Remittance slows, imports shoots up
Bangladesh Bank sees a wider deficit in the current account balance in the country's external sector due to high import pressure and a slowing remittance inflow in the current fiscal year.
The deficit in current account balance may widen to $884 million in 2011-2012 from an estimated surplus of $564 million a year ago, according to a projection in the central bank's Monetary Policy Statement.
If it happens really, the current account balance (of balance of payments) will slip into deficit from surplus after 11 years.
The current account balance was in deficit in FY2001. The following year it ran a surplus of $240 million. In 2009-10, it scored a surplus of about $4 billion.
The slowing remittance inflow is partly responsible for the feeble state of the current account balance.
In July, the first month of the current fiscal year, the remittance inflow was $1.02 billion, down 1 percent from the previous month, Bangladesh Bank said in a statement. Bangladesh received $1.03 billion in remittance in June.
In the last fiscal year, remittance grew only 6 percent, which was 13 percent in fiscal 2009-2010.
Meanwhile, the central bank has finalised the account of the last fiscal year's import, which shows 41.47 percent growth. In June, imports grew 40 percent.
In the last fiscal year, imports stood at $33.65 billion, which was $23.7 billion in 2009-10.
All types of commodities registered a rise in import but food imports saw a substantial jump. According to official statistics, rice and wheat imports rose by 133 percent, capital machinery by 40 percent, petroleum products by 39 percent and industrial raw materials by 47 percent.
Imports declined in June, compared to May. The letters of credit opening rose by 34 percent in the last fiscal year, indicating high imports in the coming months.
The high import and low remittance growth have created pressure on balance of payments, leading to depreciation of the taka.
On August 2, the taka traded against the dollar at 74.73, compared to 69.41 a year ago.
Bangladesh Bank is yet to complete the final account of BoP of the last fiscal year. However, as per its estimate in the current account balance, surplus will be $564 million, which was $3.73 billion surplus in 2009-10, meaning the surplus has shrunk by 562 percent.
The BB monetary statement also did not paint any rosy picture about the external sector. According to the monetary policy, remittance growth in fiscal 2012 is likely to remain around the same mid-single digit level as was in fiscal 2011.
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