Keeping trade gap within limits
Monday, 12 May 2008

This year the trade deficit during the July-February of the current fiscal has grown about 47 per cent amounting to about 4.46b US dollars compared to the corresponding period of last year. This was very much expected as prices of food items and oil have hit an all time high. The situation has been further compounded by the caretaker government’s unwillingness to restrict import of non-essential items. We do not think that our export growth will match that of imports. One factor is that recession has now set in most of the rich countries including the United States and that will surely affect our exports. The same recession may also shrink our manpower markets. The net result will be sluggish growth in exports while import costs will continue to mount due to clever machinations of the rich countries. In about a week’s time, oil price has gone up by nearly five dollars a barrel. On the other hand, if the Bush mandate about bio-fuel production remains unchanged or if the Thai-proposed rice cartel becomes a reality the pressure on our resources will mount manifold. Although a section of our economists think that in spite of mounting trade deficit the balance of payments is not that uncomfortable still we think we shall have to prepare for the worst.  As of now the only way seems to be restricting imports as much as possible. With the basics badly missing agricultural production will remain dependent on good weather and we shall have to continue buying oil whatever the price may be. Therefore, the focus should be on non-essential items.  If Bangladesh Bank can pressurize commercial banks to cut lending rates the Commerce Ministry can also ban import of luxury items. It is no more the question of abiding by the WTO guidelines it is the question of our survival. So far there has been indication that the caretaker government is even thinking in these lines. Perhaps people in charge are hoping for support from agencies like World Bank and Asian Development Bank. That may or may not be enough but we shall have to find our own solutions. But it should be the effort of the CG to seriously work to keep the trade gap within limits.

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