CPD comments draw flak from advisers
Monday, 16 July 2007
FE Report
The caretaker government and the central bank Sunday rejected outright the observations of the local think-tank, the Centre for Policy Dialogue, (CPD) saying that the latest monetary policy was "realistic" and would not hurt the economy.
Terming the Bangladesh Bank-prepared policy statement "suicidal," for the economy, the CPD Saturday said it would squeeze the private sector credit and stunt the economic growth momentum. It also flayed the caretaker authority for its decision to raise the prices of fuel, gas and fertiliser.
"I don't agree (with the views) that the monetary policy is suicidal," finance and planning adviser Mirza Azizul Islam told newsmen.
"The latest monetary policy statement will help the government mop up additional liquidity to tame inflation and maintain the macroeconomic stability," Islam said as he brushed aside the CPD's observations about the policy the government will be pursuing in the next couple of months.
Energy adviser Tapan Chowdhury took a swipe at the CPD comments as "baseless" and "uncalled-for."
Similar reaction came from the BB governor Salehuddin Ahmed who dismissed the CPD's comments saying that the monetary policy, prepared by the central bank, would not affect the economy.
"The policy will not have any negative impact on the economy. Nor it will hamper production. We, however, will remain alert so that the credit flow to the private sector is not affected," the BB governor told newsmen.
"…Growth rate of private sector credit that mirrors a part of the aggregate demand grew 15.6 per cent, which was lower than previous year's growth rate of 17.1 per cent," the BB said in its monetary policy.
Citing example of neighbouring India, the finance and planning adviser said that the central bank's monetary stance would help the government mop up additional liquidity to contain inflation, while maintaining the macroeconomic stability.
Islam termed the CPD's observation imaginary and called upon the local think-tank to analyse the impact on interest rate and private sector investment before commenting about the contractionary monetary policy.
Private sector investment went up in proportionate to the growth of gross domestic product (GDP), despite continuation of the contractionary policy during the last three years, he added.
Islam also refuted the CPD allegation about the influence of the International Monetary Fund (IMF) on the government for taking policy decisions, saying that the present administration is not at all biased towards the global lender.
"The government policies sometimes may look identical of the recommendations of the IMF. In fact, the government pursues its own policy," he maintained.
The finance adviser also refused to accept CPD's remark on proposed price increase of fuel and fertiliser as the government is yet to take any final decision on the issue.
He, however, hinted that the upward adjustment of the fuel prices is needed to narrow down the deficit financing.
Otherwise, the government has to cut the development expenditure, squeeze social safety net and reduce agricultural subsidy, which will not be acceptable, he added.
To a query, Islam said reduction of systems loss by three to four per cent will not deliver any good results, as the present oil prices in the international market will push up the power generation cost.
On the proposed fertiliser price hike, Islam noted that the government had information that farmers were more concerned about the timely delivery of the input than the nominal increase of its price.
"The farmers are more worried about the availability of fertiliser in right time," he added.
About another CPD observation on striking a new deal with the IMF, Islam said the government still needs external assistance to implement the development projects and maintain the balance of payment.
"Foreign exchange reserves have shown a robust growth in recent times, thanks mainly to the inflow of record remittances. But those are private flows, not the public money," he observed.
Earlier at a press briefing Saturday, Debapriya Bhattacharya, executive director of the private think-tank, said: "It would be an erratic decision to hike the prices of gas, power, fuel and fertiliser at a time when the prices of all essentials were going up."
Bhattachariya also said the plan to raise the prices of gas, power, fuel and fertiliser in line with the prescription of the IMF would be suicidal.
The caretaker government and the central bank Sunday rejected outright the observations of the local think-tank, the Centre for Policy Dialogue, (CPD) saying that the latest monetary policy was "realistic" and would not hurt the economy.
Terming the Bangladesh Bank-prepared policy statement "suicidal," for the economy, the CPD Saturday said it would squeeze the private sector credit and stunt the economic growth momentum. It also flayed the caretaker authority for its decision to raise the prices of fuel, gas and fertiliser.
"I don't agree (with the views) that the monetary policy is suicidal," finance and planning adviser Mirza Azizul Islam told newsmen.
"The latest monetary policy statement will help the government mop up additional liquidity to tame inflation and maintain the macroeconomic stability," Islam said as he brushed aside the CPD's observations about the policy the government will be pursuing in the next couple of months.
Energy adviser Tapan Chowdhury took a swipe at the CPD comments as "baseless" and "uncalled-for."
Similar reaction came from the BB governor Salehuddin Ahmed who dismissed the CPD's comments saying that the monetary policy, prepared by the central bank, would not affect the economy.
"The policy will not have any negative impact on the economy. Nor it will hamper production. We, however, will remain alert so that the credit flow to the private sector is not affected," the BB governor told newsmen.
"…Growth rate of private sector credit that mirrors a part of the aggregate demand grew 15.6 per cent, which was lower than previous year's growth rate of 17.1 per cent," the BB said in its monetary policy.
Citing example of neighbouring India, the finance and planning adviser said that the central bank's monetary stance would help the government mop up additional liquidity to contain inflation, while maintaining the macroeconomic stability.
Islam termed the CPD's observation imaginary and called upon the local think-tank to analyse the impact on interest rate and private sector investment before commenting about the contractionary monetary policy.
Private sector investment went up in proportionate to the growth of gross domestic product (GDP), despite continuation of the contractionary policy during the last three years, he added.
Islam also refuted the CPD allegation about the influence of the International Monetary Fund (IMF) on the government for taking policy decisions, saying that the present administration is not at all biased towards the global lender.
"The government policies sometimes may look identical of the recommendations of the IMF. In fact, the government pursues its own policy," he maintained.
The finance adviser also refused to accept CPD's remark on proposed price increase of fuel and fertiliser as the government is yet to take any final decision on the issue.
He, however, hinted that the upward adjustment of the fuel prices is needed to narrow down the deficit financing.
Otherwise, the government has to cut the development expenditure, squeeze social safety net and reduce agricultural subsidy, which will not be acceptable, he added.
To a query, Islam said reduction of systems loss by three to four per cent will not deliver any good results, as the present oil prices in the international market will push up the power generation cost.
On the proposed fertiliser price hike, Islam noted that the government had information that farmers were more concerned about the timely delivery of the input than the nominal increase of its price.
"The farmers are more worried about the availability of fertiliser in right time," he added.
About another CPD observation on striking a new deal with the IMF, Islam said the government still needs external assistance to implement the development projects and maintain the balance of payment.
"Foreign exchange reserves have shown a robust growth in recent times, thanks mainly to the inflow of record remittances. But those are private flows, not the public money," he observed.
Earlier at a press briefing Saturday, Debapriya Bhattacharya, executive director of the private think-tank, said: "It would be an erratic decision to hike the prices of gas, power, fuel and fertiliser at a time when the prices of all essentials were going up."
Bhattachariya also said the plan to raise the prices of gas, power, fuel and fertiliser in line with the prescription of the IMF would be suicidal.