IMF suggests fiscal space to face fallout from global recession

IMF has suggested that the current revised budget and the next one should be formulated with a view to creating any fiscal space that may be deemed necessary for contingent action to ease economic challenges in the wake of global recession.

“Next fiscal year’s budget will be critical, no politician can ignore the potential fallout from global recession. Also, it would be the first budget for the new government. So the government will want to manifest its thinking and its ideas into the budget,” said Masato Miyazaki, adviser to the Asia Pacific Department in the International Monetary Fund (IMF) told a press briefing yesterday.

Under his leadership, an IMF team that visited Bangladesh from March 30 to April 2 to discuss the recent economic developments with the government and other stakeholders.

Referring to the current global situation and its possible effect on Bangladesh economy, Miyazaki said. “Things are very uncertain whether this will happen or not, nobody knows. But, of course it is always wise to be conservative and to think of various scenarios.’

He said he is certain that the authorities are mindful of the various risks.

He also said revenue prospects are likely to be very weak in FY10 and future years, with appropriate changes in tax policy and revenue administration.

“The new government should consider carefully revenue reforms to support the spending for infrastructure and social investment that, in turn, will boost the economy’s medium-term growth potential and accelerate poverty reduction,” Miyazaki suggested.

Further support for increased public investment should come through steps to develop a robust and transparent framework for public-private partnerships and strong efforts to streamline the project approval process and project implementation, the IMF adviser added.

Miyazaki observed that overall Bangladesh’s economy has so far remained relatively robust.

The domestic economy has retained momentum from a favourable agricultural performance, he said.

However, he said, pressures from the global slowdown continue to build and it now seems likely that growth will moderate. Garment and other exports are slowing and garment export orders are now declining, he said, fearing that any significant slowdown in the export sector is likely to weigh heavily on the domestic economy through a reduction in demand for services, transport and construction.

The IMF adviser said remittances remain robust but in recent months the number of workers returning from abroad has risen. These factors may put downward pressure on the current account of the balance of payments and increase the need for policies to maintain the momentum of domestic demand, he said.

In response to a query, he said the growth would remain between 5 per cent and 5.5 per cent this year and the next year.

During its stay here, the team met AMA Muhith, finance minister, AK Khandker, planning minister, Dr Mashiur Rahman, prime minister’s adviser for finance and planning, Dr Salehuddin Ahmed, Bangladesh Bank governor, Dr Mohammad Tareque, finance secretary, and Muhammad Abdul Mazid, NBR chairman, and other senior government officials.

Source: The Daily Star, 03 April 2009


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