'Money laundering is one of the major factors that contributed to the rise in the country’s trade deficit'
Money laundering and an appreciation in the value of the Taka were big factors in the near doubling of Bangladesh’s trade deficit in the past financial year to $18.25 billion, a leading policy analyst has said.
According to the latest data from the central bank’s Balance of Payments (BoP), the deficit was only $9.47billion for the July to June period of the 2016-17 fiscal year - half the figure at the end of fiscal year 2018.
“The present situation of balance of payments is not good or sustainable,” Policy Research Institute (PRI) Executive Director Ahsan H Mansur told the Dhaka Tribune.
“Money laundering is one of the major factors that contributed to the rise in the country’s trade deficit. Money might have been laundered through under and over invoicing in imports and exports.
“To combat money laundering, the government has improved the country’s overall investment situation as private sector investment is still slow”.
The economist said the scale of money siphoning would be lesser if there was a political stability in the country after the next general election.
“Both the ruling and opposition parties might involve in money laundering in case political calmness does not prevail,” he said.
Ahsan H Mansur said the trade deficit had also worsened due to the appreciation of the Bangladeshi Taka against the currencies of competitor countries. “(It) is another reason which encourages imports and discourages exports,” he said.
The central bank said the trade deficit was the result of the slower growth of exports as compared to the growth of imports during the period under review.
The current account deficit also hit a record high in FY18 - up to $9.78 billion from only $1.33billon a year before.
According to the data, imports increased by 25.23% % to $54.46billion in FY18, as compared to $43.49 billion in the July-June period of FY2016-17.
Meanwhile, Bangladesh earned around $36.66 billion from exports during the same period of FY2017-18, as compared to $34.65 billion in the previous year.
In line with the shortage in current account balance and trade deficit, the Foreign Direct Investment (FDI) inflow into Bangladesh for the July-June period of FY2017-18 dropped by 7.90%.
The country received FDI amounting to $2.79 billion in FY18, compared to $3.03 billion a year ago.
A Bangladesh Bank official told the Dhaka Tribune that the deficit had grown due to the import of capital machinery and construction materials.
“(These) increased sharply as the Bangladesh government is implementing a good number of big infrastructure projects such as Padma bridge, Dhaka Mass Rapid Transit Development Project, Rooppur Nuclear Power Plant and Matarbari Power Plant,” he said.
“In addition, the import of food items, capital machinery and raw materials have also risen in recent period causing further dent on the overall country’s import payment.”