The New Nation - Internet Edition

Staff Reporter

Country Director of the Asian Development Bank (ADB) Hua Du has expressed her optimism, forecasting the soaring food price is likely to ease in coming fiscal year as the country is expected to reap a bumper potato and rice production in this season.

According to her, GDP growth in Bangladesh could improve to 6.5 per cent and the inflation to moderate at 8 per cent in the next fiscal year.

She was addressing a news briefing yesterday at the ADB office, while unveiling the agency's "Asian Development Outlook (ADO) 2008."

"Greater efforts will be required to lift agriculture productivity to sustain food self-sufficiency in the face of increased threats from natural calamities intensified by climate change," Hua Du told a press briefing at the ADB's Bangladesh Resident Mission.

The ADO report said the economic outlook considered several downside risks that could derail projections - the main risk was political developments in the lead up to the general elections scheduled to be held by end 2008, and their outcome.

"In macroeconomic management, the major risk is rapidly growing inflation: failure to rein it in could seriously undermine macroeconomic and political stability," it said, adding that the perennial vulnerability to natural disasters also presents a risk.

Hua Du pointed out that natural disasters have worsened growth and inflation indicators, but uncertainty created among investors by the ongoing anti-corruption drives has started to ease.

The GDP growth is forecast to improve to 6.5 per cent in 2008-09 due to improved external and domestic demand, and a recovery in agriculture, she added.

It is also assumed that the authorities would pursue well-coordinated fiscal, monetary and exchange rate policies with a focus on curbing inflation and raising revenues, she further added.

"A final assumption is that the Government will at least partly rationalise fuel prices," she said.

The report said, greater investment is needed in power generation, the Chittagong seaport needs to continue contracting out operations and management to the private sector, including those of the New Mooring container terminal.

Formulation of an appropriate coal policy is especially important so as to expedite decisions on some of the other foreign investment proposals worth US$ 11 billion in important sectors, it added.

ADB's Dhaka office chief economist Rezaul Karim Khan, however, said the projected eight per cent inflation for the next fiscal was still worrying.

He advised the government to take measures to increase domestic agricultural production to bring inflation down to a satisfactory level.

He said the country's budget was under pressure since costs of importing food, fertiliser and oil have increased substantially.