Courtesy Financial Express 8/2/11
Decline in remittance flow, higher import payments blamed
Decline in remittance flow, higher import payments blamed
The country's overall balance of payments (BoP) has entered the negative territory after a long time due to widening trade gap, lower growth of inward remittance and deficit balance in the financial account, officials said.
"Due to deficit of US$ 873 million in financial account the overall balance showed a deficit of $584 million during July-November, 2010 against the surplus of $2156 million during July-November, 2009," the central bank said in its Major Economic Indicators: Monthly Update-January, 2011.
The current account balance also decreased by over 66 per cent to US$563 million during July-November period of fiscal 2010-11 (FY11) from $1.674 billion of the same period of previous fiscal.
"The pressure on external sector may continue in the near future following widening trade gap and poor performance of inward remittances," Director General of the Bangladesh Institute of Development Studies (BIDS) Mustafa K Mujeri told the FE Monday.
Mr. Mujeri, also former chief economist of the Bangladesh Bank (BB), predicted that the country's external sector might come under more pressure in the coming months due mainly to nominal growth of remittances.
The country's overall trade balance, on the merchandise account, recorded a deficit of $2.752 billion during the period under review as compared to that of $1.976 billion of the corresponding period of the previous fiscal.
During the period, export earnings stood at $8.299 billion against the import payments of $11.051 billion, the BB data showed.
"We hope that the overall balance of payments will turn positive by the end of this fiscal," an executive of the central bank told the FE Monday.
He also said the pressures of import payments particularly for food grains will ease in the coming months after Boro harvest.
Meanwhile, the country received $4.581 billion as remittances during the period, registering a 1.67 per cent negative growth over the corresponding period in the previous fiscal.
"The inward remittance growth turned positive in December last after months of stagnation," a BB senior official said, adding that the positive remittance growth also continued in the month of January 2011.
The country received $6.510 billion during the July-January period of fiscal 2010-11, registering nominal a 0.386 per cent growth over the same period of the previous fiscal, according to the central bank statistics.
However, the flow of net foreign direct investment (FDI) rose to $320 million during the period against $285 million of the corresponding period of the previous fiscal, the central bank officials said.
The portfolio investment witnessed a significant rise to $56 million in the period from $34 million deficit of the same period of the last fiscal.
The net receipts of foreign aid declined to $437.69 million during July-December period of this fiscal against $1.1426 billion of the corresponding period of previous fiscal, the BB officials confirmed.
However, the central bank officials said they are not worried about the negative position of the BoP as the country has 'a satisfactory level of foreign exchange reserve'.
But the BB officials admitted that pressure on foreign exchange reserve has gradually increased due mainly to higher import payments, particularly for fuel oils, food grains and power plant equipment.
The foreign exchange currency reserve stood at $10.46 billion Monday after selling of $84 million to the commercial banks on the same day.
"We expect the country's overall balance of payments to improve further as the country is set to receive more funds from multilateral development partners by the end of this fiscal," another BB official said.
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