Assistance contingent on implementation of a strong comprehensive policy strategy
http://independent-bangladesh.com/news/feb/18/18022002ts.htm
by Staff Reporter
The IMF mission led by Luis Valdivieso has left Dhaka on the conclusion of its latest round of discussions with the Bangladesh government authorities without pledging direct financial assistance in response to Dhaka’s request for money to help it cope with the present situation. But the Fund’s resident office issued a statement yesterday prescribing measures that constituted a typical IMF package.
Some economic analysts expressing dismay over the outcome of discussions termed it a "failure", while others expressed doubts whether Bangladesh would get any emergency IMF assistance before the budget for the next fiscal, which is four months away.
Referring to the latest round of discussions, the IMF statement said: "The authorities believe that a comprehensive policy package would be better framed in the context of the budget for the next fiscal year, and discussions will continue on that basis."
The statement issued from the office of the IMF’s resident representative clearly sent the message that additional external financial assistance from the international financial institutions was contingent on "determined implementation of a strong comprehensive policy strategy." As the formulation of the IMF-prescribed Interim Poverty Reduction Strategy Paper ( I-PRSP) that would contain the policy strategy could be completed just before the Development Forum meeting to be held on March 13, some experts feared that this much needed assistance to revamp the cash strapped economy could not be received within a short time.
The IMF said that the discussions with the authorities "were very open and constructive, and they succeeded in identifying various policy options for tackling the economic challenges that Bangladesh faces".
The IMF stressed the need for efforts to foster a better macro-economic balance. In this connection the authorities had indicated their intention to take steps to limit the budget deficit to a level consistent with available resources and to avoid resorting to administrative controls, excessive monetary financing and non-concessional borrowing, the statement observed. The IMF noted that accompanied by sensible handling of interest rate and exchange rate policies, such fiscal policy efforts should serve to bring about greater economic stability.
The IMF said that "the Bangladeshi authorities and the IMF staff would maintain an active policy dialogue in the weeks and months ahead and will proceed with the implementation of a work plan of technical assistance in the areas of central bank legislation and fiscal transparency and budgeting." A comprehensive financial sector assessment programme to be conducted jointly by the IMF and the World Bank was also scheduled to take place in the next few months, the statement added.
The IMF mission, which came here on February 2 to assess the overall economic condition held a series of meetings with the concerned government officials to prepare a report to be submitted to the IMF Board.
Noted economist Dr Debapriya Bhattachariya told The Independent that while "we share many of the concerns expressed by the IMF about the current state of the country’s economy we fail to fully appreciate the approach taken towards addressing them." With four months left before the new fiscal year, most of the suggested intermediate measures could be better accommodated through a supplementary budget and revised ADP for the fiscal year 2002 and subsequently more adequately addressed through the budget for the fiscal year 2003.
He said the suggested measures constituted a typical IMF package and the reference to the PRSP was an imposed one. If the country was in a position to implement these measures, it would have little need for IMF support. And the implementation of the intermediate measures in many ways was going to pre-empt the scope and objective of the PRSP.
"So it is also not appropriate in terms of policy sequencing. Its now seems that the IMF through its technical assistance (TA) work plan, is going to have a more direct involvement in fiscal management and budgetary process.
Meanwhile, leading economist Dr Wahiduddin Mahmud in his reaction to the statement on the latest discussions between the Government and IMF said that the short term credit with commercial interest rate that the government wanted from the IMF as standby facility was not that much necessary as it has to be repaid within two or three years. He suggested that long-term credit was more necessary to address the present economic situation. Dr Mahmud also felt that at the present moment the country’s forex reserves situation would not have that much problem if the government did not get the short term credit it had asked for from the IMF.
M. Syeduzzaman, former Minister for Finance, said that the IMF statement indicated that short-term support to help improve the adverse balance of payment situation might be available, even though not up to a significant amount.
He said for a larger package of support from the IMF, would have to wait till the framing of the budget for the next fiscal year, that the mission said, should incorporate a medium-term programme and a poverty reduction strategy.
For long-term larger support, the IMF mission wanted the government to achieve a better macroeconomic balance and reduce budget deficit to manageable limits. Syeduzzaman, who is also the chairman of the Bank Asia, said there was no alternative to overcoming fiscal imbalance and excessive budget deficits.
The IMF mission also wanted the government not to adopt any control measures in the short term that might come into conflict with the open market policy.
The former Finance Minister said the technical assistance proposed in the area of central bank legislation, fiscal transparency and budgeting was very significant. Without pursuing those it would be very tough to achieve macroeconomic balance, he added.
Finance Minister of the past Awami League government SAMS Kibria said that he was deeply concerned at the failure of the government in managing the economy. "It seems that Finance Minister M Saifur Rahman is losing control over the overall economic situation", he commented. He said that he would give his views on the overall economic situation within a short time.
===== Kevin Dean Buffalo, NY ICQ: 8616001 http://www.yaysoft.com
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