Govt may seek PRGF extension, or strike similar deal with IMF
Tuesday, 12 June 2007
Shakhawat Hossain
Finance and planning adviser Mirza Azizul Islam hinted Monday that the caretaker government would either seek extension of the Poverty Reduction Growth Facility (PRGF) or strike a new deal on a similar credit programme with the International monetary Fund (IMF).
"We still need foreign assistance to carry out our annual development programme," he told reporters at his office in reaction to suggestions by economists that Bangladesh should discontinue tied credit programme.
Almost 49 per cent of the new fiscal's Tk 265 billion annual development programme (ADP) is set to be financed by overseas aid, he added.
The Centre for Policy Dialogue (CPD) and former adviser Akbar Ali Khan have suggested discontinuation of such credit programme with the IMF as the country has enough foreign currency reserve and the inflow of remittance is very good.
Brushing aside the suggestion Islam said: "It's not the issue. One should see if the government deal with the IMF runs contrary to the national interest."
The finance and planning adviser pointed out that inflow of remittance was only good for payment of import bills, but the government would need foreign aid to implement the ADP successfully.
The existing deal on credit -- Poverty Reduction Growth Facility -- with the Washington-based multilateral donor agency expires in the current month.
The Ministry of Finance (MoF) sources, however, said an extension of the PRGF deal or signing of a new similar deal is almost inevitable for the country to ensure uninterrupted flow of foreign aid.
"It will be very difficult for the country to convince other donors such as the World Bank (WB) and the Asian Development Bank (ADB) for support without continuation of loan programme with the IMF," said a senior finance ministry official.
The government has already extended the Poverty Reduction Strategy (PRS) by one year, which means it intends to continue with the PRGF as both are closely linked, he added.
The IMF, which used to offer soft loan in maintaining the balance of payment, started providing programme loan in the form of PRGF for the first time in 2003.
The donor agencies are showing interest for programme loans in recent years. But the country needs project aid under easy terms and conditions, sources said.
The IMF has approved a total of US$590.7 million under the PRGF, which includes $78.7 million as Trade Integration Mechanism (TIM) credit. Until October 2006, IMF completed the fifth review of Bangladesh's economic performance under the PRGF and released about $467.4 million. The multilateral capital donor is now undertaking the sixth review.
According to an IMF press statement, the PRGF-supported programmes are based on the country's own poverty reduction strategies, adopted in a participatory process involving civil society and development partners and articulated in a Poverty Reduction Strategy Paper (PRSP).
The main focus under the PRGF agreement is fiscal reform, involving a sustained revenue mobilisation effort and a shift in spending toward infrastructure and human resource development to support growth and the Millennium Development Goals (MDGs), while keeping public debt sustainable.
Nearly one decade ago, the IMF provided $138 million Emergency Assistance for Bangladesh to assist the country's economic recovery following a devastating flood in 1998.
UNB adds: The Ministry of Finance has formed two committees, headed by joint secretaries, and 10 sub-committees to review the post-budget recommendations to be submitted by 5.00 pm on June 14.
"We'll take corrective measures, if necessary, on the basis of the recommendations after consultation with the people concerned," Finance Adviser Mirza said.
He said they have already received some suggestions in the forms of letter, e-mail and on website. Few trade bodies also requested meetings with him to raise their points.
The Ministry of Finance invited post-budget recommendations to review and accommodate in the budget for fiscal 2007-08 in absence of a parliament.
The budget will be approved through an ordinance by the President on June 28.
Replying to a question, the Finance Adviser said he would examine what could be done on the duty on computer and accessories considering the sensitivity of the item.
Finance and planning adviser Mirza Azizul Islam hinted Monday that the caretaker government would either seek extension of the Poverty Reduction Growth Facility (PRGF) or strike a new deal on a similar credit programme with the International monetary Fund (IMF).
"We still need foreign assistance to carry out our annual development programme," he told reporters at his office in reaction to suggestions by economists that Bangladesh should discontinue tied credit programme.
Almost 49 per cent of the new fiscal's Tk 265 billion annual development programme (ADP) is set to be financed by overseas aid, he added.
The Centre for Policy Dialogue (CPD) and former adviser Akbar Ali Khan have suggested discontinuation of such credit programme with the IMF as the country has enough foreign currency reserve and the inflow of remittance is very good.
Brushing aside the suggestion Islam said: "It's not the issue. One should see if the government deal with the IMF runs contrary to the national interest."
The finance and planning adviser pointed out that inflow of remittance was only good for payment of import bills, but the government would need foreign aid to implement the ADP successfully.
The existing deal on credit -- Poverty Reduction Growth Facility -- with the Washington-based multilateral donor agency expires in the current month.
The Ministry of Finance (MoF) sources, however, said an extension of the PRGF deal or signing of a new similar deal is almost inevitable for the country to ensure uninterrupted flow of foreign aid.
"It will be very difficult for the country to convince other donors such as the World Bank (WB) and the Asian Development Bank (ADB) for support without continuation of loan programme with the IMF," said a senior finance ministry official.
The government has already extended the Poverty Reduction Strategy (PRS) by one year, which means it intends to continue with the PRGF as both are closely linked, he added.
The IMF, which used to offer soft loan in maintaining the balance of payment, started providing programme loan in the form of PRGF for the first time in 2003.
The donor agencies are showing interest for programme loans in recent years. But the country needs project aid under easy terms and conditions, sources said.
The IMF has approved a total of US$590.7 million under the PRGF, which includes $78.7 million as Trade Integration Mechanism (TIM) credit. Until October 2006, IMF completed the fifth review of Bangladesh's economic performance under the PRGF and released about $467.4 million. The multilateral capital donor is now undertaking the sixth review.
According to an IMF press statement, the PRGF-supported programmes are based on the country's own poverty reduction strategies, adopted in a participatory process involving civil society and development partners and articulated in a Poverty Reduction Strategy Paper (PRSP).
The main focus under the PRGF agreement is fiscal reform, involving a sustained revenue mobilisation effort and a shift in spending toward infrastructure and human resource development to support growth and the Millennium Development Goals (MDGs), while keeping public debt sustainable.
Nearly one decade ago, the IMF provided $138 million Emergency Assistance for Bangladesh to assist the country's economic recovery following a devastating flood in 1998.
UNB adds: The Ministry of Finance has formed two committees, headed by joint secretaries, and 10 sub-committees to review the post-budget recommendations to be submitted by 5.00 pm on June 14.
"We'll take corrective measures, if necessary, on the basis of the recommendations after consultation with the people concerned," Finance Adviser Mirza said.
He said they have already received some suggestions in the forms of letter, e-mail and on website. Few trade bodies also requested meetings with him to raise their points.
The Ministry of Finance invited post-budget recommendations to review and accommodate in the budget for fiscal 2007-08 in absence of a parliament.
The budget will be approved through an ordinance by the President on June 28.
Replying to a question, the Finance Adviser said he would examine what could be done on the duty on computer and accessories considering the sensitivity of the item.