Although the cost of imports is going up, the current account balance sees a surplus because of the leap in remittance inflow
The country's importing cost has risen slightly in the July-October period of the current financial year despite its fall during the pandemic.
Although the cost of imports is scaling up, the current account balance surplus has exceeded $4 billion because of the leap in remittance inflow.
The central bank released the figures in this regard on Wednesday.
In the July-October period of the current Fiscal Year 2020-21, imports have decreased by about 13% compared to the same period in the last fiscal.
However, the surplus in the current account rose by more than $4 billion in the July-October quarter compared to that in July-September.
An increased demand for drugs and safety materials during Corona has led to an increase in imports of raw materials and capital equipment, which had some impact on the total import costs.
In July, the cost of capital equipment in the pharmaceutical industry rose by 150% compared to the same period a year ago. The central bank has not yet released information in this regard in recent months.
On the other hand, in July to October the export income has increased by about 1% compared to the same period last year while remittance by more than 43%.
Economists believe that the rise in remittance inflows has played a role in increasing the current account balance surplus.
In this context, former lead economist of the World Bank Zahid Hussain told The Business Standard that demand has gone down as people's income has fallen which has affected the cost of imports as well.
The banks' liquidity is on the rise as import costs have come down, he said, adding that an uptick in foreign exchange reserves has kept the foreign exchange rate stable, which is good for the country's economy.
Zahid Hussain said: "The central bank was buying dollars from the market to prevent the taka from strengthening against the dollar due to rising reserves."
According to the economist, the uncomfortable thing is that this situation is temporary, and may change by the time the pandemic will start to decrease, but uncertainty is also there, because nobody knows when corona crisis will start to slow down.
He suggested that the government at this moment should create domestic demand through increasing revenues.
"If the demand increases, the import cost will also follow suit."
In July-October, foreign exchange reserves crossed $41 billion for the first time riding on remittances.
With this amount of reserves, it is possible to meet the import cost of more than 8 months.
Net foreign direct investment (FDI) fell by more than 50% in July-October quarter compared to the same period last year. However, the investment increased by $38 million alone in October to $153 million in the entire July-October period.
The investment by non-resident Bangladeshis during this period (July-October) has increased by about 11% compared to the same period a year ago.
On the other hand, foreign investment in the capital market is declining. During the months of July to October, foreign investors have taken away a total of $167 million selling their shares.