Dhaka, Bangladesh
Export, remittance growth slumps

Export, remittance growth slumps

Balance of payment under pressure

Unnayan Onneshan (UO) has said monumental deficit in current account balance coupled with declining wage earner's remittance and foreign aid disbursement is likely to exert immense pressure on the country's balance of payment, reports UNB. The independent multidisciplinary private think-tank came up with the observation in its monthly publication of the 'Bangladesh Economic Update' August 2017 on Monday. It called for a thorough reexamination of the current trade and industrial policies to address the structural bottlenecks and creation of a stable business climate to attract increased inflow of private investment including Foreign Direct Investment (FDI). The think-tank also urged for the adoption of new strategies to expand country's productive capacities that enhance utilisation of available resources through efficient entrepreneurial capabilities and increased production linkages. Referring to declining rate of growth in inflows of wage earner's remittance, the think tank showed that the inflow of remittance declined by 14.48 percent and stood at USD 12,769 million in FY 2016-17 compared to the previous fiscal year. On monthly basis, the remittance inflow declined by 4.18 percent in June 2017 compared to May 2017 and stood at USD 1,214.61 million, which further declined by 8.15 percent to USD 1,115.57 million in July 2017. Decline in the inflow of remittance is likely to pose threat to the social infrastructure of rural Bangladesh since the remittance-recipient households in rural areas expend a significant portion of their income on consumption, health and education. Given the informal system for transferring money induced by large gap in rate of US dollars in banks and curb market, it is imperative that a conducive atmosphere for higher inflow of remittance can be maintained through effective regulatory measures and diplomatic negotiations, urges the research organisation. With increasing export concentration of readymade garments (RMG), growth in total export earnings exhibited a significant decline by 8.08 percentage points in FY 2016-17 compared to FY 2015-16. Rate of growth in export earning stood at 9.77 percent in FY 2015-16, whereas at the end of June 2017, export growth declined to 1.69 percent for the last fiscal year resulting in a shortfall in the year's target (USD 37,000 million) by USD 2,165 million. Non-diversification of export markets and lack of export competitive products may pose serious challenge to the performance of external sector, cautions the UO. Fresh opening of import letter of credits (LCs) for industrial raw materials has, however, registered a growth of 6.11 percent during July-May of FY 2016-17 compared to the corresponding period of FY 2015-16. This growth in opening of LCs for industrial raw materials cannot be capitalised until the lack of entrepreneurship and productive capacity in the economy are dealt with in order to rise to the challenges of unemployment and low private investment, comments the UO. With decline in inflow of remittance and export growth, rise in import payables along with shortfall in the primary income and income from the service sector, the current account balance exhibits a monumental deficit of USD 2,103 million during July-May of FY 2016-17 compared to a surplus of USD 3,193 million during the same period of the previous fiscal year. Deficit in current account balance has been continuing since the third month of the last fiscal year. As a consequence, the total balance of payment declined to USD 2,682 million in July-May of FY 2016-17 compared to USD 4,143 in the corresponding period of FY 2015-16. Taking account of the fact that both total and net receipt of foreign aid declined in FY 2016-17, the research organisation finds that disbursement of total foreign aid decreased by 7.11 percent and stood at USD 2,728.20 million during July-May of FY 2016-17 compared to a 7.71 percent increase during the corresponding period of the previous fiscal year. The net receipt of foreign aid, on the other hand, also declined by 11.16 percent and stood at USD 1,896.16 million in July-May of FY 2016-17 compared to an increase of 14.74 percent during the corresponding period of FY 2015-16.

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