Bangladesh’s Balance of Payment or BoP has skyrocketed after the end of the first quarter of the fiscal 2017-18.
Compared with the same period of the last fiscal year, it grew by almost 7500 percent.
Analyst Zaid Bakht says he predicts the trend will continue throughout the year as imports are on the rise.
He, however, sees not much reason to be concerned due to the high foreign currency reserves.
The current account of the Balance of Payments shows the difference between a country’s export earnings and import spending.
A surplus indicates the country is earning more from exports than it is spending on imports, while a deficit indicates the opposite.
“The global oil price had been low for quite some time,” Bakht said. “As a result, our import costs had dropped markedly. But rising oil prices for the last one year drove up import costs,” said Bakht, a research director at the Bangladesh Institute of Development Studies or BIDS.
In 2015-16, the price of oil per barrel (almost 159 litres) was between $30 and $35. Now it is over $60.
Another significant cause for the rising BoP deficit is the rise in imports of oil, food, capital machinery and industrial raw materials, he added.
The combination of these factors has caused the huge BOP deficit, he added.
Bangladesh Bank figures show, fuel import cost increased by 41.4 percent in the first quarter while spending on food (rice and wheat) rose by a little over 240 percent.
The construction of Padma Bridge and other large-scale projects has caused a surge in spending on equipment.
Spending on capital machinery and industrial raw materials imports went up by 28 and 16.23 percent, respectively.
Bangladesh’s import spending, in the first four months of the current 2017-18 fiscal year, increased almost 29 percent while export earnings grew only 7.6 percent.
Bakht, however, does not see the deficit to cause concern for now. “Increased spending on capital machinery and raw materials indicates rising investment in the country.”
With an almost $33 billion in reserves, the rising import spending will not be a problem, he added.