The New Nation - Internet Edition

Pulack Ghatack

Pressure on the overall economy is mounting as the country's import is increasing inconsistently with its export growth. Bangladesh's overall imports exceeded the $20 billion mark in the just concluding financial year, against $14 billon export leaving deficit of as much as $6 billion.

The trade deficit is widening alarmingly and putting serious pressure on the balance of payment, which is still surplus due mainly to a robust growth in inward remittances from the expatriates, officials of the Bangladesh Bank informed.

The country's foreign exchange reserves will need to increase by 20 per cent to $6 billion to reflect the rising cost of imports, they said.

Central bank officials estimated that total imports might reach $20.28 billion, an increase from the $15.97 billion of the previous year.

The overall import grew by 26.99 per cent during July-June period of fiscal 2007-08 over the same period of the previous fiscal while export earnings marked nearly 15 per cent growth over the same period a year ago.

The trade gape is likely to be enlarged further in coming days, as soaring global food and fuel prices have been swelling the country's import costs.

The high trade imbalance is also putting pressure on the country's current account balance. Current account balance, which had around US$1 billion surplus in the last fiscal year, is likely to run to deficit this year.

The Government recently sought financial support of IMF to cope with the current account deficit, sources concerned said.

"The pressure on the balance of payments has intensified significantly and our current account balance is now negative for the first time in several years," Finance Adviser Mirza Azizul Islam said in a letter to the IMF recently.

According to estimation of the central bank at least $6 billion will need as reserve to make the country able to pay ever-rising import bills for a minimum three months without any hassle.

The central bank raised the reserves target to $5.0 billion in August 2007 from $3.0 billion.

After a routine payment of $591 million to the Asian Clearing Union (ACU) against imports for May-June period, the country's foreign exchange reserve stood at $5.60 billion in the first week of the new financial year. The figure was $6.20 billion at the end of June.

However, despite larger deficit in trade balance the current account balance recorded a surplus of $390 million during July-March, 2007-08 against the surplus of $605 million during July-March, 2006-07 due mainly to larger current transfers of $6.233 billion," the central bank says in its Major Economic Indicators: Monthly Update for May, 2008.

The overall balance of payments recorded a surplus of $215 million at the end of March last as against a surplus of $809 million during the same period of the previous fiscal due to surplus in capital account and current account amounting to $390 million and $358 million respectively, according to the Update.

The country's overall balance of payments is maintaining a surplus trend due to higher inflow remittances and foreign aid, the experienced sources said.

Expatriate workers sent home a record $7.94 billion in the fiscal year nearly 33 per cent higher than in 2006-07.

On the other hand, the net receipts of foreign aid recorded higher at $877.74 million during the period against $537.52 million of the corresponding period of previous fiscal, thanks to huge donors' assistance for the floods and cyclone victims, officials confirmed.