Bangladesh trade deficit widens sharply

DHAKA: Bangladesh's trade deficit widened by $1.07 billion to $4.95 billion in the first half of 2010/11 fiscal year from a year ago, due to a rising import bill as global commodity prices hit record highs.

Imports to the South Asian country rose 36 percent to $15.2 billion in the July-December period from a year earlier while exports increased 41 percent to $10.26 billion.

The overall import jump reflected gains in food grains, industrial supplies and materials and capital goods as trade continued bouncing back from a sharp fall caused by the global financial crisis.

Food inflation in the country climbed to a three-year high of 11.01 percent in December and analysts have warned that rising global food prices may drive it higher still.

The government, under mounting pressure to control prices, seeks to import 2.2-3 million tonnes of rice and wheat in the year to June, up from 550,000 tonnes in the previous year.

Bangladesh typically runs a trade deficit but soaring global commodity prices and increased volumes are pushing the gap wider, said Mustafa K. Mujeri, director general of the Bangladesh Institute of Development Studies.

"But it's good for the economy as imports of capital goods and other industrial raw materials are rising on the back of economic recovery," Mujeri, also former chief economist of the central bank, said.

"Exports are picking up but sluggish growth of remittances, which could offset the shocks of rocketing import bills, is worrying," he said.

Bangladesh's more than 6 million expatriate workers sent home $5.54 billion in the first half of the fiscal year against $5.53 billion the previous year as employment growth dried up in traditional markets such as Saudi Arabia, Kuwait and Malaysia.

Foreign exchange reserves at the end of January fell to $10.38 billion, the lowest since May 2010, from $11.17 billion in December.

Bangladesh's balance of payments swung to a $584 million deficit in July-November 2010 from a $2.156 billion surplus a year earlier, central bank data showed.  (Reporting by Ruma Paul; Editing by Susan Fenton)