The New Nation - Internet Edition

The Asian Development Bank has singled out high inflation as a challenge for Bangladesh’s economy as it reiterates that gross domestic product growth might be below 6 per cent in the current 2007-2008 fiscal year. 'Containing high inflation is a major macroeconomic challenge’, ADB said in its latest quarterly report released recently adding the country’s fixed income earners and the poor are vulnerable to high and rising food prices. It projected an economic turnaround in the second half of the fiscal year that ends June next.

Floods and cyclone put pressures on the economy by 'aggravating’ high inflation and slowing growth prospects. Global price volatility and domestic factors like business confidence also took their tolls on the economy. Food, which accounts for 59 per cent weight in consumer price index, became costlier by 14.5 per cent in December 2007 compared to 11.4 per cent in July the same year, propelling the general inflation to record high of 11.59 per cent. ADB’s country director here, however, forecast that the rate could come down to 8.9 per cent in the second half of the fiscal year on the back of 'better economic performance’ and her hope also rested on a 'bumper Boro crop’.

The finance adviser the other day said that the government’s borrowings from the banking system in the first half exceeded the whole year target already by Tk 2,000 crore. The central bank governor claimed that there had been certain improvement in business confidence. 'We have to increase public expenditure to create employment. So, borrowing from banks to finance projects under the annual development programme will give more dividends than creating any inflationary pressure,’ he was quoted to have said. The ADB in its quarterly report said under-pricing of energy products posed a major fiscal risk. It also pointed out that the rise in subsidies to offset impacts of global oil and fertiliser prices amplified pressures on the fiscal balance.