Dubbing the caretaker authority's market intervention mechanism as "temporary solution," the Centre for Policy Dialogue said Saturday the deployment of paramilitary BDR in stabilising the prices of essentials would not grind out any tangible results in the long term.
"We consider it (BDR interventions) a temporary solution, obviously not a permanent measure," research director of CPD Mustafizur Rahman told a press conference. The CPD, a local research form, organised the press conference to share the findings of the State of the Bangladesh Economy FY 2007 with the local media.
"The BDR operations may be a short-term measure of the government not to let the prices of essential commodities go up further as Ramadan nears," he said.
Rahman said the deployment of Bangladesh Rifles (BDR) personnel to sell daily essentials would not simmer down the overheating commodity market in the long term.
The government should patronise more importers and make the market more competitive, while dismantling the clout of a handful of traders, the trade expert said as he put forward a specific suggestion in redressing the situation.
In its report, the CPD warned the national inflation is unlikely to come down below 7.0 per cent in near future.
It said the government should pursue a price-stabilisation policy to decrease price volatility. "It's more of a supply side issue. It's not a macroeconomic problem, rather a product-specific issue," the report noted.
On the domestic front, the CPD identified lack of institutional monitoring mechanism, collusion of market agents, increased production cost of domestic commodities, enhanced transportation costs and too many market intermediaries are the major reasons behind the creeping inflation, particularly food inflation.
Relatively high interest rate and bank charges, dislocation in market structure due to anti-corruption drive, and information gap between different stakeholders are also blamed for the price spiral.
The report also found global supply shocks due to adverse climatic conditions in major exporting countries and international price hike of petroleum products to be other factors that exacerbated the price situation.
According to the report, the rural food inflation is higher than all other classification of inflation most of the times, if not always.
In his speech, executive director of the CPD Debapriya Bhattachariya said Bangladesh should no longer sign any fresh agreement with the International Monetary Fund (IMF) that could cost sovereignty of the country.
"There's no reason to sign any deal with the IMF, given the country's balance of payments situation and healthy foreign exchange reserves," the CPD economist felt, as he said foreign assistance could enmesh Bangladesh in the "aid trap."
Bhattacharya lauded the current reform measures by the caretaker government, saying the nation may not reap the benefits of reforms within a short time, but those would be beneficial for the country in the long run.
"If good governance prevails, the GDP growth could increase by 1.0 to 2.0 per cent," he said.
The CPD executive director was critical of the demolition of illegal business structures of the poor people, especially in slum areas. "In those illegal structures poor people ran their legal business, which contributed to the economy, although that economy is part of the informal economy," he told reporters.
The CPD executive director listed 16 challenges for the government in the next fiscal year - a period when no political government will be in office and no parliament in session.
The challenges include stabilising market price (particularly food prices), realistic growth projection, addressing inequality, investment augmentation, improved domestic savings, expanding domestic tax base, improving quality of ADP implementation, improving investment in agriculture, proper utilisation of allocation in power, education and health.
Sustaining export growth, improving FDI flow, greater mobilisation of equity capital, sustaining remittance flow, pushing forward structural reforms and greater foreign aid flow are the other challenges.
About the foreign direct investment (FDI), the report said it declined by 16.5 per cent to US$ 435 million during July-March of the current fiscal, although the target for the financial year was set at $1.2 billion.
The downturn is also noticeable as far as foreign aid disbursement is concerned, with Bangladesh receiving $976 million during July-April period of the fiscal 2007, down by 4.3 per cent from the corresponding period of the FY 06. The budgetary target of foreign assistance was $1.8 billion.
However, the flow of remittances has been phenomenal, registering a growth of 26.2 per cent in the first 10 months of the FY07 compared to the corresponding period of FY 2006.
The country received $5.2 billion in remittances from expatriate Bangladeshis until May 21 of fiscal 2006-07, reaching all time high.
© 2024 - All Rights with The Financial Express
