The country’s trade deficit fell by 15.6% year-on-year to $979 million in July of the current FY 2019-20, due mainly to a slowdown in import growth.
According to the central bank data, trade deficit eased in July as import grew by only 2.26% against the 8.11% export growth during the period.
Import payments in the month stood at $4.81billion from $4.70 billion in the same period of last fiscal year.
On the other hand, export earnings reached $3.83 billion in the first month of FY20 against $3.54 billion in the same month of last fiscal year.
Of the export earnings, readymade garments that constitute 86.5% of the country’s exports fetched $3.31 billion, a raise by 9.68% from $3.02 billion, according to the data.
The fall in trade deficit is a positive sign for the economy but the slowdown in import growth is not always a good sign, either, experts have said.
They say overall import; particularly import of capital machinery and raw materials is the fundamental basis for local industrialization, which subsequently transforms into enhanced export earnings for the economy.
The deficit narrowed due to a slowdown in import growth, says Zahid Hussain, former lead economist of World Bank, Bangladesh.
Food import in the month declined due to improved food production in recent time, he mentions, adding that import of capital machinery on the other hand declined for lack of a sound investment environment.
Import of capital machinery will increase in the coming months if good investment climate prevails, he adds.
The current account balance turned positive $240 million in July from negative $179 million in the same month of last fiscal year, says the BB data.
Besides the current account balance, the country’s overall balance also turned positive $124 million in July of the current fiscal year from negative $199 million in the same month of previous fiscal year.
According to the Bangladesh Bank data, the country received $214 million net foreign direct investment in July of the current fiscal year against $200 million in the same month last fiscal year.
However, foreign portfolio investment in the country’s capital market has declined. The net portfolio investment dropped to $7 million from $17 million.
As of July this year, foreign exchange reserves stood at $32.55 billion, up from $32.09 billion a year earlier.
In the last fiscal year, the country’s trade deficit narrowed by 14.76% year-on-year to $15.49 billion, thanks to a steady growth in export earning and a slowdown in import growth.
