Staff Reporter :
Monumental deficit in current account together with declining wage earners’ remittance and foreign aid disbursement exerts immense pressure on the Bangladesh’s balance of payment, a study reveals.
The Unnayan Onneshan (UO), an independent multidisciplinary research organizatrion, in its monthly publication of the August 2017 titled “Bangladesh Economic Update: External Resource Sector, Recent Trends and Challenges” suggested a thorough reexamination of the current trade and industrial policies to address the structural bottlenecks and creation of a stable business climate in the country.
Besides, to attract increased inflow of private investment, including foreign direct investment (FDI), the organization has urged the government to adopt new strategies, and expand the country’s productive capacities.
It will enhance utilization of available resources through efficient entrepreneurial capabilities and increase production linkages, the study said.
Referring to the declining growth rate in inflows of wage earners’ remittance, the report showed that the inflow of remittance declined by 14.48 per cent and stood at USD 12,769 million in FY 2016-17 compared to the previous fiscal year.
On monthly basis, the remittance inflow declined by 4.18 per cent in June 2017 compared to May 2017 and stood at USD 1,214.61 million, which further declined by 8.15 percent to USD 1,115.57 million in July 2017.
Decline in the inflow of remittance is likely to pose threat to the social infrastructure of rural Bangladesh since the remittance-recipient households in rural areas spend a significant portion of their income on consumption, health and education.
The Chairperson of Unnayan Onneshan, Rashed Al Mahmud Titumir, suggested that the informal system for transferring money induced by large gap in rate of US Dollars in banks and curb market, a conducive atmosphere for higher inflow of remittance has to be maintained through effective regulatory measures and diplomatic negotiations.
With increasing export concentration of readymade garments (RMG), growth in total export earnings exhibit a significant decline by 8.08 percentage points in FY 2016-17 compared to FY 2015-16.
Rate of growth in export earning stood at 9.77 per cent in FY 2015-16, whereas at the end of June 2017, export growth declined to 1.69 percent for the last fiscal year resulting in a shortfall in the year’s target (USD 37000 million) by USD 2165 million.
“Non-diversification of export markets and lack of export competitive products may pose a serious challenge to the performance of external sector,” Rashed said.
Fresh opening of import letter of credits (LCs) for industrial raw materials has, however, registered a growth of 6.11 percent during July-May of FY 2016-17 compared to the corresponding period of FY 2015-16.
“This growth in opening of LCs for industrial raw materials cannot be capitalized on until the lack of entrepreneurship and productive capacity in the economy are dealt with in order to rise to the challenges of unemployment and low private investment,” Rashed added.
The report revealed that with decline in inflow of remittance and export growth, rise in import payables along with shortfall in the primary income and income from the service sector, the current account balance exhibits a monumental deficit of USD 2,103 million during July-May of FY 2016-17 compared to a surplus of USD 3,193 million during the same period of the previous fiscal year.
Deficit in current account balance has been continuing to decline since the third month of the last fiscal year. As a consequence, the total balance of payment declined to USD 2682 million in July-May of FY 2016-17 compared to USD 4143 in the corresponding period of FY 2015-16.
Taking account of the fact, both total and net receipt of foreign aid declined in FY 2016-17, the report found that disbursement of total foreign aid decreased by 7.11 per cent and stood at USD 2,728.20 million during July-May of FY 2016-17 compared to a 7.71 per cent increase during the corresponding period of the previous fiscal year. The net receipt of foreign aid, on the other hand, also declined by 11.16 per cent and stood at USD 1,896.16 million in July-May of FY 2016-17 compared to an increase of 14.74 per cent during the corresponding period of FY 2015-16.
Monumental deficit in current account together with declining wage earners’ remittance and foreign aid disbursement exerts immense pressure on the Bangladesh’s balance of payment, a study reveals.
The Unnayan Onneshan (UO), an independent multidisciplinary research organizatrion, in its monthly publication of the August 2017 titled “Bangladesh Economic Update: External Resource Sector, Recent Trends and Challenges” suggested a thorough reexamination of the current trade and industrial policies to address the structural bottlenecks and creation of a stable business climate in the country.
Besides, to attract increased inflow of private investment, including foreign direct investment (FDI), the organization has urged the government to adopt new strategies, and expand the country’s productive capacities.
It will enhance utilization of available resources through efficient entrepreneurial capabilities and increase production linkages, the study said.
Referring to the declining growth rate in inflows of wage earners’ remittance, the report showed that the inflow of remittance declined by 14.48 per cent and stood at USD 12,769 million in FY 2016-17 compared to the previous fiscal year.
On monthly basis, the remittance inflow declined by 4.18 per cent in June 2017 compared to May 2017 and stood at USD 1,214.61 million, which further declined by 8.15 percent to USD 1,115.57 million in July 2017.
Decline in the inflow of remittance is likely to pose threat to the social infrastructure of rural Bangladesh since the remittance-recipient households in rural areas spend a significant portion of their income on consumption, health and education.
The Chairperson of Unnayan Onneshan, Rashed Al Mahmud Titumir, suggested that the informal system for transferring money induced by large gap in rate of US Dollars in banks and curb market, a conducive atmosphere for higher inflow of remittance has to be maintained through effective regulatory measures and diplomatic negotiations.
With increasing export concentration of readymade garments (RMG), growth in total export earnings exhibit a significant decline by 8.08 percentage points in FY 2016-17 compared to FY 2015-16.
Rate of growth in export earning stood at 9.77 per cent in FY 2015-16, whereas at the end of June 2017, export growth declined to 1.69 percent for the last fiscal year resulting in a shortfall in the year’s target (USD 37000 million) by USD 2165 million.
“Non-diversification of export markets and lack of export competitive products may pose a serious challenge to the performance of external sector,” Rashed said.
Fresh opening of import letter of credits (LCs) for industrial raw materials has, however, registered a growth of 6.11 percent during July-May of FY 2016-17 compared to the corresponding period of FY 2015-16.
“This growth in opening of LCs for industrial raw materials cannot be capitalized on until the lack of entrepreneurship and productive capacity in the economy are dealt with in order to rise to the challenges of unemployment and low private investment,” Rashed added.
The report revealed that with decline in inflow of remittance and export growth, rise in import payables along with shortfall in the primary income and income from the service sector, the current account balance exhibits a monumental deficit of USD 2,103 million during July-May of FY 2016-17 compared to a surplus of USD 3,193 million during the same period of the previous fiscal year.
Deficit in current account balance has been continuing to decline since the third month of the last fiscal year. As a consequence, the total balance of payment declined to USD 2682 million in July-May of FY 2016-17 compared to USD 4143 in the corresponding period of FY 2015-16.
Taking account of the fact, both total and net receipt of foreign aid declined in FY 2016-17, the report found that disbursement of total foreign aid decreased by 7.11 per cent and stood at USD 2,728.20 million during July-May of FY 2016-17 compared to a 7.71 per cent increase during the corresponding period of the previous fiscal year. The net receipt of foreign aid, on the other hand, also declined by 11.16 per cent and stood at USD 1,896.16 million in July-May of FY 2016-17 compared to an increase of 14.74 per cent during the corresponding period of FY 2015-16.
