Presentation on 'Balance of Payment' of Bangladesh

4. Group Member’s Name
1) Sudipta Chowdhury 103011
54
6) Kazi Md. Abdull Al
Noman
103011
48
2) Sabrina Mahmood 103010
17
7) Ziaul Hoque 103011
02
3) Mahmud Hasan 103010
85
8) Lucky Akter 103011
59
4) Biswajit Dey 103010
25
9) Md. Habibur Rahman
Habib
103010
69
5) Md. Monirul Murshed 103010 10) Billal Hossain 103011

5. Balance of payment is a statistical statement designed to
provide, for a specific period of time, a systematic record
of an economy’s transactions with the rest of the world.
Its major components are the current account and the
financial account. The spending of foreign currency is
debit and it is a negative item. If a transaction earns
foreign exchange for the nation, it is recorded as a plus
item and it is a credit. Generally speaking, imports are
debits and exports are credit.
If credits are more, i.e. exports are more, than it is a
positive sign for the economy and it is known as a
favorable balance of payment. If debits are more, i.e.
imports are more, than it is a negative sign for the
economy and it is known as an unfavorable balance of

6. A balance of payments (BOP) sheet is an accounting
record of all monetary transactions between a country
and the rest of the world. These transactions include
payment for the country’s exports and imports of goods,
services and financial capital, as well as financial
transfers.

7. Trade – buying and selling of goods and services.
Exports – a credit entry.
Imports – a debit entry.
Trade balance – the sum of exports and imports.
Factor income – repayments and dividends from loans and
investments.
Factor earnings – a credit entry.
Factor payments – a debit entry.
Factor income balance – the sum of earnings and payments.

8. The balance of payments is divided into two major
accounts –
A) The Current Accounts and
B) The Capital Accounts

9. The balance of payments on Currents Account
includes items like imports & exports, expenses
on travel, transportation, insurance, investment
income etc. These relate to current transactions
i.e. it shows all flows that directly affect the
national income accounts

10. Items Taka
Export of goods and services ( A ) ***
Import of goods and services ( B ) ***
Trade Balance ( A-B )= C ****
Investment Income ( D ) ***
Debt Service Payment ( E ) ***
Net remittance and transfer ( F ) ***
Total Current Account Balance (C+D-E+F)=G ****

11. The Capital Account, on the other hand, is made
up of capital transactions e.g. borrowing and
lending of capital, repayment of capital, sale &
purchase of securities and other assets to and from
foreigners - individual & Governments i.e. it shows
all flows that directly affect the national balance
sheet. These transactions show the International
monetary reserve position of the country.

12. Items Taka
Direct foreign investment ( H ) ***
Foreign loan ( I ) ***
Increase in foreign assets ( J ) ***
Resident capital of outflow ( K ) ***
Total Capital Account Balance ( H+I-J-K)=L ****

13. Items Taka
Export of goods and services ( A ) ***
Import of goods and services ( B ) ***
Trade Balance ( A-B )= C ****
Investment Income ( D ) ***
Debt Service Payment ( E ) ***
Net remittance and transfer ( F ) ***
Total Current Account Balance (C+D-E+F)=G ****
Direct foreign investment ( H ) ***
Foreign loan ( I ) ***
Increase in foreign assets ( J ) ***
Resident capital of outflow ( K ) ***
Total Capital Account Balance ( H+I-J-K)=L ****
Increase/ Decrease Cash Reserve Account ( M ) ***
Errors & Omission ( M-G-L ) ***

14. The economy of Bangladesh is branded worldwide for its
quality RMG products. As we have basic export revenue from
RMG sector, a slight change in this sector will have a
significant impact on our economy.
From spinning to weaving, from knitwear to leisurewear and
high street fashions, the textiles and clothing industry is
Bangladesh’s biggest export earner with value of over $ 16
billion of exports in 2009-10.

16. Import dependence is one of BOP. The
group of
import is significantly higher than that of
export.
If can reduce import dependency or increase
the level
of export then it will help to reduce the

17. Major Commodities 2012-2013 ( Million US)
1. FOOD GRAINS
i. Rice
ii. Wheat
2. Milk & cream
3. Spices
4. Oil seeds
5. Edible oil
6. Pulses all sorts
7. Sugar
8. Clinker
9. Crude petroleum
10. POL
11. Chemical
12. Pharmaceutical products
13. Fertilizer
14. Dyeing, tanning etc. materials
15. Plastics and rubber articles thereof
16. Raw cotton
17. Yarn
18. Textile and articles thereof
19. Staple fibre
20. Iron, steel and other base
21. Capital machinery
22. Others
726
30
696
214
118
242
1402
422
731
487
1102
3642
1302
119
1188
399
1366
2005
1356
3273
455
2335
1835
6860
Sub Total 31579
Import of EPZ 2505
Grand Total 34084

19. Imports of goods and services (BOP; US dollar) in
Bangladesh was last measured at 37660209273.17 in
2012, according to the World Bank.

20. Goods imports (BOP; US dollar) in Bangladesh was last
measured at 32289687006.31 in 2012, according to the
World Bank

21. Transport services (% of service imports; BOP) in
Bangladesh was last measured at 78.89 in 2012, according
to the World Bank.

24. Another strong component of BOP is
remittance inflow. Our largest resource is
manpower and our remittance inflow
demonstration a satisfactory performance.
Bangladesh scored the second position as
the remittance earning nation. We can
increase our remittance in two ways :
•By exploring new labor market.
•Increasing the skill of existing
manpower working abroad.

29. Foreign direct investment (FDI) is a potent weapon of
developing the economy of Bangladesh and can play an
important role in achieving the country’s socio-economic
objectives including poverty reduction goals. In a capital-
poor country like Bangladesh, FDI can emerge as a
significant vehicle to -
 To build up physical capital,
 To create employment opportunities,
 To develop productive capacity,
 To enhance skills of local labor through transfer
of technology and
 help to integrate the domestic economy with the
global economy.

30. This policy note provides an assessment of the
current situation of FDI in Bangladesh and
examines its impact on the country’s balance of
payments.
FDI usually involves participation in
management, join venture, transfer of
technology & expertise.

33. Dimensional Problems
There are several dimensional problems in
case of poor FDI Performance.
• Lack of branding our investment along
with a poor RMG wings for FDI.
• We have poor infrastructural facilities,
insufficient gas & poor supply &
unstable political setting
• Failing to ensure work place security.

34. Positive Effects On ‘ Balance of
Payment’:
Export:
Bangladesh’s export sector has played a key
role in the country’s economic development over
the past three decades and continues to play an
important role in the economy in terms of
• employment, empowerment and social
change;
• investment;
• foreign exchange earnings; and
• multiplier impacts.

35. Positive Effects On ‘ Balance of
Payment’Income on Investment:
Income on investmentincludes the interest
income, dividend income from foreign
securities and bonds. If the income on
investment increases, the cash inflow of a
country also increases and have a positive
impact on BOP.
Any Receipt of Foreign Money:
Sometimes different donor countries for
example Japan, China provide assistance in
terms of subsidies or loan.

36. Positive Effects On ‘ Balance of
Payment’
Any Gifts Or Aids:
ADB, IDB, World Bank, WHO, UNICEF,
UNAID provides aids in case of educational
and health sector which creates a favorable
position for Bangladesh.
Any Foreign Sale of Stock & Bond:
Foreign securities and bond held by
Bangladeshi people are sold in the foreign
market generate money receipt in our
country.

37. Negative Effects On ‘Balance of
Payment’
Import:
Import has a negative effect not only on BOP
but also on the monetary environment of a country
specially for Bangladesh. If we import products or
services, it reduces foreign reserve. It also increases
the demand for the foreign currency and it causes
devaluation of Taka.
There are some reasons for dependency on import.
Those are given below-
•Global Recession since 2008
•Deteriorating law and order situation which stops
investment
•Slow growth of production

38. •Low exports
•Electricity shortage/Mismanagement which
result in low crops
•Energy crisis causing low output and closure
of many industrial units, which reduces the
exports
•Political instability
•Fiscal policies
•Trade restrictions in developed countries
•Limitless export of primary commodities
Depreciation of Bangladeshi Taka.
•Inflation
•Low foreign exchange remittances

40. Investment in Foreign Country:
Investment generates income. But, too
much investment reduces the reserve of
a country.
Stock of direct foreign investment - abroad:
$108.1 million (31 December 2012 est.)
Country comparison to the world: 89
$107 million (31 December 2011 est.)

41. Payment to Foreign Country:
Sometimes, we have to take loan from the rest of
the world for our country. So, we have to pay
interest and dividend that stimulate the outflow of
Taka. And also if the foreigners invest in our
country, they earn on their investment and take
those money to their country that also stimulate
outflow of money.
Gift or Aid Given:
Bangladesh not only takes gifts/ aids from rest of
the world, but also in case of natural calamities or

42. Any Purchase of Stock or Bonds From
Abroad:
When Bangladeshi people purchases
stocks and bonds from foreign country, then
it increases outflow of money and it reduces
reserve of our money.

43. • Political instability and uncertainty
• GSP (Generalized System of Preference)
Facility
• Lack of good image
• Infrastructural problem
• Indecision of Government
• Lack of proper policy regarding FDI
• Lack of good governance
• Obsolete technology
• Corruption and bureaucratic delay

46. In outside world Bangladesh is familiar as a
 poor,
 terrorist,
 full of natural calamities and
 extremist country.

47. Foreign investors always consider infrastructural
facilities to establish industry in foreign country.
These facilities include
 Transportation
Electricity supply
Gas fuel power supply
Building safety etc.

48. For example, we can say the FDI proposal of
TATA group government cannot take the
decision within one and half years. One reason
is that the lack of effectiveness of the govt. in
case of big proposal.

49. When the government changes FDI policy
also changes. And government cannot take
the better policy regarding coal policy. Due to
change policy within a short period of time
investors are not interested to invest in our
country.

50. If we want to understand about the lack of good
governance , Padma Setu will be the best
example for us to understand.

51. We need to change old technology by
modern technology.

52. Corruption spread in every sector of our
country. Due to corruption and bureaucratic
delay in every sector, investors are afraid to
come in our country for their investment.

53. Foreign direct investment (FDI) may increase Future
expectations:
- Foreign direct investment (FDI) may increase
if there is political stability and continuation of policies.
- If the IMF, World Bank and Asian
Development Bank release their loans for Bangladesh
as promised, then our balance of payment may show
some improvement.
- Friends of Bangladesh have promised
significant monetary support, which will certainly have
a positive effect.
- Imports are expected to decrease. If this
happens, it will have a positive effect on balance of
payment, since this is relying on foreign elements and
support. If this is accomplished, then the balance of

54. •Quality of bureaucracy and governance
•Improvement of law and order situation
•Development of infrastructure and human
resources
•Improvement of port services
•Privatization and further reforms
•Modernization of business law
•Setting up of industrial parks
•Setting up of new EPZs
•Improving the country’s image abroad
•Policies regarding macroeconomic stability
•Economic and commercial diplomacy