Feb 22
Major Economic Indicators In Doldrums PDF Print E-mail

By Apu Ahmed

Steep rise in trade deficit, negative current account balance and slowdown in income of exports against high growth in payments for imports, depreciation of currency and nosedive in inflow of remittance are not good indicators from the view of the country’s economy. Unfortunately, the major economic indicators are in negative territory with the most surprising fact that the weaknesses of the economy are surfacing very quickly. Most disturbing fact is the high growth of import against slowdown in exports that created suspicion of capital flights. Things could be worsening further unless the policy makers take immediate steps to revert the trend.



No doubt, the negative inflow of remittance that had emerged in the previous fiscal year served a danger signal for the recently concluded fiscal.  Rise in ‘Hundi’ operation has been blamed for the sharp decline in inflow of remittance that has been supporting the country’s balance of payment for long. The government initiatives to check ‘Hundi’ have not worked. The inward flow of remittance slumped to a six-year low to $12.76 billion in 2016-17 amid dull business situation in the Middle East countries, where most of the expatriates live. The inward remittance decreased by 14.47 per cent, or $2.16 billion, to $12.76 billion in FY17 compared with that of $14.93 billion in FY16. The remittance inflow stood at $15.32 billion in FY15, $14.23 billion in FY14, $14.46 billion in FY13, $12.83 billion in FY12, and $11.65 billion in FY11. Local bankers noted that the situation was ‘upsetting’ as the inflow decreased in last two fiscal years in a row.


With the slowdown in export since the second quarter of the last fiscal, the country’s economy has come under serious pressure. Export earnings in FY17 stood at $34.83 billion with a shortfall of more than $2 billion from the government-set target of $37 billion. The export growth was the lowest since the FY 2001-02. According to the provisional data, export earnings from RMG products in FY17 stood at $28.15 billion with a minimal growth of 0.20 per cent. Export earnings from knitwear stood at $13.75 billion with 3.01 per cent growth while earnings from woven fell by 2.35 per cent to $14.39 billion in FY17. Shrinking global demand for apparel products and devaluation of currencies of the major importing countries are blamed for the nominal export earnings growth.

Twin Pressure

In fact, the twin pressure arisen out of negative inflow of remittance and slowdown in exports has created serious impact on other economic indicators like trade deficit and the current account balance. The country’s trade deficit hit an all-time high in the recently concluded fiscal year 2016-17 standing at $9.47 billion, up 46.62 per cent compared with that of the FY 2015-16. The Bangladesh Bank officials said that export growth had significantly declined against higher growth of import payments in FY17, which was mainly responsible for the record trade gap year-on-year in last fiscal year. The biggest ever gap earlier gap recorded in FY 11 was $9.32 billion. According to BB officials the trade deficit had maintained a level below $7 billion from FY14 to FY16 mainly due to steady export earnings against import payments. But, the trade gap ballooned in last fiscal year due to slow earnings from the export of readymade garment, the main export product of the country.

Current Account Balance

The country’s current account balance registered a deficit of $ 1.48 billion in the recently concluded fiscal year 2016-17 for the first time in last five years due to a negative growth of inward remittance, trade balance, services and primary income. The current account balance, the gap between export receipts and net earnings, including remittances, and import payments and profit repatriation by multinational companies and local people, earlier registered its all-time high surplus at $4.26 billion in the previous fiscal year of 2015-16. It is an unusual phenomenon for a country that the record surplus in the current account balance had just plunge into a large gap quickly. The country’s current account balance stood at $2.87 billion in FY15, $1.40 billion in FY14, $2.38 billion in FY13 and a deficit amount of $447 million in FY12.  BB in its projection for July-December of 2017 said the deficit in the current account balance would widen further to $2.72 billion the current fiscal. The BB also forecasted that the country’s trade deficit would cross $11 billion this fiscal year 2017-18 due to recent pressures on the economy’s external sector strength.


There should always be a co-relation between import payment and exports income for the country like Bangladesh. But the slowdown in exports does not support the import payments that stood at $44.27 billion in FY17 compared with that of $40.07 billion in FY16. The huge import growth created scopes for suspicion that money were laundered in the process as the growth came against the backdrop of a dull investment situation in the country. According to a Bangladesh Institute of Bank Management research report released in June, a large amount of money is being laundered abroad from Bangladesh through export and import business or trade financing as a section of unscrupulous businessmen is playing four tricks for the purpose. The four tricks being used are over- and under-invoicing, over- and under-shipment, false description of the products and showing multiple invoicing in the LC authorisation forms submitted in the banks by the businessmen.

Experts Views

Former interim government adviser AB Mirza Azizul Islam said a huge volume of capital machinery was imported in the period in line with the commercial banks’ statements, but apparently there was no investment in the country’s private sector. The businesspeople who are allowed to pay zero per cent tariff to import capital machinery might be abused the opportunity to launder capital from the country. In FY17, the import of industrial raw materials posted a growth of 3.52 per cent against the 3.15-per cent growth in FY16. Settlement of LCs for the industrial raw materials amounted to $16.22 billion in FY17 against $15.66 billion in FY16. But there is no impact of higher import growth of industrial raw materials and intermediate goods on exports. The BB, customs department and finance ministry should investigate the matter jointly, he said. Former BB governor Salehuddin Ahmed feared that some businesspeople were laundering money through over-invoicing in their LCs. The BB should strengthen its monitoring system to see whether the businesspeople are importing goods in accordance with LCs’ invoice, he said.


Economists and trade experts said the drop in the current account balance would put an adverse impact on the country’s macroeconomic situation if the import payments increase more in the months to come than that of the previous period. The import payment is likely to increase as the government could not enforce any effective mechanism to check capital flights. Moreover, the government has to import 15 lakh tonne rice due to losses of staple to floods. The import payment would increase further for spending huge amount of foreign currency for rice import. The country needs to increase exports income, said Mustafizur Rahman, distinguished fellow of the Centre for Policy Dialogue. He said the export oriented businessmen needed productivity-driven growth and the diversification of markets and products to increase exports growth. He also said that to remain competitive in the global market Bangladesh should cut the cost of doing business.

CPD’s Recommendations

Centre for Policy Dialogue noted that amid gloomy picture of economic indicators the country might faces deficit of $ 3 billion in the current account balance in the current fiscal that might hamper the country’s prospect of graduating out of the least developed country. Projected growth in gross domestic product of 7.4 would in the current fiscal may be affected unless the government addressing the loopholes.  CPD also noted increasing public debt burden, persisting weakness in the banking sector performance and sluggish capital market should also be addressed. More effective steps will need to be taken for utilisation of the foreign aid in the pipeline. Inability to initiate the needed economic reforms is a major concern from the macroeconomic management point of view. This is particularly pertinent for the financial sector in Bangladesh. The banking sector is suffering from endemic structural weaknesses due to lack of policy and institutional attention. It has now become an emergency to undertake an in-depth review and assessment of the health and performance of the banking sector of the country, and come up with concrete guidelines to deal with NPL, rescheduling of bad debt, and recapitalisation of banks.