Economy faces four key challenges
Wednesday, 19 March 2008
Shakhawat Hossain
Bangladesh economy faces four big challenges at present, with inflation spurred by an 'astronomical' price rise of food-grains and crude oil the biggest headache for the government, the finance ministry said.
Maintaining healthy growth of exports amid fears of recession in the United States, climate change and maintaining the momentum of reforms are the three other key challenges the country is facing at the moment, it said.
The document was presented during a meeting between the Finance adviser Mirza Azizul Islam and the visiting managing director of the World Bank, Ngozi Okonjo-Iweala.
The WB managing director was told that "while the overall macro economic management is satisfactory," the country was still battling with domestic and external factors that are "generating some stress in the economy," it said.
"The 'astronomical rise" in the prices of oil, foodgrains, fertilisers, and edible oil in the international market has further widened the negative trade balance," it said.
The sky-rocketing price hike has also boosted inflation to an all time record high of 11 per cent in January, after it maintained a double digit rate since the beginning of the fiscal year in July.
Experts have blamed a demand supply gap and a weak taka against a massively falling dollar for much of the high price pressures in the country.
The ministry said the floods in July and August and the cyclone in November have put a strain on the fiscal balance, forcing the government to undertake huge unforeseen expenditure.
The government has earlier put the cumulative damages of the two disasters to 2.8 billion dollars, making a huge dent on the growth prospect for the current fiscal year.
The Finance Adviser in his budget speech last June forecast a seven per cent growth, but he lowered the target to around six per cent due to the devastating natural disasters.
It said exports have picked up growth momentum in the second quarter after some 'initial setbacks' in the first quarter but maintaining the growth remains a top challenge due to 'recessionary tendency' in the US, the top buyers of Bangladeshi goods.
The country's export growth was in the negative territory even after five months of the fiscal, but it made a stunning comeback in the next two months, with seven months' growth now hovering around 9.78 per cent.
The country also needs to "mainstreaming climate changes issue through adoption measure', amid worries by global experts that the wheels of the country's development can be turned back by frequent bouts of natural disaster like flood, draught and cyclone, it added.
"Maintaining the momentum of the reforms in the coming days" remains a challenge in the wake of the failed government attempt to privatise loss-making Rupali Bank.
The ministry, however, listed growth in remittance as the "one silver lining" as it has helped contain the current account balance deficit within a reasonable limit despite higher import payment due to international price hike of major commodity products.
Bangladeshi working and living abroad have in the first eight months of the fiscal remitted US$ 4.8 billion dollars, clocking a growth of over 26 per cent growth.
Bangladesh economy faces four big challenges at present, with inflation spurred by an 'astronomical' price rise of food-grains and crude oil the biggest headache for the government, the finance ministry said.
Maintaining healthy growth of exports amid fears of recession in the United States, climate change and maintaining the momentum of reforms are the three other key challenges the country is facing at the moment, it said.
The document was presented during a meeting between the Finance adviser Mirza Azizul Islam and the visiting managing director of the World Bank, Ngozi Okonjo-Iweala.
The WB managing director was told that "while the overall macro economic management is satisfactory," the country was still battling with domestic and external factors that are "generating some stress in the economy," it said.
"The 'astronomical rise" in the prices of oil, foodgrains, fertilisers, and edible oil in the international market has further widened the negative trade balance," it said.
The sky-rocketing price hike has also boosted inflation to an all time record high of 11 per cent in January, after it maintained a double digit rate since the beginning of the fiscal year in July.
Experts have blamed a demand supply gap and a weak taka against a massively falling dollar for much of the high price pressures in the country.
The ministry said the floods in July and August and the cyclone in November have put a strain on the fiscal balance, forcing the government to undertake huge unforeseen expenditure.
The government has earlier put the cumulative damages of the two disasters to 2.8 billion dollars, making a huge dent on the growth prospect for the current fiscal year.
The Finance Adviser in his budget speech last June forecast a seven per cent growth, but he lowered the target to around six per cent due to the devastating natural disasters.
It said exports have picked up growth momentum in the second quarter after some 'initial setbacks' in the first quarter but maintaining the growth remains a top challenge due to 'recessionary tendency' in the US, the top buyers of Bangladeshi goods.
The country's export growth was in the negative territory even after five months of the fiscal, but it made a stunning comeback in the next two months, with seven months' growth now hovering around 9.78 per cent.
The country also needs to "mainstreaming climate changes issue through adoption measure', amid worries by global experts that the wheels of the country's development can be turned back by frequent bouts of natural disaster like flood, draught and cyclone, it added.
"Maintaining the momentum of the reforms in the coming days" remains a challenge in the wake of the failed government attempt to privatise loss-making Rupali Bank.
The ministry, however, listed growth in remittance as the "one silver lining" as it has helped contain the current account balance deficit within a reasonable limit despite higher import payment due to international price hike of major commodity products.
Bangladeshi working and living abroad have in the first eight months of the fiscal remitted US$ 4.8 billion dollars, clocking a growth of over 26 per cent growth.