BB, IMF differ on growth projection, Agrani divestment

FE Team | Published: October 29, 2007 00:00:00 | Updated: February 01, 2018 00:00:00

Shakhawat Hossain
The central bank has found the International Monetary Fund (IMF) suggestion to shorten the period for classification of default loans and divest the Agrani Bank by November 30 next year unacceptable.
It has also differed with the IMF on a number of issues, including the gross domestic product (GDP) growth and annual rate of inflation projections for the current fiscal year (2007-08), sources said.
An IMF exploratory mission in an Aid Memoire, prepared and submitted to the government at the end of its visit to Bangladesh last month, projected a GDP growth rate of 5.5 per cent for this fiscal taking into consideration the effects of recent floods and negative impact of the ongoing ant-graft drive on economic activities.
But the central bank during a meeting with the same mission did not accept the projection and said the GDP growth could be 0.5 percentage point less than the original projection of 7.0 per cent for the current fiscal.
The BB has projected average inflation rate at 8.5 per cent which is 0.5 percentage point lower than that projected by the IMF for the current fiscal.
Central bank governor Saleh Uddin Ahmed chaired the meeting with the IMF mission.
The BB also disagreed on the IMF suggestions to bring about changes in the definition of default loan and termed the deadline of November 2008 for divestment of Agrani bank as impractical.
The IMF suggested shortening of the period from existing 90 days to 30 days for classification of default loans.
Such recommendation cannot be taken up at this stage, the BB told the IMF mission, adding that the central bank has already taken some steps to gradually introduce internationally accepted practices.
On Agrani bank divestment within November 30 next year, the central bank said: "Considering the experience of Rupali Bank, divestment of the Agrani Bank within the date specified does not seem to be practical."
The government is in an awkward position following the delay on the part of Saudi Prince Bandar Bin Mohammed Bin Abdulrahman Al-Saud in acquiring the majority shares of the Rupali Bank.
The Saudi prince was the highest bidder for more than 90 per cent stakes of the largely stated owned Rupali Bank at around US$450 million after the government put the bank on sale in line with an agreement with the IMF in 2004.
The government has been waiting for the Saudi prince's response since early this year to sign the final contract.
Besides, the BB commented that the central bank was not the regulatory authority for fund management and insurance companies after IMF wanted the central bank to issue guidelines for pension funds and insurance companies.
The BB also did not make any commitment on lifting restrictions on non-resident taka account within the current fiscal although it assured the IMF to review the issue.
The BB position said although the country is facing the challenge of inflationary pressure, it cannot forget about employment creation and income generation.
"This imperative coupled with the requirement for post flood rehabilitation would necessitate accelerating investment in the private sector," said the BB.
The BB observed that the monetary targets set in the earlier PRGF had to be revisited and further tightening of the monetary policy might force the economy to a recessionary path.
Meanwhile, the FE in a front-page story published Sunday said the government has scaled down the growth projection to 5.5 per cent from the original 7.0 per cent for the current fiscal year. Actually, an IMF exploratory mission on Poverty Reduction Growth Facility (PRGF) in its draft Aid Memoire made the GDP growth projection, not the government. The Mission submitted the Memoire to the government.