Sixth Instalment Delayed

Few clear economic reform agenda on the sight, Recovery delays ,so does the freedom from economic plight.

The IMF in a press conference stated that it would negotiate the sixth instalment of the $5.5 billion credit package with the next elected govt,which is likely to assume power by February next year. The present govt has three months to go and the contesting parties have not yet presented any detailed scheme on economic recovery, as I highlighted here several times. Moreover, macroeconomic situation has improved a lot since the program started: erosion of reserve stopped, market determined exchange rate is set, inflation eased slightly, and flexible exchange rate is introduced.

If this positive trends continue and post election optimism prevails, the remaining instalments may not be needed. On top of that ,if elected govt is not committed to economic reform programs envisioned by the IMF, it will be pointless to continue the reform programs here. So a wait-and-see approach is adopted.

When this mission arrived, they were eager to know when the central govt would lower the policy rate. The central bank on the other hand plans to lower the policy rate when inflation falls below 5 or 6%. Inflation is still hovering over 8% and the IMF's projection for the rest of this fiscal year is that inflation would remain elevated above 8%.

The latest statement hints they accepted the argument offered by the central bank. They are in favor of lowering of policy rate when inflation rate falls below 6%.

The IMF even sat with several political parties to have a glimpse about their economic programs. Long before the arrival of the IMF, former commerce minister and BNP senior leader Amir Khosru Mahmud Chaudhuri stated BNP believes sovereignty of the central bank but it opposes separation of policy and implementation departments of the NBR. Reform programs outlined by other parties are not so pronounced. Women participation to the economy and recent "end-of-prophecy" movement garnered lots of media attention. The "end-of-prophecy" movement created communal tensions in the country. Particularly the Ahmadiya community who thinks their leader was the last prophet feels intimidated. The persecuted group has huge presence and investment in Bangladesh. Pushing up this sort of political campaign widens the fault lines existed in Political field and threatens the stability of politics and economy.

The NBR chairman in an interview said from next year the NBR would cease to impose decision on taxes abruptly and it would pass the authority to the Parliament. End of ad hoc practice of decision making would benefit the business here as tax policy would be more projectionable and it will help them in business operations and investment plan.

Govt is criticised right and left as it is not taking any bold steps towards reforms. As I mentioned earlier, this govt is formed through blackmailing: the chief advisor himself was about to languish in prison, the commerce advisor faced several charges before taking up the post, legal advisor and student advisors were summoned to the cantonment on the eventful days of July last year. And most importantly it was formed to rescue the economy, not to do any bold political reforms, riding on the image of Prof Yunus. The objective was partly fulfilled , but to a great extent it was a disaster. A govt formed through blackmailing does not deliver much. Macroeconomic situation improved, yet passport fell in international ranking,overseas employment shrank, western countries restrict entry of Bangladeshis, political rift widened as a major political party will be absent in next election, NPL situation worsened, law & order situation deteriorated further. I think it is naive to expect much from a mandate less ,blackmailed govt. Bangladeshis in general are eying towards the next election. They hope the situations will improve a lot under the new govt.

In brief, sixth instalment is delayed to see what the next elected govt will offer as economic reforms and how the economy behaves in the meantime. Despite major macroeconomic improvement, we should not expect much from this blackmailed govt!