Commodities drive surge in Bangladesh deficit-ADB

DHAKA, May 18 (Reuters) - The Asian Development Bank (ADB) on Sunday blamed surging prices of imported commodities for a jump of almost 53 percent in Bangladesh's trade deficit for the first eight months and said the budget was on track for a wider-than-expected deficit.

"Higher import bills amplified by rising international commodity prices, pushed the trade deficit to $3.2 billion during July-February of 2008 fiscal year, up from $2.1 billion," said Hua Du, the ADB's country director in Bangladesh.

The economy is was under tremendous pressure due to rising prices of fuel and food in international markets along with repeated natural calamities in 2007, she said.

"Food subsidies, because of higher international prices and domestic production shortfall for floods and cyclone are estimated at $1.3 billion or 1.7 percent of GDP (gross domestic products) in fiscal year of 2008," Hua told reporters while releasing a quarterly economic update.

The latest ADB report said Bangladesh's fiscal deficit for fiscal 2008 was likely to increase to 4.8 percent of GDP from 3.2 percent.

The national budget for the year estimated that the deficit would be 4.2 percent of GDP.

"Pressures on the fiscal balance increased because of flood and cyclone relief and rehabilitation expenditures; and a sharp rise in subsidies following the rise in fuel, fertilizer, and food-grain prices in international markets," the report said.

Floods and a cyclone last year killed nearly 4,500 people, made millions homeless, destroyed around 3 million tonnes of rice and other grains in the fields, and destroyed infrastructure in rural areas, officials said.

"Administered prices of fuel and fertilizer continue to generate substantial fiscal cost to the government," the report said.