Country's current account recorded a large surplus, more than US$ 2.0 billion, in the just-concluded fiscal year (FY).
Economists attributed the reason for the large surplus to the rise in remittances and fall in import payments.
They said the surplus achieved through lower import payment has offered a 'mixed blessing' for the economy.
Dr Atiur Rahman, Governor of Bangladesh Bank (BB) Thursday said the current account balance surged to more than $ 2.0 billion in FY 2012-13.
According to the BB estimate, the current account which deals with components such as export receipts, import payments, net earnings in services including remittances and profit repatriation by multinationals and local people, rose to US$2,004 million against $151 million in FY 2011-12.
Dr. Zaid Bakht, Director (research) of Bangladesh Institute of Development Studies (BIDS), told the FE: "The surge in the current account is due to rise in remittances and fall in imports."
Dr Bakht said such type of surge in the economy is not always desirable especially for a country like Bangladesh which is highly dependent on imports for productive sectors.
"It has mixed blessings for the economy as it helps appreciate local currency against the greenback," Dr Bakht noted.
Currency appreciation discourages inflow of remittances.
Currency appreciation also leads to loss of competitiveness in exports.
According to the BB, local currency Taka appreciated by 2.6 per cent between January and June of the last fiscal year.
Dr Bakht said the central bank buys dollars when inflow of the same is heavy. "Such type of purchase by the BB results in inflationary pressures on the economy."
Dr Atonu Rabbani, a Professor of Economics at the University of Dhaka said the surge is a temporary phenomenon.
"I don't know whether it will continue or not," Dr Rabbani added.
He said there is no mechanism to manage the situation right now. "If it becomes a sustainable one, then the central bank can take steps to manage it."
Dr Khandker Golam Moazzem, Additional Research Director at the Centre for Policy Dialogue (CPD) said the surge in current account balance is appreciating the local currency, thus, affecting the exporters.
He, however, said raw material imports from neighbouring India by local exporters will compensate somewhat.
Rupee has fallen by nearly 12 per cent since the beginning of the Indian fiscal year in April 2013 and reached an all-time low of Rs 61.21 as against the US dollar.
Dr Moazzem said 'Arab Spring' is helping raise the real wages of the Bangladeshi workers in the Middle Eastern countries.
The BB data showed the inflow of remittances by nearly 9 million non-resident Bangladeshis (NRBs) in the FY 2012-13 reached a record high of nearly 15 billion US dollars, about 13 per cent higher than the same period of the previous year.
Import payment was 30.20 billion US dollars, down by 0.39 per cent in July-May period of the 2012-13 fiscal year, while earnings from exports stood at US$ 23.90 billion, up by 10.12 per cent during the same period, the BB data showed.
However, Dr Zaid Bakht said the central bank should take steps to raise imports for productive sectors.
He also said, "Our banking sector has been moving slowly in the matters of opening letters of credit (L/Cs) since the loan scam by Hall-Mark Group. The BB actions might boost confidence in the banking sector."
Source:The Financial Express
