The country’s trade deficit increased by 1.5 per cent or $145 million in the July-January period of the current fiscal year 2020-21 with import payments rising for the third consecutive month in January.
According to the Bangladesh Bank data released on Tuesday, the trade deficit rose to $9.79 billion in July-January of FY21 from $9.64 billion in the same period of FY20.
As the COVID-19 outbreak disrupted trade and economic activities, the country’s trade deficit was on the decline mainly due to a decline in import payments.
However, the country’s import situation has been improving gradually since November 2020.
Import payments in January were much higher than the monthly average payments in the first six months of the current fiscal year.
Monthly average import payments were $4.2 billion in the first half of FY21 but the country’s import payments for January was $6.69 billion.
Payments against imports increased to $4.99 billion in December 2020 from $4.46 billion in the previous month.
In October 2020, the country’s import payments dropped to $4.05 billion after increasing to $4.3 billion in September from $3.52 billion in the previous month.
In July, the country’s import payments were $3.91 billion.
As an import dependent country, the import situation is considered as a major tool to assess the country’s economy, said BB officials.
The improvement in imports indicates that the economic activity in the country has been improving gradually, they said.
With a significant decline in coronavirus infection rate along with the beginning of vaccination in the country, businesses have started rebuilding their stock of raw materials and other industrial inputs that has resulted in an increase in import payments.
In the global context, the investment sentiment has already turned around with the Dow Jones Industrial Average, a stock market index that measures the stock performance of 30 large companies listed on stock exchanges in the United States, is on the rise.
The index exceeded 30,000 points level in November to stand at 31,802 points on Monday after dropping below 20,000 points mark in March 2020.
With improved investment confidence in the global arena, the confidence of the country’s businesses is also improving.
Bankers and businesses said that the commencement of COVID-19 vaccination in the country from January 27 would ramp up investment confidence as well.
The BB data also showed that the country’s export earnings dropped by 1.02 per cent or $228 million to $22.13 billion in July-January of FY21 against the $22.36 billion earnings in the same period of the previous fiscal.
The drop in export earnings was higher than the drop in import payments in the first seven months of the current fiscal year that resulted in the increase in trade deficit.
The current account balance, that was $4.1 billion surplus in the July-December period, dropped to $2.24 billion surplus in the July-January period of FY21 due mainly to the higher import payments in January.
In July-January of FY20, the country’s trade deficit was $1.81 billion.
The country’s gross and net foreign direct investments dropped by 7.31 per cent and 27.6 per cent respectively in the period under consideration.
The BB data also showed that the country attained $530 million in net foreign direct investment in July-January of FY21 against $732 million in the same period of the previous fiscal year.
Net portfolio investment or investment on the country’s capital market posted a $180 million deficit in July-January from $37 million surplus in the same period in the previous fiscal year.