Bangladesh's July-November trade deficit narrows but set to balloon again

20:22, January 25, 2010      

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Bangladesh's trade deficit in the first five months of the current 2009-10 fiscal year ending in June squeezed by around 25 percent compared with that a year earlier but analysts said Monday it is set to balloon again amid soaring import demand.

The Bangladesh Bank (BB) data showed Monday the country's import payment stood at 8.08 billion U.S. dollars in the first five months of 2009-10 fiscal year (July 2009-June 2010) while during the same period earnings from export reached 6.11 billion U. S. dollars.

The South Asian country's gap between export earnings and import payments during the July-November period of the last 2008- 09 fiscal year was estimated at 2.66 billion U.S. dollars.

The BB data showed that the country's imports in July-November period of 2009-10 fiscal year plunged 12.47 percent from that in the same period of 2008-09 fiscal year while during the same period exports fell 7.05 percent.

Trade analysts said the country's import payment maintained sliding trend during July-November as demands for industrial raw materials and capital machinery by the local manufacturers did not pick up fully in that period after the shocks of global recession.

They said imports of capital machinery and raw materials dropped as global recession squeezed sales of Bangladeshi goods mainly ready-made garments to the markets in Europe and particularly in the United States.

The trade deficit also maintained its sliding trend as food imports dropped amid robust domestic production, Mustafa K. Mujeri, director general of the state-run think-tank Bangladesh Institute of Development Studies, told Xinhua Monday.

He said trade deficit is expected to widen in the second half of the current fiscal year as major macro economic indicators show further boost in industrial raw materials and capital machinery import, which are good for the country to achieve its desired growth.

The BB data showed Bangladesh's overall import in December of the current 2009-10 fiscal year marked over 20 percent rise compared with that of the corresponding period of the previous fiscal year.

According to provisional statistics of the BB, settlement of letters of credit (LCs) for import in December 2009 stood at 2.07 billion U.S. dollars against 1.72 billion U.S. dollars in the same month a year ago.

The overall import in December also recorded hefty rise as local demands for agricultural inputs including fertilizer and diesel boosted, said a senior BB official, who requested to be unnamed, adding trade gap will likely continue to widen in the coming months also due to soaring import cost of essentials.

Officials, however, said strong remittances from millions of Bangladeshis working abroad helped offset the impact of the trade shortfall and keep the overall balance of payments in surplus.

They said Bangladesh's foreign exchange reserves rose to a record 10.34 billion U.S. dollars at the end of November last year which was 5.25 billion U.S. dollars at end of November, 2008 as trade gap narrowed largely in the last fiscal year.

Trade gap in the last 2008-09 fiscal year was 4.71 billion U.S. dollars against 5.33 billion U.S. dollars in the previous 2007-08 fiscal year (July 2007-June 2008).

Bangladesh's trade gap widened to a large extent in 2007-08 fiscal year because of the soaring cost of fuel and food imports following the super cyclone Sidr and two consecutive floods in the second half of 2007.

Source: Xinhua
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