Trade deficit narrows by 21% in six months of FY21

Trade deficit narrowed by 21% in the first six months of the current fiscal year, compared to a year earlier, riding on a decline in imports, a worrying sign for a growing economy like Bangladesh.

A narrowing trade deficit indicates a slump in consumption during the pandemic even after economic activities resumed in full swing in recent months.

From July through December 2020, the trade balance improved to negative $6.46 billion from negative $8.22 billion in the same period of the previous year, according to Bangladesh Bank.

A trade deficit occurs when a country's imports exceed its exports.

The import growth fell 6.80% year-on-year in the July-December period of the current fiscal year when the export growth was negative 0.44%.

Imports of capital machinery declined by 39% in the July-November period of fiscal year 21, indicating stagnation in the private sector investment.

The Bangladesh Bank in its recent monetary policy review report stated that the government's stimulus packages along with the restoration of business confidence may boost public and private investment.

Following a strong growth in export and remittances, the foreign exchange reserves are expected to continue its uptrend, the report said.

Cargo handled by the Chattogram port started increasing sharply after May 2020 and came back to the pre-pandemic level in November 2020.

The private sector credit growth in trade and commerce and consumer finance increased significantly during the first quarter of FY21, as per the review report.

The current account balance, an important indicator of an economy's health, stood at $4.32 billion in July-December of FY21, which was in negative territory in the same period of the previous fiscal year, the BB data shows.

A current account deficit means that the value of goods and services imported is greater than the value of exports.

Surplus current account balance shows the country's strength to make foreign payment.