huge deficit in the current account balance. In the fiscal year 2021-22, the amount of this deficit (negative) is one thousand 869 billion 70 million dollars. In the same period in the previous financial year, the deficit was only 457.8 million dollars. Overall transaction deficit stood at 5.38 billion dollars whereas there was a surplus of $9.27 billion in earlier financial year.
According to economists, Bangladesh has a large deficit in the balance of trade and transactions due to an abnormal increase in imports. They have expressed their view that at this moment the biggest challenge of economy of Bangladesh is to establish hard control over imports anyhow. Otherwise, the whole economy will be in crisis.
In this context, the executive director of a private research organization Policy Research Institute (PRI) Ahsan H. Mansoor said that the country's economy is under a lot of pressure due to unrestrained imports. Balance of payment exceeded $18 billion, dollar market has become volatile. Now, except reducing imports by any means there is no other alternative way open to tackle the problem.
Due to increase in imports, Bangladesh's foreign exchange reserve has fallen below 40 billion dollars. On 1st August amount of reserve was 39.80 billion dollars. Considering import cost 650 crore dollars per month it is possible to meet import expenses of 6 months with this reserve.
Amid such frustrating situation foreign direct investment has increased in the country. Against 338.7 million dollars during financial year 2020-21 Bangladesh received FDI amounting to 470 million dollars in financial year 2021-22.
Main sources of earning foreign currency are export and remittance sent by Bangladeshi expatriates. At the end of July, 2022 amount of remittance received was $ 209 crore which is 11% higher than $187 crore received in July, 2021 (Bangladesh Bank report, 4th August, 2022). According to report published by Export Promotion Bureau (EPB) on 4th August, against 388 crore 78 lakh 60 thousand dollars in July 2021 Bangladesh earned 391 crore 9 lakh 20 thousand dollars from export in July, 2022 which is 13.39% higher than target. It is expected that if this upward trend continues situation will certainly improve.
The writer is a former Commissioner of Taxes
Source: Sun Editorial