With the Covid-19 pandemic fading away, the country's month-on-month trade deficit widened 35% in October owing to an increase in imports compared to exports.
Until September, the country's trade deficit was $6.73b, which increased to $9.09b at the end of October, according to the Bangladesh Bank data released on Wednesday.
Economists say imports have been very low over the past year because of Covid-19 and the inflow of remittances has declined since the beginning of the current financial year.
However, the foreign exchange reserves are still satisfactory. In this situation, even if imports increase, there is no problem. Because if imports increase, the investment will increase. Increasing investment means creating employment opportunities. The economy as a whole will gain momentum.
The trade deficit widened to $9.09b in the July-October quarter of the fiscal 2021-22, which was $3.49b in the same period of the previous fiscal year.
Exports in October this year were about $4.73b, which is around a 60% increase compared to the same period last year. But the pace is slowing down in November.
The export receipts were about $686m lower than those in October this year, according to the latest provisional data released from the Export Promotion Bureau (EPB).
In this regard, Ahsan H Mansoor, executive director at the Policy Research Institute (PRI), said both imports and exports in the July-October period of the current fiscal year increased compared to the same period of last fiscal year.
"But imports have increased about 30% in the current financial year compared to exports, which has never happened before. In order to reduce the trade deficit, it is necessary to increase exports or to reduce imports," he added.
"Still there is some relief for us. With the increase in imports, exports are also increasing. Besides, it seems that this export trend will continue for some time. So, if imports, which are rising, are properly invested, it will be good for the economy," he said.
Besides, Mansoor believes two things can be done to reduce the trade deficit.
"If we want to reduce this deficit, we have to increase remittances first. Second, devaluing taka will decrease imports."
Remittance inflow has continued to drop for six consecutive months till November, registering an 18-month low despite an upward trend in the country's trade and commerce outlook following an improved pandemic situation.
Bangladeshi expatriates remitted $1.55b in November, a nearly 25.25% year-on-year decline. The remittance inflow was $2.07b in November last year.
Besides, the total remitted amount in the first five months (July-November) of the current fiscal year was $8.60b, which is a 21% drop year-on-year, according to the central bank's data.
The rising trade deficit is putting pressure on the current account balance. The current account balance declined by 87.82% in one month in October from September.
In the July-October period of the current fiscal year, the current account balance stood at a negative $4.76b from the surplus of $3.63b in the same period of the last fiscal year.
Meanwhile, the country's foreign exchange market has been on the rise despite the central bank releasing more dollars in the last few months due to rising imports. The central bank sold $2b by the end of November.