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Bangladesh’s flood-ridden economy bounce back

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November 16, 2000 

Dhaka-- (UNB) – Accelerated economic activities spurred by booming agriculture after 1998 flooding helped the flood-ridden economy bounce back on a good footing last financial year and gave a boost in the current fiscal.

“The economy is going well now,” Bangladesh Bank Governor Dr Mohammad Farashuddin said releasing the 1999-2000 annual report of the central bank yesterday (Wednesday).

GDP growth rose to 5.5 per cent in 1999-2000 fiscal from 4.9 per cent in the previous fiscal due to expansion of the agriculture sector and strong demand in the export sector, says the report.

The economic fundamentals showed a hesitant trend after the worst ever flooding.

In 1999-2000, agricultural production grew 5.5 per cent compared to 3.3 per cent in the previous fiscal, industrial growth stood at 4.3 per cent from 3.2 per cent in 1998-99.

Although money supply increased at an enhanced rate, the rate of inflation dropped to 3.5 per cent in the bygone fiscal year from 8.9 per cent of 1998-99 as the overall supply situation, including grain supply, remained satisfactory.

“But, the impact of increased money supply on inflation should be monitored continuously,” the BB recommends in the report.

It suggested efficient adjustment of the currency and fiscal policies through strengthening private sector financing and keeping public sector financing as low as possible so that last two years’ increased money supply and public borrowings cannot raise inflationary pressures.

Meanwhile, bank credits to the private sector, now considered the growth engine of the country, reduced to 10.7 per cent during the fiscal from 13.8 per cent in the previous fiscal.

But, the total domestic credits rose to 13.6 per cent from 13.1 per cent due to 31.3 per cent increase in the public- sector borrowings in 1999-2000 for enhanced financing for the fiscal year’s ADP, the report said.

“The cumulative government borrowings came down to Tk 1,073 crore as on November 2, 2000 from Tk 1,862 crore on November 2, 1999,” said the governor.

He also informed newsmen that the central bank was yesterday maintaining a foreign exchange reserve, immediately after a payment to the Asian Clearing Union (ACU), that would be enough for two months’ import payments.

According to the report, the reserve was USD 1.602 billion at the end of June 2000, which was USD 1.523 billion at the end of June 1999.

The report suggested taking effective measures to implement programmes for modernization of agriculture and improve the systems of food-grain preservation and distribution to maintain the growth trend.

It also recommended optimum utilisation of equity capital development funds of Tk 100 crore with the central bank for a positive result in industrialisation and increasing export of non-traditional goods, particularly the software and food- processing and agro-based industries.

Yet, says the report, there are many issues like infrastructure and technology to improve for industrial development. “It requires modern technology-based industry for a sustainable export growth.”

The report warned a stiff competition for the country’s readymade garment sector, the major export earner, due to United States’ TDA-2000 bill that allows duty-and quota-free access of goods to USA from some LDCs who are competitors to Bangladesh.

In addition, the SAARC cumulation act is also posing threat to the RMG sector, it said suggesting all-out efforts to get into the TDA-2000 and taking effective initiative to improve the RMG sector by establishing design and fashion institutions.

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