Balance of Trade

Of
Bangladesh
Nawshad Hasib
ID- 213011001

Introduction
A statistical statement called a balance of payments is made to give a detailed account of how an
economy's ties with the rest of the world change with time. The current account, capital account
& official reserve account are three of its key components. It is a deficit and a negative item
when a country spends foreign cash. Any transaction that generates revenue for the country is
recorded as a surplus and a plus item. The balance of trade, which is the difference between
merchandise exports and imports, is frequently evaluated using the current account.
A favorable balance of trade occurs when exports are more than imports, which is a good
indicator for the economy. An unfavorable balance of trade, or more debits than credits, is a
symptom that it is using more of its foreign currency reserves. Bangladesh's reliance on imports
has resulted in a negative balance of payments for many years. Here are a couple of reasons why
Bangladesh is facing a deficit in the balance of trade:
 Dependent on just the textile industry for the majority of the export
 Slow economic growth after the Covid-19 pandemic and Ukraine-Russian War
 Inflation
 Depreciation of taka
 Energy shortages lead to reduced production and the closure of several industrial
facilities
Objective of the study
The most significant economic factors now in Bangladesh are import, export, and exchange rate
since they aid in balancing the country's overall balance of payments. The globe is becoming
more interconnected. The impact on an economy might be positive or negative. However, it is a
problem for all emerging and least developed nations, and they make an effort to compete and
accomplish the desired growth and development. The following are the study's main goals:
 To determine the influence of imports & exports of goods on the trade balance
 To determine how the trade balance is affected by GDP and the exchange rate
 To determine why the Bangladeshi taka is getting depreciated day by day
Methodology
An economy's trade balance is impacted by a variety of aspects, and the balance of payments is
likewise subject to a wide range of indicators. There are several approaches to examining the
consequences of the trade balance. By comparing statistical data on total export and import of
goods, we will investigate the impact of several variables, particularly the balance of payments,
that affect the trade balance in this paper. Then, we will use the formula of Balance of trade
(Balance of trade (BOT) = Value of Exports − Value of Imports) to figure out the value. Data
dependability is a critical issue for all studies. As a developing nation, our country has an
unreliable statistical database system. So, data from the World Bank & OEC (The Observatory of
Economic Complexity) will be used. These sources of information are acknowledged and
accepted by everybody, and the offered data has found widespread use throughout the nation.
Therefore, the data and information from these sources that were used in this analysis were
trustworthy and reliable.
Literature Review
The majority of the literature on the same subsets of payment balances was available in the form
of short articles. An attempt has been made to create an overview of the literature basis on data
gathered from the existing research articles.
Hossain and Alauddin (2005) investigate Bangladesh's trade liberalization process and its
implications on the growth and pattern of exports, imports, GDP, and other macroeconomic
variables, with an emphasis on exports. They experimentally observed that trade liberalization
has had a favorable influence on GDP growth and that reducing anti-export bias and the import-
GDP ratio has had a strong long-term impact on exports.
Analysis
According to the World Bank (2021), Bangladesh has a net trade in goods of -32.52 billion at the
current US dollar. It has $41.91 billion worth of goods exports. In the contrast, it has $74.43
billion in import of goods.

Figure 1- Balance of trade, Bangladesh Source- World bank (2021)

 Figure 2- Net exports of Bangladesh. Source- World bank (2021)

Figure 3-Net imports of Bangladesh. Source- World bank (2021)

From the figures, we can see that the value of our imports is more than double what we are
exporting. This high outflow than inflow is creating a huge impact on our foreign currency
reserves. This is one of the primary causes of the depreciation of the taka in comparison with US
dollars. Our high dependency on imports is creating a massive aggregate demand for US dollars
and hence we have to spend more money on it.
Another cause for our heavy dependence on imports rather than exports is that we are heavily
dependent on a few sectors for exporting goods. According to OEC (2020), more than 80% of
the total exports of Bangladesh are textile goods. This astounding value shows how Bangladesh
failed to build up more export-oriented industries instead of focusing only on one industry.
Bangladesh's top exports include non-knit men's suits ($5.75 billion), knit t-shirts ($5.74 billion),
knit sweaters ($4.91 billion), non-knit women's suits ($4.63 billion), and knit women's suits
($2.45 billion). Our major export partners are Germany ($6.59 billion), the United States ($6.25
billion), the United Kingdom ($3.05 billion), Spain ($2.95 billion), and Poland ($2.27 billion).

Figure 4- Export items & destinations. Source- OEC (2020)

Due to heavy resilience on textile industries for exports, it is impacting our imports as well. Our
imports are primarily dominated by cotton yarns & machines used in textile industries for
producing garments. Also, as Bangladesh only has a few natural energy reserves, it has to import
energy from other countries to meet the demand. Hence, petroleum is also another major
dominant in our import market. Bangladesh’s top imported goods are- Refined petroleum ($2.64
billion), raw cotton ($1.8 billion), wheat ($1.28 billion), light rubberized knitted fabric ($1.09
billion), heavy pure woven cotton ($975 million).
Our main import partners are China ($15 billion), India ($7.91 billion), Singapore ($2.29 billion),
United States ($1.79 billion), and Indonesia ($1.69 billion).

Figure 5-Import items & destinations. Source- OEC (2020)

Conclusion
From the above data & analysis, we have observed that currently Bangladesh has a deficit
balance of trade value. This is due to more imports than exports in our country. Also, we have
seen that heavy resilience in just one industry for exports impacted the imports as well. Another
cause for the slow economic growth of Bangladesh is the aftermath of the Covid-19 pandemic &
Ukraine-Russian War. So, if Bangladesh wants to overcome the deficit of Balance of trade, it has
to tackle and overcome these economic implications. Also, it has to focus on & support other
export industries for economic growth. This will result in more inflow of dollars & increase the
country’s foreign currency reserve.
References
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and Its Impact on Macro Variables Particularly Export Expansion, The Journal of
Developing Areas, 39(1), 127-150.

2. Chowdhury, S. R., & Hossain, A. (2014). An Econometric Analysis of the Balance of

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August 28, 2022, from https://data.worldbank.org/indicator/BN.GSR.MRCH.CD?
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