Inflation biggest economic challenge: Atiur

The Governor of Bangladesh Bank (BB) Atiur Rahman said Thursday that the country's biggest economic challenge was taming inflation, which in September hit a record high, reports Reuters. In September, annual inflation rose to 11.97 per cent, from 11.29 per cent in August, mainly because of soaring food prices and an increased cost of importing fuel oil. The inflation rate has not yet been reported in October, though a government official has hinted it may have been higher than the September pace. For the current fiscal year (FY), which ends in June 2012, "the biggest challenge for our economy is to contain inflation that is rising gradually," Mr Rahman told the news agency in an interview. The governor of BB said he is striving to contain inflation to below 10 per cent and to keep the country's budget deficit to the target of five per cent. "We are tightening monetary policy while ... ensuring (that) private sector credit is available for worthy projects," Mr Rahman said. Between March and September, Bangladesh Bank raised its key interest rate four times. In the last case, the repo rate was increased half a percentage point to 7.25 per cent. The governor said he expects gross domestic product (GDP) to expand between six per cent and seven per cent this FY, for which a seven per cent target was set. Despite rising global pressures, country's export earnings grew by more than 22 per cent during the first quarter of current FY, the governor said. "But the global economic downturn may impact our traditional exports (through rest of the year) and we need to remain vigilant," he said. Mr Rahman said that more important than achieving seven per cent growth was having growth that is "shared equitably so that the poor benefit." About one-third of Bangladesh's more than 150 million people live in poverty. Economists and analysts say the country needs annual growth of more than eight per cent to effectively tackle the problem. The governor said the central bank had asked the government to reduce subsidies on food and fuel to try to limit the fiscal deficit. The government last week raised fuel prices for the third time since May, a move that will trim the country's subsidy burden but put more pressure on persistently high inflation. To meet financial needs, the country has asked for a $1 billion loan from the International Monetary Fund (IMF) that Mr Rahman said he hopes the IMF will approve 'without imposing conditions.'