However, the overall balance of payment (BoP) showed a slight deficit during the same period due to declining net foreign direct investment (FDI) and foreign aid.

The trade deficit dropped by 6.27 percent during July, 2005-January, 2006 period, down from $100 million during the corresponding period of the previous year and stood at $1.49 billion.

The current account balance now shows a surplus of $262 million, which was a deficit of $209 million during the same period of the previous year.

Last year, the current balance account hit deficit for the first time in three financial years, following which the central bank adopted a cautious monetary policy. Following the tightened monetary policy the country's external balance sheet's position improved, although taka was depreciated against dollar.

During July-January period in the current fiscal year import grew by 11.3 percent which during the same period of the previous year was 24.50 percent.

Fresh opening of letters of credit (L/Cs) for import during the same period increased by 2.49 percent, which was 23.20 percent in the same period of the previous fiscal year. This shows the import will go down further in the coming months.

On the other hand, export during July-January of FY'06 increased by 16.92 percent, which in the corresponding period of the previous year was 14.58 percent.

During July-February of the FY 06 remittance increased by 23.76 percent, which was 10.55 during the same period of the previous year.

The decrease in import growth and the rise in export and remittance resulted in a surplus of the current account balance.

But net FDI dropped by 6.78 percent over the first seven months of the current fiscal year and stood at $371 million and net foreign aid shrank by 53 percent during the same period and stood at $294 million.

Sources said though trade deficit dropped, the overall balance of payment showed a deficit of $11 million during the first seven months of the current fiscal year due to the decline in FDI and foreign aid.

GOVERNMENT BORROWING
The decline in foreign aid has not only created negative pressure on the balance of payment but also forced the government to borrow from internal sources.

The government's borrowing from internal sources during the first seven months of the current fiscal year rose by 53 percent and stood at Tk 3343. Of the amount, the government's net borrowing from the banking source rose by 231 percent. This year the government borrowed Tk 1784 crore while the amount was Tk 538 crore during the same period of the previous year.

However, the government's borrowing from the savings instruments reduced by 5.11 percent during the period.