WORLD TRADE  
ORGANIZATION  WT/BOP/S/14 
20 April 2007 
 
 (07-1612) 
Committee on Balance-of-Payments Restrictions  
  
 
CONSULTATIONS WITH BANGLADESH 
 
Background Document by the Secretariat
 
 
 
1. This document has been prepared in accordan ce with paragraph 12 of the Understanding on 
the Balance-of-payments Provisions of the GATT 1994. 
I. PREVIOUS CONSULTATIONS WITH BANGLADESH 
2. The Committee on Balance-of-Payments Restric tions last consulted with Bangladesh on 
29 November 2004.  At that time, Members recogni zed that Bangladesh had, in 2002, been granted 
justification under the balance-of-payments provision s to restrict the import of chicks, eggs, common 
salt and cartons until 2009.  They welcomed the di smantling of other restrictions in accordance with 
the time table submitted in WT/BOP/N/54 and looked forward to the notification by the Government 
of Bangladesh regarding the final eliminati on of quantitative restrictions on these items on 
1 January 2005.  On the understanding that Banglad esh would submit a time table for the removal of 
the remaining restrictions by 2007, it was agreed th at the next consultations would be held in the 
spring of 2007.  
3. Since the previous consultation, Bangladesh notif ied the WTO that it had removed restrictions 
on cartons in July 2005.1 
II. MACROECONOMIC AND TRADE DEVELOPMENTS SINCE THE LAST 
CONSULTATION 
A. RECENT ECONOMIC PERFORMANCE  
4. Bangladesh's economy continues to grow at an impressive rate, reaching 6 per cent in 
FY 2005 and 6.7 per cent in FY 2006 on a rebound in  agricultural production and strong clothing 
exports, particularly noteworthy in the knitwear seg ment (Tables 1 and 3).  The increase in GDP per 
capita has also been significant. Inflation accelerat ed somewhat in the last two years on account of 
higher prices for food imports but has recently be gun to ease.  The budget remains in deficit as 
revenue growth remains slow and revenue as a per cent of GDP remains one of the lowest in the 
world.  The financial performance of state- owned enterprises continues to deteriorate. 
5. Sustained growth has supported a steady reduc tion in extreme rural poverty and progress on 
most human development indicators is equally impres sive;  still, a large part of the population remains 
below the poverty line and Bangladesh continues to face formidable challenges in addressing 
infrastructure constraints and improving social services. 
                                                      
1 WT/BOP/N/63, 9 August 2005. WT/BOP/S/14 
Page 2  
 
  6. After recording a deficit of 1 per cent of GDP  in FY 2005, the current account registered a 
surplus of close to 1.5 per cent of GDP in FY 2006  fuelled by strong growth of exports and workers' 
remittances, accompanied by a slowdown in import gr owth brought about by a tightening in monetary 
policy and a depreciation of the taka (Table 2).  Gr oss official reserves incr eased to US 3.4 billion, 
equivalent to about 2.5 months of imports. 
 
TABLE 1 
 
Selected Economic Indicators – FY 2003 – FY 2006
 
 
Fiscal year (ending 30 June) 2002/2003 2003/2004 2004/2005 2005/2006 
 (% change)    
Real GDP 5.3 6.3 6.0 6.7 
Inflation (annual average) 4.4 5.8 6.5 7.2 
Export growth 9.5 7.2 23.2 21.6 
Import growth 13.1 13.0 20.6 12.1 
Central government budget (% of GDP)    
 Total revenue 10.3 10.2 10.5 10.6 
 Total expenditure 13.7 13.3 13.8 13.8 
 Overall balance -3.4 -3.1 -3.3 -3.2 
  Including grants -2.3 -3.9 -3.0 -2.8 
 Domestic financing 1.2 1.8 1.7 2.1 
 Foreign financing 2.1 1.3 1.6 1.2 
 Source : IMF. 
 
 
TABLE 2 
 
Balance-of-Payments FY 2003 to FY 2006   
(US$ million) 
 
Fiscal year (ending 30 June) 2002/2003 2003/2004 2004/2005 2005/2006 
Trade balance -2,215 -2,881 -3,297 -2,879 
 Exports 6,492 6,959 8,573 10,422 
 Imports 8,707 9,840 -11,870 -13,301 
Services -691 -874 -1,123 -1,100 
Transfers 3,440 3,653 4,198 5,347 
 Of which:   workers' remittances 3,062 3,063 3,759 4,802 
Current account balance 76 -476 -888 572 
Capital account balance 1,009 477 923 218 
 Of which:   net aid flows 634 242 491 432 
  foreign investment 378 391 776 743 
Other Capital (incl. Errors and omissions) -431 -460 -806 -1,588 
Overall balance 811 -355 35 790 
Memorandum items:     
Current account balance/GDP 0.1 -0.8 -1.5 0.9 
Gross reserves (US$ million) 2,471 2,714 2,930 3,424 
 (In months of imports of goods and non-
 factor services) 2.9 2.8 2.5 2.6 
Medium- and long-term external public debt 
(US$ million) 16,953 17,196 17,687 18,119 
External debt/GDP 32.8 30.4 29.3 29.1 
Debt-service ratio 8.0 7.1 6.3 5.5 
Real effective exch ange rate (99 = 100)  90 89 86 83 
Nominal GDP (US$ million) 57,719 56,554 60,299 62,245 
GDP per capita (US$) 389.2 417.9 440.1 448.5 
Source :  IMF. 
  WT/BOP/S/14 
 Page 3 
 
 
  7. Continued trade reform and greater regional and global integration are reflected in the 
increase of international trade from 28 per cent of GDP in 2000 to 38 per cent in 2006. With regard to 
merchandise trade, Bangladesh remains heavily de pendent on exports of cl othing and to a lesser 
extent textiles, although some progress in export of agricultural products is evident (Tables 3 and 4). 
8. The large majority of its exports are destined  for North America and Western Europe, while 
nearly one third of its imports are sourced from India and China (Charts 1 and 2).  Trade figures do 
not reflect the substantial unofficial trade (estimated at 13 per cent of total trade in 2000) that is believed to take place, particularly with Banglad esh's large neighbour, India, with which it shares a 
long border.
2  
TABLE 3 
 
Main Exports  
(US$ million, on shipment basis) 
 
 2001/2002 2002/2003 2003/2004 2004/2005 2005/2006 
TOTAL 5,986 6,548 7,603 8,655 10,526 
Of which:      
 Ready-made garments 3,125 3,258 3,538 3,598 4,084 
 Knitwear and hosiery products 1,459 1,654 2,148 2,820 3,817 
 Frozen shrimp and fish 276 322 390 421 459 
 Jute goods 242 257 246 307 361 
 Leather and leather products 207 191 211 221 257 
 Raw jute 61 82 80 96 148 
 Tea 17 15 16 16 12 
Source :  IMF, based on data from Bangladesh authorities. 
  
TABLE 4 
 
Main Imports  
(US$ million) 
 
 2001/2002 2002/2003 2003/2004 2004/2005 2005/2006 
TOTAL (C.I.F. basis) 8,540 9,658 10,903 13,146 14,746 
Of which:      
 Capital goods 2,617 2,735 2,875 2,814 1,539* 
 Textiles 1,063 1,106 1,295 1,571 1,728 
 Petroleum products /  481 620 770 1,253 1,400 
   crude petroleum 242 267 252 350 604 
 Yarn and staple fibre 332 311 380 468 577 
 Oil and oil seeds 323 428 544 528 563 
 Cotton 312 393 583 665 742 
 Food grains 186 409 431 574 418 
Source :  IMF, based on data from Bangladesh authorities. 
* Reclassification in FY 2006. 
 
 
                                                      
2 WTO, Trade Policy Review of Bangladesh, TPR/S/168, 9 August 2006. WT/BOP/S/14 
Page 4  
 
  CHART 1 
 
Bangladesh:  Geographical Distribution of Foreign Trade – 2001/2002 – 2005/2006
 
(In per cent of Total) 
Imports
Other
57%
China
16%India
15%Western Europe
12%
 
 
CHART 2 
 
Bangladesh:  Geographical Distribution of Foreign Trade – 2001/2002 – 2005/2006  
(In per cent of Total) 
Exports
Other
12%
United States
28%
Western Europe
56%Canada
4%
  WT/BOP/S/14 
 Page 5 
 
 
  B. MACROECONOMIC , STRUCTURAL AND TRADE POLICY FRAMEWORK  
9. As noted in the Trade Policy Review held in September 2006, macroeconomic stabilization 
and structural reform have been pursued to steer  economic performance onto a higher growth path and 
assist orderly adjustment to the phasing out of the quotas associated with the ATC.   
10. Fiscal policy has been prudent while tax administration reforms have led to some 
improvements in domestic VAT and income tax collec tion but have yet to translate into substantial 
revenue gains.  The customs tariff is Bangladesh's  main trade policy instrument as well as a major 
source of government revenue (26.4 per cent of to tal tax revenue).  Since government revenue is 
heavily dependent on trade taxes, an associated probl em of tariff liberalization is the loss of tariff 
revenue and its effect on the budget balance.   
11. Following periodic reductions in the last few years, the unweighted average applied tariff 
stood at 12.5 per cent FY 2006.3  The Government has further reduced average import duties 
(including surcharges) by 2.2 percentage points in th e context of the FY 2007 budget.  With regard to 
quantitative restrictions, only live poultry and eggs remain subject to an import ban and common salt 
to an import restriction.   
12. Bangladesh's export-oriented investment regime  has attracted increasingly large inflows of 
foreign direct investment – net foreign investment h as nearly doubled in the last two years.  In the 
area of customs clearance there has been remarkable improvement in overcoming delays.  All customs procedures are now completed in one hour and port  paper work in 2 hours while freight forwarding 
charges have been drastically reduced.
4 
13. Like other LDCs, Bangladesh benefits from dut y and quota free access into the EU but EU 
rules of origin place the country at a disadvantag e relative to competitors with stronger backward 
linkage industries.  In the US market, garment exports from Bangladesh face relatively high tariffs 
and the Government of Bangladesh continues to  seek to secure duty-free access in the US.  
Bangladesh has joined three regional free trade bloc s, namely the South Asia Free Trade Area, the 
Bay of Bengal Initiative for Multi-Sector Technical  and Economic Cooperation and Trade Preferential 
System among the member states of the Organization of Islamic Countries;  details of these free trade 
agreements are still being negotiated. 
__________ 
 
                                                      
3 Economic Review, 2006. 
4 World Bank, Poverty Reduction Strategy Paper:  Bangladesh , 30 October 2005.