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Download PDF The International Monetary Fund (IMF) yesterday said the law enforcers’ drive against hoarding is disrupting the entire supply system and adversely affecting the inflation.
The IMF also suggested increasing the prices of gas and power and introducing automatic pricing formula for petroleum products.
The observations came at a press conference organised by an eight-member IMF team headed by its Asia and the Pacific Department Adviser Thomas Rumbaugh at the IMF office yesterday.
During its 16-day stay in Bangladesh, the IMF team made a general assessment of the economy in context of this year’s Article IV consultation and implementation of policies supported by the Poverty Reduction and Growth Facility (PRGF) arrangement.
“Administered measures to prevent hoarding and control the prices of essentials are creating uncertainty and supply disruptions and may actually have the opposite effect on inflation,” Rumbaugh said at the press conference.
Asked how he evaluates the recent joint forces’ drives against hoarding, he said, “I think you have to be very careful in that kind of policies so you don’t end up disrupting trade, disrupting imports and actually making the pricey situation.
“That’s the only point that we asked the government to be very careful about–how they implement this kind of measures by different ministries,” Rumbaugh said.
On inflation he said, “Ultimately, inflation is determined by macroeconomic policies. So, you need to make sure that you have the right monetary policies in place.
“We have advised the government that they need monetary policies in response to the increasing inflation and they need to be preparing to allow the exchange rate policy to be a little bit more flexible…The combination of the two would help to constrain prices,” he said.
Rumbaugh said dismal performance of tax revenue is the main obstacle to growth.
He said the authorities are to be applauded for the recent hikes in electricity tariffs and fuel prices, which go some way in cutting the state-owned enterprises’ losses. The main beneficiaries of subsidised oil prices are the relatively well-off while the poor would be much better served by additional transfers from the budget.
“To prevent large and persistent deviations between domestic and international oil prices in the future, the IMF recommends the introduction of an automatic pricing formula,” he said.
In the power sector, further electricity tariff adjustments will be needed, Rumbaugh said, adding that the price of natural gas should also be gradually brought in line with world prices to reduce the existing market distortions and supplement government revenue.
Asked if increased prices of power and gas may affect inflation further, he said, “As a temporary matter, it would have impact on inflation for two months. But it would be moderate very quickly by designed macroeconomic policies.”
On Bangladesh’s economic performance, he said economic activity remains strong despite the election related disruption and the political transition in January. A slowdown in agriculture is being more than offset by strong manufacturing and exports, and domestic demand remains buoyant as evidenced by a rebound in imports and high credit growth.
The growth for the fiscal year 2007 is estimated at 6.7 percent and the growth momentum is expected to be sustained in fiscal 2008.
Rumbaugh said, “We have talked to many people in last two weeks, including government body, civil society and private sector. Everybody termed the situation over the last two months ‘temporary’. And I also think the overall economic situation is temporary and the growth would be quite strong.”
April 21st, 2007 at 2:17 am
No country can strive success & achive economic
growth without United effort enchained with political stability.
Our faith must be strong to maintain Iman which will generate spirit of honesty. There must be feeling of patriotism among all future political leaders, departmental heads down to the level of worker.A team spirit must be maintained in every
tiny field of work.
Let us build together our country with out malic,
vice, corruption, political killings,strikes,
burnings & allkinds of anarchy let rich & poor have peaceful life & freely do their duties with
respect & dignity.
Thank you