Trends of Balance of Payments in Bangladesh

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1. Abstract
In the backdrop of the dual track recovery of the global economic environment, Bangladesh economy in the early months of fiscal year 2010-11 demonstrated mixed signals. These emerging signals portend new tensions in the fiscal, monetary and balance of payment (BOP) situation. Because of various developments experienced in the global, regional and national arena, macroeconomic management is set to become more challenging in FY2010-11. Besides, the rising inflationary trends, new tensions, if not strains, are emerging in the areas of fiscal performance, monetary policy and balance of payments. When concern is expressed about deficit in the balance of payments what is usually meant is that a part of the balance- usually the current account- is behaving in a way that puts strain on other parts that that are needed to finance any deficit. We may now focus our attention in some depth to these terms-current and capital accounts.

2. Background of the Study
As a part of MBA program, our “International Finance and Banking” course teacher Prof Dr. Muhammad Asaduzzaman assigned us to prepare a report on the topic “Trends of Balance of Payments in Bangladesh”. We have gone through a number of books, articles and related topics on the websites and made the report.

3. Rationale of the study
We are the students of MBA. Many of us will enter into the business market. Some of us may enter in the world trade market. Going to prepare such a report as a part of International Finance and Banking course, we had to review a lot of papers on this topic and acquired required knowledge about the Balance of Payments of Bangladesh that helped us to perceive knowledge about a wide variety of International trade and Banking systems.

4. Introduction:
The Balance of Payments provides an overview of a country’s international transactions. Maintained on the principle of double entry book keeping, it records the goods and services that the country has sold to or brought from the rest of the world. Brief overview of this topic in relation to Bangladesh is discussed and tries to find the trend in the following sections.



5.1 Balance of Payments-Definition
The Balance of Payments is the summary statement or statistical record of a country’s international economic transactions with the rest of the world over a certain period of time presented in the form of double-entry bookkeeping.

5.2 Components of BOP
The Balance of Payments statement is presented with three major components:
• Current Account;
• Capital Account and
• Official reserve account.

5.2.1 Current Account
The current account includes trade in goods and services and unilateral transfers. The main categories of service transactions are travel and transportation, receipts and payments on foreign investments, and military transactions. Unilateral transfers refer to gifts made by individuals and the government to foreigners, and gift received from foreigners. The export of goods and services and the receipt of unilateral transfers are entered in the current account as credits (+) because they lead to the receipt of payments from foreigners. On the other hand, the import of goods and services and granting of unilateral transfers are entered as debits (-) because they lead to payments to foreigners.