Coordination council to discuss macro-economic situation, ways to help overcome strains Thursday

Nazmul Ahsan A meeting of the Council for the Coordination of Fiscal, Monetary and Exchange Rate Policies (Coordination Council) will be held on Thursday next to review the current macro-economic challenges and find out ways to help overcome them, a senior official in the Ministry of Finance (MoF) said. Poor disbursement of foreign aid and rising trade imbalance that caused strains on the country's balance of payment (BoP) will figure in prominently at the meeting. Finance Minister AMA Muhith will preside over the meeting. The Governor of Bangladesh Bank (BB), Chairman of National Board of Revenue (NBR), secretaries of finance division, banking and financial institutions division, economic relations division (ERD) under the MoF, and secretaries of commerce and planning ministries, who are also members of Coordination Council, are expected to attend the meeting. "The meeting of the Coordination Council will discuss how to address the current BoP problems, lower government's borrowing from the banking system and consider the arrangement to foot the rising subsidies bill," a top finance official old the FE on Saturday. He said the government is now faced with multiple internal and external complexities that resulted in severe deterioration of BoP situation, huge bank borrowing and large spending burden by way of subsidies. "We are confronted with multi-faceted economic problems having no quick fix to get out of the mire," another top MoF official said. He said the meeting might also discuss issuing sovereign bond to international markets in a bid to address the current BoP-related problems. The City Bank NA and Standard Chartered Bank have recently proposed to the MoF to issue the bond as a move to deal with the current economic challenges, he added. "We are examining the entire issue of issuing the bond. The expert opinion from the Coordination Council meeting may be sought before taking a final decision on it," the official told the FE. Meanwhile, the BB, in a recent communication made to MoF, has expressed its great concern over the looming BoP problems and urged the government to take necessary steps to help attract foreign currency to the country, a source said. In the first three months of the current fiscal year, the current account balance declined to about $310 million, which is less than half of the amount during the corresponding period of the previous fiscal year. During the corresponding period last year, the surplus in current account balance was $622 million. The International Monetary Fund (IMF) has projected that the current account balance may face a deficit by $849 million in the current fiscal year, while the balance was $995 million in surplus last year. In the first two months of the current fiscal year, the deficit in financial account was around $1.0 billion against $1.58 billion during the whole period of last year. According to data of ERD, foreign aid disbursement declined by 28 per cent to $246 million in the first three months of the current fiscal year, down by $61 million from what was received during the corresponding period of the previous fiscal year. The situation about foreign aid has shown a further worsening trend after the major financiers of Padma Bridge including the World Bank and Asian Development Bank have suspended disbursing their committed fund, an ERD official said. Officials concerned said the amount of subsidy for the current fiscal, originally estimated at Tk 224.70 billion, could rise up to Tk 400 billion if price adjustments in various sectors are not made again. In the last fiscal, subsidy was originally estimated at Tk 142.63 billion. But it went up to Tk 193.99 billion under the revised budget. "It is not unlikely that Coordination Council will advocate for further price hikes in power and energy to help rein in the swelling amount on account of the overall subsidies bill," a high official in MoF told the FE. He said the total borrowing target of the government for the current fiscal year (FY) 2011-2012 is likely to exceed by this week.