Dhaka [Bangladesh], December 8 (ANI): Bangladesh's current account deficit further widened in October as imports continued to increase in comparison to the combined receipts from exports and remittances, The DailyStar reported. The current account records Bangladesh's transactions with the rest of the world, particularly its net trade in goods and services.
As per the news report, the widening of the deficit implies that the pressure on the foreign exchange market continues to remain high. The data from Bangladesh's central bank has revealed that Bangladesh's current account stood at USD 4.5 billion in deficit as the end of October, as per the DailyStar report.
Earlier in 2021, Bangladesh's current account had a deficit of USD 3.83 billion, a reverse from the corresponding period in 2020 when it was a surplus of USD 4.05 billion. Ahsan H Mansur, Executive director of the Policy Research Institute of Bangladesh, has said that the lower inflow of remittances shows the ongoing capital flight, as per the DailyStar report.
More than 7.84 lakh male and female workers travelled from Bangladesh to other countries from Bangladesh between January and August in search of jobs, according to the news report. The massive outflow of foreign workers could have played a key part in giving a boost to remittance earnings. However, the money transferred by the workers was only 2.03 per cent between July and October.
As per the news report, some people and entities have been laundering money to other countries through trade under and over-invoicing. They are conducting illegal transactions by convincing migrant workers to transfer money to their families by offering them better rates for the US dollar in comparison to the rates offered by banks in Bangladesh.
Over-invoicing occurs when exporters give an inflated invoice to importers, generating a payment is more than the value of the shipped goods to launder money abroad. Under-invoicing takes place when the price of products on an invoice is less than the amount paid for it.
The over-invoicing and under-invoicing take place when the importer or exporter wants to lower the tariff or if the buyer or seller seeks to reduce their profits to pay fewer taxes. Ahsan H Mansur stressed that it will be difficult to tackle the deficit in the current account if the ongoing capital flight is not being stopped. "It is widely reported that some delinquent borrowers have recently siphoned off money from the banking sector," The DailyStar quoted Ahsan H Mansur as saying.
"The vested quarters might have laundered money abroad by embezzling funds from the banking sector," Mansur added.
Meanwhile, exports increased 8 per cent year-on-year to USD 15.92 billion between July-October. Meanwhile, imports grew 6.72 per cent year-on-year to USD 25.51 billion in between July to October. The development comes despite the central bank's decision to discourage purchases of products and services from the international markets.
The current amount deficit could reduce as the opening of letters of credit (LCs) has decreased in recent months as banks are not showing a willingness to facilitate non-essential and luxury imports .
The Bangladesh Bank has so far in the current fiscal year injected about USD 6.5 billion into the market for helping banks in clearing import bills. As of November 3, gross foreign exchange reserves were at USD 33.78 billion in comparison to USD 44.88 billion a year earlier, which shows a fall of around 25 per cent. (ANI)