The New Nation - Internet Edition

BUSINESS REPORT

Bangladesh economy would slow down to 5.0-5.5 per cent this fiscal as a huge food import bill coupled with slide in export saw the country facing the 'biggest' impact on its balance of payment, the IMF said on Tuesday.

The International Monetary Fund (IMF) said the twin disasters of floods and cyclone has damaged some 3.7 per cent of the country's GDP, exacerbating already slowing growth and increasing food prices.

The staff estimates that "without additional balance of payments supports, international reserves would be depleted below three months of import coverage by end June 2008."

"The biggest balance of payments impact arises from the need to import large volumes of food," the IMF said, after releasing an emergency natural disaster assistance worth US$217 million dollars early this month.

The country's food and fertiliser import bills would increase by $630 million due to the twin disasters while the relief and reconstruction costs for the current fiscal are estimated at $850 million.

The Fund said the country's Gross Domestic Product (GDP) is now projected to grow at 5.0-5.50 per cent due to the impact of the twin disasters and the soaring food bill.

"Together with the indirect effect on growth expected from the damage sustained by infrastructure, this is projected to reduce the growth rate staff projected prior to the disasters by ¾ of a percentage point to 5.0-5.5 per cent," the IMF said.

It said much before the twin disasters the country's economy was already slowing down and the inflation was on the rise due to the 'anti-corruption drive' launched by the caretaker government and a downturn in global economy.

"The ADP implementation rate in the early months of the FYO8 was the lowest in a decade, as the government's anti-corruption drive led to greater scrutiny of projects," it said.

And due to the government's continued sale of oil at a far lower than the international rates, new losses incurred by the state-owned enterprises including the Bangladesh Petroleum corporation would hit 1.0 to 1.5 per cent of the GDP, should the oil prices not adjusted this fiscal.

In its assessment, the Fund said inflation, which hit over 11 per cent in January, "is expected to moderate only slightly to 10 per cent by end-FY08 given prevailing high international prices."

"Price pressures emerged on the back of the international commodity inflation, earlier monetary accommodation and supply bottlenecks resulting from the government's anti-corruption and anti-hoarding policies," it said.