The New Nation - Internet Edition

BSS, Dhaka

Bangladesh enjoyed improved external sector viability in fiscal (FY) 2007-08 with relatively stable exchange rate, positive current account balance, and higher foreign exchange reserves exceeding US$ 6 billion at the end of the fiscal.

The country's export earnings also marked a growth of 15.3 percent during July-May of FY 2007-08, the Bangladesh Bank data shows.

The 12-month average Consumer Price Index (CPI) inflation was 7.20 percent in FY 2007-08 and rose to a high of 10.00 percent in March 2008 and then declined to 9.87 percent in May 2008. The persistent rise in inflation during most of the period of FY 2007-08 was contributed by both internal shocks and external developments, the BB data shows.

The inflation in Bangladesh moved to a double digit level only temporarily in March 2008 compared with the persistently rising inflation at double digit level in major South Asian countries, a recent review of BB said.

The government raised price of compressed natural gas (CNG) in June 2008 and prices of fuel oil and urea fertilizer in July 2008, the review said.

While the impacts are yet to be seen, these adjustments may somewhat push up the point to point inflation temporarily but, with expected positive supply response of the real sector to policy measures of the government and BB the impact of the rise may be avoided, the review added.

Despite a robust import growth and widening trade deficit, higher external aid flow and healthy growth in workers' remittances provided a cushion to the external sector balance, the review said and expected that with pursuit of prudent policies to maintain the existing increasing trend in exports and remittances, the country's external sector is likely to remain stable in FY 2008-09.

Among the monetary aggregates, the growth of broad money (M2) was 17.5 percent in May 2008 down from 18.3 percent in May 2007. Private sector credit increased by 24.5 percent on year-on- year basis in May 2008 (22.3 percent during July-May FY08) compared with 15.6 percent over the same period in the previous year.

Bank advance by economic purpose in end-March 2008 shows that a significant share of advances 27.2 percent went to industry, 24.7 percent to working capital and 18.7 percent to trade.