Donor appreciation and tasks at home
Tuesday, 3 July 2007
Syed Fattahul Alim
Economy and the government that presides over it, are two different entities. They may sometimes be at cross purposes. In the case of the least developed and poorly performing economics, the people at home as well as the wider world beyond the national borders are apt to put the blame for non-performance of the economy squarely on the government's shoulder. Bangladesh as a newly emerging country on the world map and inheriting a legacy of deprivation and poor governance at birth, turned out to be an ideal whipping boy before the international community since day one of its coming into being. An infamous remark by famous diplomat of global repute portrayed Bangladesh as an international basket case even when the country was struggling to come out of the ravages of the war of independence. Small wonder that the calumny continues to haunt the nation even when it is well into the fourth decade of its existence. Of late, the scenario appears to be changing at least in the eyes of the international donor community.
Understandably; the ongoing drive for reform in politics, governance and economic management has been appreciated by the donor agencies. The multilateral bodies representing mostly the will of the very powerful countries of the North have commended the recent performance of the economy. The International Monetary Fund (IMF), the World Bank (WB) and the Asian Development Bank (ADB) are all visibly happy about the performance of the economy in the recent times. The IMF in a recent report has lauded the performance of Bangladesh in achieving most of the programme objectives set by its fund titled Poverty Reduction Growth Facility (PRGF). The multilateral donor agency report expressed satisfaction that the many indicators devised by the international experts to measure the worth and performance of the different economies in the world, especially in the South, do now respond well to the case of Bangladesh economy, so far as its macro-level management is concerned. The poverty index reflected through the UN's Millennium Development Goals (MDGs), the government steps for planned reforms in the financial management in the public sector and adoption of the medium term budgetary framework are all welcomed by the IMF. Having thus won the appreciatory remarks from the IMF, there is no reason why Bangladesh should not stake its claim on the last tranche of the PRGF from IMF amounting US $ 100 million. This is certainly a good piece of news for the incumbent government.
However, while appreciating the various achievements made by the economy including the record of stable growth for the past few years, the IMF report, however, has looked critically at the under-execution of the country's development spending.
In its recommendations the IMF report further said that the government should make upward adjustment of the price of natural gas for the sake of its efficient use, further liberalise the exchange rate regime of taka, tighten the monetary policy and implement Financial Sector Assessment (FSAP) recommendations made by IMF in 2003.
The multilateral donor agency is of the view that implementation of its suggestions and recommendations will lead to more efficient and transparent governance of the economy. There is certainly a lot of logic and goodwill in such recommendations made by the IMF and suchlike multilateral donor bodies that have a huge stake in the global financial management in order that the road for free movement of goods and services across the national borders everywhere remains free of encumbrances. There is, however, a catch here. Markets follow a cruel law that is predisposed to reward the stronger players. In a free market paradigm, the goods and services that have the sharper competitive edge turn out to be the ultimate winner in the struggle for survival. Economies that cannot match their stronger counterparts in producing the various goods and services with a better competitive are doomed to eternal perdition.
The relevance of alluding to this special, albeit cruel, feature of the free market ideology is that the ultimate goal of the IMF and the World Bank prescriptions is to remove the obstacles to the expansion of the global market. And in that greater mission for the larger picture, the smaller voices and needs are often go unattended and unheeded most of the time. What is more, they are even mercilessly bulldozed into the silence of obedience and conformity. Recently, the World Bank and the IMF themselves have come under closers scrutiny for their bias to pet ideologies regardless of the specificities of the economies they try to address. One may like to mention here the East Asian crash of the nineties.
So, in the face of these otherwise well-intentioned advice, recommendations and prescriptions of the multi-lateral donor agencies like the IMF, the recipient governments need be more circumspect about swallowing their aid packages and attending regimen hook, line and sinker. There should be certain exercise of informed choice on the part of government at the receiving end. There is no reason why the experts and executives of the global funding agencies will not appreciate, if the government leaders of the receiving economies are able to demonstrate even a semblance of maturity while putting across their options before the former. Such maturity in handling the issue of aid and various suggestions from the donors would go a long way towards better management of the foreign aid by the recipient economies.
Returning to the case of Bangladesh, a few cautionary notes may not be quite out of place in this context.
The suggestion of increasing, for instance, the tariffs on gas, power and the charges of other utilities including oil price does make sense when one looks only at the government's book of account. Increased revenue earning from a widened tax base and forex reserve from growing remittances by Bangladeshi wage earners living abroad should ideally render the macro-economy stronger and better performing. The impacts of the upward adjustment in the prices of gas, oil and utility charges, reduction of the subsidies, increased interest on credits and contractionary monetary policy to offset the inflationary trend are all good so far as they are meant to strike a balance in the dry balance sheet of the government's income and expenses. But in real life situation these measures will affect the lives of the people in the middle and low income brackets both in the urban and semi-urban contexts. That is simply because, their levels of income have not increased at a par with the rise in the cost of living. It is claimed that the measures referred to above do contribute towards reducing poverty, but the reality on the ground is that the gap between the rich and the poor is widening inexorably. The poor are getting poorer and the line of the dispossessed from the rural hinterland towards the cities is getting longer with every passing day.
But in the cities the citizens, excepting the few rich ones, are smarting under the pressure of increased cost of living and diminished purchasing power of the money they earn. How will the cities then cope up with the added pressure of the rural migrants?
The government will have to address these issues on its own by creating more job opportunities in the rural areas. The expatriates' remittance money may, of itself, do no good other than showing a bloated income account of the government unless it is also invested in useful productive activities. Similarly, the increased revenue earning through expanded tax base may prove to be of little value if the money itself loses its purchasing power. And the reduced level of lending from the banks and the contractionary monetary policy would suppress not just the inflationary trend, they may also discourage fresh investments in the economy.
For increasing the real worth of the economy, what is of overriding importance at the moment is more investment both in the public and the private sectors. At the same time, the government has also to take the specific and unique aspects of our society and economy into account, while accepting the guidance and prescriptions of its international partners in development.
Economy and the government that presides over it, are two different entities. They may sometimes be at cross purposes. In the case of the least developed and poorly performing economics, the people at home as well as the wider world beyond the national borders are apt to put the blame for non-performance of the economy squarely on the government's shoulder. Bangladesh as a newly emerging country on the world map and inheriting a legacy of deprivation and poor governance at birth, turned out to be an ideal whipping boy before the international community since day one of its coming into being. An infamous remark by famous diplomat of global repute portrayed Bangladesh as an international basket case even when the country was struggling to come out of the ravages of the war of independence. Small wonder that the calumny continues to haunt the nation even when it is well into the fourth decade of its existence. Of late, the scenario appears to be changing at least in the eyes of the international donor community.
Understandably; the ongoing drive for reform in politics, governance and economic management has been appreciated by the donor agencies. The multilateral bodies representing mostly the will of the very powerful countries of the North have commended the recent performance of the economy. The International Monetary Fund (IMF), the World Bank (WB) and the Asian Development Bank (ADB) are all visibly happy about the performance of the economy in the recent times. The IMF in a recent report has lauded the performance of Bangladesh in achieving most of the programme objectives set by its fund titled Poverty Reduction Growth Facility (PRGF). The multilateral donor agency report expressed satisfaction that the many indicators devised by the international experts to measure the worth and performance of the different economies in the world, especially in the South, do now respond well to the case of Bangladesh economy, so far as its macro-level management is concerned. The poverty index reflected through the UN's Millennium Development Goals (MDGs), the government steps for planned reforms in the financial management in the public sector and adoption of the medium term budgetary framework are all welcomed by the IMF. Having thus won the appreciatory remarks from the IMF, there is no reason why Bangladesh should not stake its claim on the last tranche of the PRGF from IMF amounting US $ 100 million. This is certainly a good piece of news for the incumbent government.
However, while appreciating the various achievements made by the economy including the record of stable growth for the past few years, the IMF report, however, has looked critically at the under-execution of the country's development spending.
In its recommendations the IMF report further said that the government should make upward adjustment of the price of natural gas for the sake of its efficient use, further liberalise the exchange rate regime of taka, tighten the monetary policy and implement Financial Sector Assessment (FSAP) recommendations made by IMF in 2003.
The multilateral donor agency is of the view that implementation of its suggestions and recommendations will lead to more efficient and transparent governance of the economy. There is certainly a lot of logic and goodwill in such recommendations made by the IMF and suchlike multilateral donor bodies that have a huge stake in the global financial management in order that the road for free movement of goods and services across the national borders everywhere remains free of encumbrances. There is, however, a catch here. Markets follow a cruel law that is predisposed to reward the stronger players. In a free market paradigm, the goods and services that have the sharper competitive edge turn out to be the ultimate winner in the struggle for survival. Economies that cannot match their stronger counterparts in producing the various goods and services with a better competitive are doomed to eternal perdition.
The relevance of alluding to this special, albeit cruel, feature of the free market ideology is that the ultimate goal of the IMF and the World Bank prescriptions is to remove the obstacles to the expansion of the global market. And in that greater mission for the larger picture, the smaller voices and needs are often go unattended and unheeded most of the time. What is more, they are even mercilessly bulldozed into the silence of obedience and conformity. Recently, the World Bank and the IMF themselves have come under closers scrutiny for their bias to pet ideologies regardless of the specificities of the economies they try to address. One may like to mention here the East Asian crash of the nineties.
So, in the face of these otherwise well-intentioned advice, recommendations and prescriptions of the multi-lateral donor agencies like the IMF, the recipient governments need be more circumspect about swallowing their aid packages and attending regimen hook, line and sinker. There should be certain exercise of informed choice on the part of government at the receiving end. There is no reason why the experts and executives of the global funding agencies will not appreciate, if the government leaders of the receiving economies are able to demonstrate even a semblance of maturity while putting across their options before the former. Such maturity in handling the issue of aid and various suggestions from the donors would go a long way towards better management of the foreign aid by the recipient economies.
Returning to the case of Bangladesh, a few cautionary notes may not be quite out of place in this context.
The suggestion of increasing, for instance, the tariffs on gas, power and the charges of other utilities including oil price does make sense when one looks only at the government's book of account. Increased revenue earning from a widened tax base and forex reserve from growing remittances by Bangladeshi wage earners living abroad should ideally render the macro-economy stronger and better performing. The impacts of the upward adjustment in the prices of gas, oil and utility charges, reduction of the subsidies, increased interest on credits and contractionary monetary policy to offset the inflationary trend are all good so far as they are meant to strike a balance in the dry balance sheet of the government's income and expenses. But in real life situation these measures will affect the lives of the people in the middle and low income brackets both in the urban and semi-urban contexts. That is simply because, their levels of income have not increased at a par with the rise in the cost of living. It is claimed that the measures referred to above do contribute towards reducing poverty, but the reality on the ground is that the gap between the rich and the poor is widening inexorably. The poor are getting poorer and the line of the dispossessed from the rural hinterland towards the cities is getting longer with every passing day.
But in the cities the citizens, excepting the few rich ones, are smarting under the pressure of increased cost of living and diminished purchasing power of the money they earn. How will the cities then cope up with the added pressure of the rural migrants?
The government will have to address these issues on its own by creating more job opportunities in the rural areas. The expatriates' remittance money may, of itself, do no good other than showing a bloated income account of the government unless it is also invested in useful productive activities. Similarly, the increased revenue earning through expanded tax base may prove to be of little value if the money itself loses its purchasing power. And the reduced level of lending from the banks and the contractionary monetary policy would suppress not just the inflationary trend, they may also discourage fresh investments in the economy.
For increasing the real worth of the economy, what is of overriding importance at the moment is more investment both in the public and the private sectors. At the same time, the government has also to take the specific and unique aspects of our society and economy into account, while accepting the guidance and prescriptions of its international partners in development.