IMF advises BB to watch global crisis impact, spend forex prudently

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FE Report
The International Monetary Fund (IMF) has suggested Bangladesh to closely monitor any impact arising from the current global financial crisis on the country's exports, particularly readymade garments, and inflow of remittances.
This was communicated by a visiting IMF mission, led by its Adviser for Asia Pacific Department, Thomas Rumbaugh, to Bangladesh Bank (BB) governor at a wrap-up meeting held in the central bank Wednesday.
The central bank maintained that exports, were unlikely to fall abruptly and the inflow of remittances had maintained a satisfactory trend during the first four months of the current fiscal.
"The inflow of remittances and export earnings have so far been satisfactory," BB Governor Salehuddin Ahmed told reporters after the meeting with the IMF mission.
The IMF mission that concluded a 6-day review of the country's economy in the backdrop of the global economic recession also advised the BB to be prudent in the use of foreign exchange reserve.
The foreign exchange reserve stood at US$ 5.16 billion Wednesday, which is estimated to be sufficient to meet the costs of imports for nearly three months.
"Our foreign currency reserve is still hovering over $5.0 billion," BB governor said, adding that the country's foreign exchange reserve did not fall like other countries.
The Washington-based multilateral funding agency also expressed the fear that the accelerated credit growth might fuel inflation to go beyond the projected 9.0 per cent.
The central bank, however, argued that the country's inflation would not go up because the commodity prices were maintaining a falling trend in the global market, the BB governor added.
The BB has already predicted that the twelve-month average inflation rate is more likely to remain in the range of 8.50 per cent and 9.0 per cent in fiscal 2008-09 that was estimated at 9.0 per cent earlier by the government.
In June last, the government said in its budget document that the average inflation would come down to 9.0 per cent in FY09.
The IMF mission also pointed out the risk of high growth in private sector credit in the recent days that might push money supply in the banking system.
"The high credit growth at 27-28 percent is acceptable only for a temporary period, but it cannot continue for a long period," Mr. Ahmed said replying to a query.
UNB adds: Finance adviser Mirza Azizul Islam said the present government was leaving three legacies on the broader economic front for the next elected government to accelerate the economic growth.
"The growth will have to be largely based on private sector and, at the same time, the government will act as a provider and facilitator that we've tried to maintain," he told reporters about one of the legacies, after a meeting with an IMF mission at the planning ministry.
The other legacies, the adviser said, would be to strengthening the institutions the government brought in as part of the reforms they pursued and strengthening agriculture sector as they brought back on the forefront after a long time.
"We hope these initiatives will be sustained to help accelerate economic growth of the country," he said, replying to a question.
IMF mission had a wrap up meeting with the finance adviser as they reviewed the country's economic situation in the backdrop of the global financial crisis, expressing satisfaction over the macroeconomic management.
The adviser said they (IMF) appreciated the economic performance despite the country having adverse domestic and external shocks during the last two years, followed by the recent financial crisis.
In view of the political transition, the mission leader Thomas Rambough, IMF's adviser for the Asia-Pacific Region, said the next elected government needed to continue with the path of reforms that helped the economy doing well despite the domestic and external adversities.