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Download PDF International donors yesterday expressed concern over the likely rise of already high food prices caused by the ongoing flood in the country, which might bring down current fiscal year’s estimated GDP growth by 0.2 percentage point.
These concerns were aired at the Economic Relations Division (ERD) in a special meeting of the local consultative group (LCG) comprising development partners and the government.
The donors, however, did not make any concrete pledge for flood relief but all indicated that they will contribute, the amount of which is likely to depend on the magnitude of the ongoing flood the development partners are still monitoring.
“The government will not ask for foreign assistance, but will welcome any voluntary donation by another country,” said ERD Secretary Aminul Islam Bhuiyan to reporters after he had co-chaired the meeting.
“We will monitor the situation closely. At this point, the focus is on the immediate relief, but eventually will move to the next stage depending on the evolving situation,” said the World Bank (WB) Country Director and LCG Chair Zhu Xian.
“As in the past, flood in Bangladesh is a multi-year phenomenon, so we have to prepare for the worst even though we hope the situation will improve,” he added.
While Bhuiyan said they will hold further meetings to coordinate the relief effort and the international donors are still monitoring the flood damage, but added that all donors ‘indicated’ they will be contributing to flood relief.
A number of countries, including Britain, the United States, Australia, Canada and Germany, have already pledged money for flood relief through their own development agencies or non-governmental organisations (NGO). The WB, in a preliminary assessment titled, ‘Bangladesh Floods 2007: Preliminary Impact Assessment’, said an already high inflation rate of 9.2 percent in June, could accelerate in the coming months.
“Rising food prices in particular is the biggest concern. The flood is making it worse,” the report said adding, “Inflation could easily rise further in the next couple of months.”
The government’s biggest challenge will be to tighten the monetary policy, as it might face a dilemma over its last month’s calls for restraint in the state’s bank borrowing, and 45 percent boost to private agri-credit growth, with a likely increase in demand for credit after the flood, said the WB.
“Stronger revenue mobilisation and increased foreign assistance are partial answers to the dilemma,” the report said.
The WB also predicted that the estimated 7 percent gross domestic product (GDP) of the current fiscal year might fall to 6.8 percent due to the flood.
The report also predicted that the flood is likely to have an adverse effect on agriculture and small-scale industries.
Flood induced imports of emergency food items and post flood reconstruction materials, might also worsen the balance of payments, especially the trade balance, with frozen food exports also likely to suffer, according to the report.
But, the WB says Bangladesh is fortunate to have a ‘comfortable’ foreign exchange reserve currently at $5 billion, compared to $3.1 billion in 2004 and $1.8 billion in 1998.
The report also said it would be possible to redirect Annual Development Program funds for post flood reconstruction, but that is likely to increase the budget deficit for FY’08.
The LCG’s flood relief plan comprises immediate relief to flood affected households with food, drinking water, medicine and shelter, and ‘livelihood restoration’ by providing short-term employment opportunities to rebuild the infrastructure.
The donor countries also plan to provide ‘transition support’ over the next four months in the form of cash grants to reconstruct houses and essential infrastructures, in addition to providing medical care, helping to rehabilitate agricultural through provisions of seeds, and creating job opportunities.
They also plan to provide a year-long post flood rehabilitation and restoration of infrastructures, by re-connecting road links severed by the flood, in addition to capacity building for longer-term reconstruction and future risk reduction programmes.
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