DHAKA: The current account balance has slipped to the negative territory for the first time in four years due to remittance contraction and high import growth. Between July and September this year, the current account deficit stood at $504 million, which was $1.66 billion in the surplus a year earlier, according to data from the central bank.
The last time the current account was in deficit was in fiscal 2011-12, when it was $447 million in the negative. Since then, the current account never slipped into deficit at any point in time. Remittance has remained a major source of foreign currency for the last 10-12 years. It slumped 17.71 percent in the first quarter of the fiscal year. And remittance’s downward trajectory continued: in the first five months of fiscal 2016-17, about $966 million was received from expatriates, down 15.64 percent year-on-year.
The growing tendency of expatriates to send money through illegal channels and the oil price crash have been blamed for the decline in official remittance figures. The oil price slump, which dropped to a historic low in January, affected the incomes of Gulf Cooperation Council economies, from where Bangladesh gets the bulk of its remittance.
Among the Middle Eastern countries, a sizeable sum comes from Saudi Arabia and the UAE. In the first five months, remittance inflow from Saudi Arabia slid 22.81 percent and from the UAE 20.61 percent. Remittance from other countries dropped as well. For instance, after the Middle Eastern countries, the highest remittance comes from the US, and it plunged 35 percent during the period.
The incoming administration of president-elect Donald Trump has created uncertainty among Bangladeshi expatriates over their future, due to which they cut back on sending money home, said Bangladesh Bank officials. Besides remittance, the huge increase in imports compared to exports is another reason for the deficit. In the first three months of fiscal 2016-17, imports rose 17.27 percent and exports only 3.52 percent.
As a result, the trade deficit in the first quarter of the fiscal year more than doubled from the previous quarter to $2.37 billion. The overall surplus too felt the strain due to the deficit in the current account balance during the period. During the July-September period, the overall surplus stood at $1.79 billion, down from $1.97 billion from a year earlier.
If the downward trend of remittance continues, there may be more pressure on the balance of payments, said a BB official. But there is no cause for immediate concern as the foreign currency reserve in the country is at a satisfactory level, he added. On November 30, foreign currency reserves stood at $31.37 billion, which is enough to honour import bills for 7.76 months.
