NORTH SOUTH UNIVERSITY ASSIGNMENT OF FINANCE 444

BALANCE OF PAYMENT OF BANGLADESH BANK

SUBMITTED TO: MD. REZAUL KARIM (Rkr) FACULTY OF BBA DEPERTMENT NOTH SOUTH UNIVERSITY SUBMITTED BY: Mrinmoy kumar Sikder ID: 083 222 030 SECTION: 5

DATE OF SUBMISSION: 07/08/2011

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 payments for the country's exports and imports of goods, services, and financial capital, as well as financial transfers. The BOP summarizes international transactions for a specific period, usually a year, and is prepared in a single currency, typically the domestic currency for the country concerned. Sources of funds for a nation, such as exports or the receipts of loans and investments, are recorded as positive or surplus items. Uses of funds, such as for imports or to invest in foreign countries, are recorded as negative or deficit items. Balance of payments may be used as an indicator of economic and political stability. For example, if a country has a consistently positive BOP, this could mean that there is significant foreign investment within that country. It may also mean that the country does not export much of its currency. This is just another economic indicator of a country's relative value and, along with all other indicators, should be used with caution. The BOP includes the trade balance, foreign investments and investments by foreigners.

The Bangladesh bank prepares balance of payments positions (BOP) of the country following the IMF Balance of Payments Manual. The data are derived from various sources such as foreign exchange transaction records of authorized dealers, documents of the Ministry of Food on import of food grain by the government, documents of Ministry of Finance on imports financed through foreign loans and grants, and custom records for the preparation of BOP.

Analysis of BOP of Bangladesh Bank In the Bangladesh Banks balancing payment we can see that in year 2010 July to 2011April the trade Balance is $-6430 million. This indicates that the export is less than the import in that time period. Thus the Trade Balance has negative or deficit balance. Moreover, in year of 2009 July to 2010 April the Trade balance was $4509millon.This is again a deficit trade balance.

In year 2009 July to 2010 April the Current Transfer was $9746milion where as in year 2010July to 2011 April this amount was $10097millon.Besically this current Transfer represent the

remittance that comes to our country in official and private way. In worker remittance, Bangladesh Bank is getting more deposits and which is also increase 4.58% with in a year.

In the financial account, the foreign direct investment is decreasing .In year 2009 July to 2010April the net FDI was $723millon. But this amount is decrease with in a year and it became $631milon after the year of 2010 July to 2011April. So it is clear that, foreign companies are losing their interest to invest in Bangladesh.

Overall balance is commonly use to measure the performance of BOP.It place al current account items , capital movement, and also error and omission above the line.Thus a surplus in overall balance indicate increase in reserve and deficit in overall balance represent the decrease in reserve. In 2009-2010 fiscal year the overall balance was $2427million where as in 2010-2011 this amount was $502million .This situation is clearly state that in 2009-2010 Bangladesh bank has surplus reserve but in 2010-2011 it becomes decrease and create a reserve deficit . This is also not a good situation for Bangladesh bank.

To sum up , Bangladesh Banks BOP is not in good position. Already there is trade deficit, FDI are decreasing simultaneously, the overall balance was also in reserve deficit. Thus Bangladesh Bank has to come forward to solve this problem .Some initiatives should take such as increase export, increase portfolio investment, and motivate FdI.

Balance of payments [Monthly Data]

(In million US$)

2009Items 10 JulyApr 201011 JulyMar 201011 JulyApr % Changes 4 over 2

1 Trade balance Export f.o.b.(including EPZ)

2 -4509 12977

3 -5570 16266 12567 21836 -1810 1849 -3659 -926 140 -1066 -168 9016 81 8935 8611 710 342 342 -1298 574 -43 -1829 863 -524 -102

4 -6430 18315 14170 24745 -1993 2094 -4087 -1033 152 -1185 -187 10097 113 9984 9613 641 417 417 -1052 631 -38 -1645 868 -602 -110

41.13 42.34 41.51

Of which : Readymade garments(RMG) 9955 Import f.o.b (including EPZ) Services Receipts Payments Income Receipts Payments Of which : Official interest payments Current transfers Official transfers Private transfers Of which : Workers' remittances Current Account Balance Capital account Capital transfers Financial account Foreign direct investment (net) Portfolio investment (net) Other investment MLT loans (excludes suppliers credit) MLT amortization payments Other long term loans (net) 17486 -1443 1577 -3020 -1141 46 -1187 -184 9746 112 9634 9192 2653 320 320 -87 723 -72 -738 1387 -566 -137

32.78 35.33

3.63 4.58

Other short term loans (net) Other asset Trade credit (net) DMBs and NBDCs Assets Liabilities Errors and omissions Overall Balance Reserve Assets Bangladesh Bank Assets* Liabilities Memorandum Items : Gross reserves (before valuation adjustments) Valuation Adjustment During the Period** Gross reserves (after valuation adjustments) In months of imports of goods and services ODs to ADs and Reserve held at OBUs

3 -648 -622 -155 -226 71 -459 2427 -2427 -2427 -3288 861 10759

168 -542 -1359 -333 -474 141 -281 -527 527 527 566 -39 10545

424 -403 -1758 -64 -356 292 -508 -502 502 502 169 333 10943

-157 10602 5.17 na

186 10731 3.8 -361

373 11316 3.9 -362

End