External Sector

The external sector of the economy refers to the international transactions that all residents of the country (private and public sector) conduct with the rest of the world. Such transactions are systematically recorded in detail within a framework that groups them into accounts, where each account represents a separate economic process or phenomenon of the external sector. The external accounts form part of an integrated system of statistics of the economy, and thus all definitions, classifications and accounting rules must be harmonized so that external sector aggregates can be compared and summed with other macroeconomic data, such as those of national accounts, monetary statistics and government statistics.

Role of External Sectors in Bangladesh Economy

External sectors such as export, import, remittances, and foreign aid have always played important roles to Bangladesh’s economy. However, the relative importance of the various external factors has changed over time. In the 1970s, the growth of the economy was sluggish and growth of exports was insignificant. The volume of export of Bangladesh’s major traditional items was actually lower in most years of the decade of seventies than what is attained in FY1970, the year before the start of the liberation war. Both the balance of trade deficit and the current account deficit as a proportion of GDP almost doubled between FY1973 and FY1980.During that period the country was following an import substituting industrial policy and the global economy had a protectionist approach to trade. In addition, the country was recovering from the losses from the independence war in 1971, domestic real shocks of two consecutive droughts in 1972 and 1973 and floods in 1974. During the 1980s, Bangladesh had started to shift from import substituting industrial and protectionist trade policies towards export-oriented industrial policies. Towards this the country had initiated important reforms in domestic policies. The 1980s was...