External Sector: Recent Trends and Challenges

Bangladesh EconomyNGO News Report :: The Unnayan Onneshan (UO), an independent multidisciplinary think-tank, in its monthly publication of the ‘Bangladesh Economic Update’ October 2015 reveals imbalance in the current account of FY 2014-15 compared to that of FY 2013-14 is likely to exert pressure on country’s balance of payments.

The current account balance stood at USD 1406 million in FY 2013-14, whereas the balance became negative and stood at USD – 1645 million in FY 2014-15. The deficit in trade balance increased significantly and stood at USD 9917 million in FY 2014-15, whereas the deficit was USD 6794 million in FY 2013-14.

In line with recent decline in total import, import of capital machineries is also on the decline implying the lack of entrepreneurship and productive capacity expansion, which together with current unemployment of large productive capacities in manufacturing sector may cause the rate of growth in Gross Domestic Product (GDP) not to reach the target.

Export earnings declined by 13.91 percent in September 2015 compared to the month of August 2015 and stood at USD 2.37 billion. In addition, export earnings fell by 6.98 percent in September 2015 compared to that in September 2014. However, latest statistics suggest exports fell short of target by 3.73 percent during July-October of 2015-16.

Total import payments during the period of July-August 2015 decreased by 2.98 percent and stood at USD 6.56 billion compared to USD 6.76 billion during the corresponding period of 2014. The import of capital machineries declined by 30.85 percent during the period of July-August 2015 and stood at USD 416.3 million compared to USD 602 million in July-August 2014.

Noting large imbalance in service in the balance of trade, the UO finds a gap of USD 4099 million in FY 2013-14 and USD 4628 million in FY 2014-15. In FY 2013-14 and FY 2014-15, the amount in credit in service was USD 3115 million and USD 3017 million respectively, whereas the amount in debit was USD 7214 million and 7645 million respectively.

Referring to declining rate of growth in inflows of remittance, the think tank shows that the inflow of remittance declined by 3.08 percent and amounted to USD 2584.58 million during the period of July-August of FY 2015-16 compared to USD 2666.84 million during the corresponding period of FY 2014-15.

Referring to the decline in disbursement of foreign aid, the research organization demonstrates that total foreign aid disbursements during the period of July- September of 2015-16 decreased by USD 0.11 billion or 17.66 percent and stood at USD 0.50 billion compared to USD 0.61 billion during July-September of FY 2014-15. Net receipts of foreign aid were also lower and stood at USD 0.26 billion in July-September of FY 2015-16 compared to USD 0.29 billion in the corresponding period of FY 2014-15.

As regards unsatisfactory inflow of FDI, the think tank shows that inflow of FDI decreased to USD 1480.34 million in FY 2013-14 from USD 1730.63 million in FY 2012-13, although FDI inflow reached USD 1833.87 million in FY 2014-15. Such inadequate inflow of FDI into Bangladesh in comparison with other countries of the same economic characteristics can be largely attributed to lack of infrastructural facilities and business confidence in the country, adds the UO.

Calling for a thorough reexamination of the current trade and industrial policies to address the structural bottlenecks, the UO urges for the adoption of new strategies aimed at expanding country’s productive capacities that enhance utilization of productive resources through efficient entrepreneurial capabilities and increased production linkages.

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