The International Monetary Fund on Sunday said that Bangladesh’s GDP growth would be less than 6 per cent in the current fiscal year 2013-2014 because of the unrest and political uncertainty ahead of national elections. ‘Unrest and political uncertainty in the run-up to the elections are affecting economic activity by disrupting supply and curbing investment appetite, with real GDP growth now expected to moderate below 6 per cent in the fiscal year 2014,’ Rodrigo Cubero, the head of visiting IMF delegation, said at a news briefing in Dhaka.
He said indicators like import, export, private sector credit growth, tax collections and remittance inflow had slowed down in recent times due to volatile political environment and labour unrest, especially in garment sector.
Cubero said that the economic slowdown might continue for the next six months and the economic activities would pick up from the next fiscal year.
He said that the growth this fiscal year would be lower than the last FY13.
According to the Bangladesh government estimate, the GDP grew by 6.03 per cent in the last FY13.
He, however, would not say what would be the GDP growth this year.
The Asian Development Bank last week said that the country’s GDP growth would decline to 5.8 per cent this FY14 because of slowing business activities amid political tension ahead of the general elections.
Cubero, who came to Dhaka to review the IMF conditions for third instalment of about $1 billion Extended Credit Facility for Bangladesh, said that the government had showed continued commitment to implement the ‘reform’ programmes prescribed by the IMF.
He claimed that that the country was in better position to withstand adverse shocks with foreign currency reserve doubling in three years and inflation pressure easing because of ‘prudent’ monetary and fiscal policies taken by the authorities.
Regarding the government move to recapitalise the scam-hit state-owned banks, Cubero said that they supported the move but the banks had to comply with a number of factors including implementation of corporate governance, management of credit risk and internal control.
When asked whether the IMF recommended that the government should make upward revision of fuel price, he said that they had not made any suggestion for immediate hike of energy prices. ‘But, the subsidy in the sector has to be withdrawn gradually,’ he said.
Cubero said that the delegation would recommend the IMF to release the fourth $140.50 million tranche of the ECF in early December.
Cubero said ‘The authorities remain committed to a budget deficit (excluding grants) target of 4.3 per cent of the GDP in the FY14. To support this goal
while boosting fiscal space for social and development spending, the authorities will be increasing tax collections by strengthening tax administration capacity.’
On the expenditure side, the authorities will address weakness in the operational efficiency and financial management of state-owned enterprises, ensuring reporting transparency and proper safeguards for transfer of central government resources to the SOEs, he said.
The IMF has welcomed the recent reforms of the government to channel new non-concessional external borrowing through the standing committee, he mentioned.
Better oversight of debt contracting will have to take full advantage of concessional borrowing opportunities and direct more expensive resources to high social-return investment projects keeping overall debt levels contained, he said.
The IMF mission welcomes some government’s plans including in coordination with development partners, the business community, labour unions, and international buyers to improve the working conditions and strengthen the safety standards for workers, Cubero said.
The delegation held meetings with government officials and business and banking sector representatives during its visit between September 22 and October 6.
-With New Age input
