Trade gap narrows to $7.66bn in Jul-Dec | The Daily Star
12:00 AM, February 10, 2019 / LAST MODIFIED: 12:57 AM, February 10, 2019

Trade gap narrows to $7.66bn in Jul-Dec

Analysts say declining import of capital machinery is a matter of concern

Trade deficit narrowed 12 percent in the first half of the fiscal year thanks to a rise in exports and a slowdown in imports.

At the end of December last year, trade deficit stood at $7.66 billion, down from $8.62 billion a year earlier, according to data from the central bank.

Economists, however, was not impressed with the development as the gap had gone down because of negative import growth of capital machinery in recent months, which play a major role in job creation.

Import payment for capital machinery stood at $2.40 billion in the first half of the fiscal year, down 5 percent year-on-year.

“It is a matter of concern,” said AB Mirza Azizul Islam, a former finance advisor to a caretaker government.

The country has been facing a jobless GDP growth over the years, so the government should lay emphasis on creating employment by way of offering stimulus packages to the private sector, he said.

Between the months of July and December last year, overall import rose 5.73 percent to $27.82 billion. At the same time exports fetched $20.16 billion, up 16.75 percent year-on-year.

There should be a balanced growth between imports and exports to make the economy more vibrant in all aspects, Islam said.

The country's current account deficit also decreased 39 percent year-on-year to $3.08 billion in the first six months.

The country will have to face a major stumbling block in maintaining a favourable current account in the years ahead as imports will increase substantially centring on the mega infrastructural projects, said Ahsan H Mansur, executive director of the Policy Research Institute.

Against the backdrop, deficit in the current account will widen heavily, which will have a bad impact on the economy.

“Foreign exchange reserves have been in a stagnant situation in the last three to four years, which is not good at all,” said Mansur, also a former official of the International Monetary Fund.

At the end of December last year, foreign exchange reserves stood at $32.01 billion, down from $33.06 billion a year earlier.

The amount is sufficient to cover import payments for 5.2 months, which was 6.1 months a year earlier.   

“So, the government should take an initiative to give a boost to both remittance and export to ease the pressure on the reserve,” he said.

Trade deficit hit an all-time high of $18.25 billion last fiscal year.

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