Bangladesh's trade deficit hit a historic high of $33.25 billion in the fiscal 2021-22 due to surged up import and commodity price hikes in the global market, according to the Bangladesh Bank.
The current account deficit also surpassed $18.50 billion during the time, showed central bank data updated on Monday.
The trade deficit in FY21 stood at $23.78 billion.
Between July and June last fiscal year, imports increased to $82.50 billion, up 35.95% year-on-year when exports grew 33.45% to $49.25 billion.
Economists emphasised on curbing imports and boosting remittances to minimise the trade deficit and provide a relief to the country's macroeconomy.
At the end of May 2022, the current account deficit was at $17.28 billion, which shot up by $1.5 billion in June to reach a historic high of $18.69 billion. The deficit had been widening by $2 billion in the past few months.
In FY21, the current account deficit was at $4.57 billion thanks to Covid-induced import fall and a high remittance inflow.
At the end of FY22, the overall balance deficit stood at $5.38 billion. The overall balance hit a $9.27 billion surplus in FY2020-21.
According to the central bank report, the country received $21.03 billion in remittance in FY22, which is 15.12% less than the previous year.
The central bank had to inject $7.62 billion in the past fiscal in the face of growing import payment. Besides, it sold more than $1 billion to banks in July.
The excessive dollar sales dragged the forex reserve to $39.48 billion from $48 billion in August 2021.
To stabilise the reserve, the central bank came up with a number of measures including widening the cash margin against imports of different products.
The letter of credit (LC) opening in July fell by 31%, according to provisional data of the Bangladesh Bank.
In July, the total LC opening was $5.47 billion, down from $7.9 billion in June, central bank data shows.
The LC opening picked up to nearly $10 billion in March amid huge business activities in the post-pandemic era creating payment pressure on banks.
However, imports started to slow down from June after the Bangladesh Bank tightened import policies to save foreign exchange reserves amid rising dollar prices.
At the same time, the central bank initiated raids to curb illegal dollar sales in the open market.
Remittance flow to Bangladesh rose 11.76 percent year-on-year to $2.09 billion in July, a development that would bring some relief for the country that is struggling to keep its foreign currency reserves in a healthy shape.
Migrant workers sent home $1.87 billion in July last year.
The Bangladesh Bank for the first time has set the interest rate ceiling for non-resident foreign currency deposit (NFCD) accounts with a great increase, in a bid to boost the inflow of foreign currencies to the country.
From now on, the interest rate on 1 to 3-year term deposits of the NFCD account holders will be 2.25% plus the benchmark reference rate – which is currently 1.75% – while it will be 3.25% plus the benchmark reference rate on the 3 to 5-year term deposits.
Ahsan H Mansur, executive director of the Policy Research Institute and also the chairman of Brac Bank, the government should have taken such measures a lot earlier.
His recommendations to minimise the trade deficit include trimming the fiscal spending, curbing imports and raising the policy rate.