HOW poor our export basket is and at which speed the export volumes are shrinking against skyrocketing imports can be understood by the Central Bank’s latest data that critically stated that there was a 245 percent trade deficit in July-August compared to corresponding months of last fiscal. The higher growth of imports from USD 1.8 billion to USD 5.25 billion explores our growing dependence on imports as well as a dwindling of local industries and devaluation of the currency. The widening trade deficit indicates the condition of macroeconomic variables including industrial growth, FDI, business environment, and much more though bulk rice imports in this instance contributes to much of the higher trade deficit.
Bangladesh Bank data, as per a daily, narrated that import payments grew by 34 percent in the first two months of the current fiscal year while export earnings increased by only 14.57 percent in the period. It is claimed that the trade deficit increased as import payments rose significantly because of the surge in rice imports, increases in the prices of crude oil on the international market and substantial depreciation of the Taka against all major currencies. Rice imports both by the public and private sectors increased significantly following huge crop losses, mainly Boro paddy, in the flash floods in the country’s north-eastern haor areas and depleting public stocks as well as rising prices of the staple in the domestic market.
The trend indicates the trade gap would widen in the coming months as the country’s rice imports will continue to rise to meet the domestic demand and restrain the soaring price hike of the staple. The government may import 12 lakh tonnes of rice in the current fiscal year while private sector importers will also import a sizeable quantity of rice. Price of crude oil in the global market is also on the gradual rise. The huge trade deficit is not a good sign for the country as it will put an adverse impact on the macroeconomic situation. The country’s overall balance, however, posted a deficit of $206 million in July-August against a surplus amount of $1.18 billion during the same month of FY17.
The government should restrain imports of unnecessary and luxury goods and take initiative to increase export earnings through diversification of export items to reduce the trade deficit. With an ever widening BoP, the national economy as a whole will tend to decline a faster rate which is not a good sign by any standard. The economic policy players should handle the situation most carefully.
