Economy facing most critical phase since ‘71

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The Asian Development Bank (ADB) country director Hua Du said yesterday Bangladesh’s economy is going through the most critical and challenging period since independence because of the extensive damage cause by natural calamities and the increase of oil price in the international market.

Releasing the quarterly economic update on Bangladesh at a press conference in the city yesterday, the ADB country director said the natural calamities are likely to take their toll on the country’s growth bringing it below 6 per cent in the current fiscal compared to 6.5 per cent last year.

“I’m have been here for about five and half years and have studied about Bangladesh for several decades since its independence, but I have never sensed such difficulties as the country is going to face this year,” Hua Du told the press conference.

She however expressed hoped that Bangladesh would be able to overcome its losses with international support. She hoped that the second half of the current fiscal would be productive.

Responding to a journalist pointing out ADB’s reported pressure on the government to adjust fuel prices with the international market Hua Du said “The clear answer is no.” She said ADB was not asking the government to increase the price of petroleum products as the main challenge of the economy now was to overcome the loses caused by natural disasters.

“We believe we can address this issue in the longer term,” she said adding price increase would have an adverse impact on agriculture right now. “We need to support the farmers”, Du said.

The ADB quarterly report identified the fall in external demand for garments as another reason for low GDP growth in the current fiscal.

“The economic prospects will depend on post flood and post cyclone rehabilitation, recovery of the garment sector and political stability in the lead-up to the general elections scheduled for the end of 2008,” the report said.

It pointed out that business confidence in the country has been severely affected by the government’s ongoing anticorruption measures.

“The extensive anticorruption drive and eviction of illegal businesses caused some fear and uncertainty among the business and investor community,” the report said.

The ADP report said a sharp decline in number of projects and investments registered with the Board of Investment (BOI) showed entrepreneurs’ reluctance in new ventures in the changed environment. The report estimated that the combined loss to assets and output caused by floods in 2007 stands at US$1 billion or 1.4 per cent of the GDP.

Replying to a query, the ADB country director said release of business leaders detained on graft charges would have a positive impact on regaining confidence in the business sector.

“To be very frank, I met a number of businessmen released from jail recently and they told me that they will now work to reenergize their businesses,” she said.

Turning to the agricultural growth in the country, the ADB economic update said agricultural growth in the current fiscal is likely to be a moderate 2.2 per cent, down from 3.2 per cent in the last year.

“Production loss because of floods is estimated at 1.3 million tonnes. The mid-November severe cyclone also damaged 38 per cent of aman areas in the coastal districts,” the report says. “The losses could be offset by a bumper boro crop production,” the report added.

The ADP report said the first quarter data of FY2008 indicates a slowdown in export-oriented manufacturing sector because of a drop in external demand. The report said a 3.2 per cent decline in the output of medium and large manufacturing units in July 2007 was caused by a fall in output of the garment industry.

“Property developers and buyers have become more circumspect as the practice of income disclosure is more strictly followed,” the report mentioned.

Hua Du said the ADB and some other donor agencies are going to announce a soft loan of US$ 180 million for Bangladesh as assistance for the cyclone-hit areas.

“This is an emergency disaster rehabilitation loan and ADB’s share is US$ 120 million while Japan, Sweden, Canada and the Netherlands will provide the rest,” she said.

She said this is a highly concessional loan and it would be disbursed by mid-January next. Moreover another loan of US$ 400 million is already in the pipeline, which would be utilised to develop infrastructures in flood-affected areas, she said.

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