The Financial Express

Import restrictions come to rescue

Current-account deficit narrows

| Updated: February 02, 2023 17:59:43

Current-account deficit narrows

Crunch-induced import restrictions come to the rescue as Bangladesh's current-account deficit (CAD) decreased over 36 per cent in six months to December from corresponding period a year before.

Bangladesh Bank's latest data show the improvement in the country's monetary position, attributing the turnaround to the central bank's measures to restrict imports.

The account deficit at the end of December was US$5.27 billion. It was $8.3 billion in December 2021.

The trade balance also narrowed to $12.3 billion during the period under review. It was $15.7 billion during the July-December period of 2021-2022, according to the official data.

During the period, overall imports fell by more than 2.0 per cent to $ 38.13 billion, while export grew over 11 per cent, with garment shipments accounting for 15.56-percent rise.

Economists find the central bank's belt-tightening measures containing imports as main reason behind the narrowing down of the CAD in the balance of payments (BoP) in external dealings.

"It is only due to import control by the central bank," says Dr Ahsan H. Mansur, executive director at the Policy Research Institute of Bangladesh or PRI.

He dubbed this type of import control as tantamount to forcible restriction on imports.

Dr Mansur mentioned that financial account remained negative as many foreign institutions are not providing trade-credit facility.

"We have to overcome the situation (financial account) otherwise the balance-of-payments situation will not improve," concludes Dr Mansur, who had once served the IMF.

Dr M. Masrur Reaz, chairman of the Policy Exchange of Bangladesh, rates this as some early relief for the economy as many forecast that CAD will worsen in the coming months of the current fiscal year.

He mentioned that capital-machinery import fell by 65 per cent and intermediate goods by 34 per cent to contribute to narrowing the gap.

He also mentioned import became "unaffordable" for many importers following forex-market volatility stemming from spikes in the dollar price.

"Consumption also squeezed during the period under review," Dr Masrur went on to enumerate the outcomes of the austerity stance.

In the meantime, the financial account of the BoP remained a matter of woe as it continued to worsen. During the six months of FY 2022, the financial account was $6.89 billion but at the end of December of the current fiscal year, it stood at $1.098 billion (negative).

The overall balance of the BoP, however, worsened to $7.2 billion (negative) against US$1.8 billion in negative arithmetic during the same period a year earlier.

However, the capital account of the balance of payments remained marginally in the positive territory at $171 million during the July-December period.

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