Corrective measures needed to halt widening trade gap

THE trade deficit is ever increasing with other nations due to high volume of import against decreasing export volume and also earnings over the years as the government has failed to address the situation. Bangladesh’s competitors are entering the global market with new commodities marginalizing our market shares. But investment in the county in private sector is not picking up to set up new industries. This in turn is slowing down productivity and exports. On the other hand dishonest business houses are resorting to over-invoicing in the make of fake import of capital machineries making huge capital flight regularly. It is causing more outgoing payment than incoming earnings making trade deficit ever growing.

Central Bank data revealed that the trade deficit increased by 347.45 per cent to $1.05 billion in July, the first month of this fiscal year (2017-18), compared with that of $236 million in the same month a fiscal year ago. Trade deficit is usual for developing nations, but the country’s recent trend is unusual.

Since fiscal 2012-13, trade deficit has been hovering around $6 billion, but in fiscal 2016-17, it made a 47 percent year-on-year jump on the back of a wide mismatch between export and import growth. The latest monetary policy statement has forecasted that the deficit may nearly double to 12.72 billion in fiscal 2017-18 as imports continue to surge. Experts said the huge trade deficit in July was not a good sign for the country as it might put an adverse impact on the macroeconomic situation in the days to come. The government should take initiative to create a balance between the import payments and the export earnings to narrow the trade gap. The current account balance set foot in the negative territory for the first time in four years in the first quarter of fiscal 2016-17, when the deficit stood at $504 million. It has been expanding since then. The last time the current account was in the deficit was way back in fiscal 2011-12. The overall surplus shrank to $3.17 billion last fiscal year, which was $5.03 billion a year earlier. The rising trade deficit could put some pressure on exchange rates.

The mounting trade deficit, which results from unplanned trade liberalization without strengthening local economy to face newer challenges. Now the country needs to do the needful to increase export to cope with the growing trade deficit. Pursuing trade diplomacy with right earnest can go a long way to recovering export market in the gloomy scenario of global trade. But the performance of Bangladesh’s missions abroad remains disappointing. They do not function properly because the officials who are posted for promoting trade and investment are mostly inefficient as nominees of influential persons in the government. We must put in place new action plans to revamp exports and rein in fake imports to narrow the trade gap. This can’t be left unattended any more.