Economy on track; Inflation, falling remittances pose challenges

Posted by BankInfo on Tue, Jan 04 2011 04:16 am

Bangladesh's economy is on course to achieve its 6.7 percent growth target in the fiscal year to June 2011 and may reach 7 percent the year after, despite the global slowdown, the central bank governor said on Thursday.

Atiur Rahman said in an interview that although the number of workers migrating had fallen due to employer nations' economic woes, and inflation was still high, exports had been buoyant during the first half of the 2010-11 fiscal year.

Clothing exports, which together with remittances from overseas workers are Bangladesh's main source of foreign exchange, were particularly strong, he told Reuters.

"Exports of ready-made garments have seen a steady increase over the first half of the year and this is very encouraging, and assured us of a strong possibility of attaining the GDP growth of 6.7 percent this year," Atiur said.

The governor said the south Asian country's economy had been greatly helped by successive bumper crops of rice, the main staple for its more than 150 million people, thanks to friendly weather and steppedup government subsidies to farmers. Atiur envisioned a more robust export and farming future for his country, which officials and economists say still struggles to attract foreign investment owing to concerns about the rule of law and about widespread corruption.

Bangladesh has produced an annual average of around 34 million tonnes of rice in the past few years, cutting its dependence on imports. But it still needs to buy around 1.5 million tonnes of rice and wheat annually to ensure food security, especially in case of natural disasters like floods and cyclones, officials have said.

Atiur said that, as the global economy slowly recovers, Bangladesh will also see an upturn. "Our economy had shown enough resilience in the early stages of the slowdown. Now it is showing a steady uptrend, as the global economy is recovering," the governor said. "We are hopeful of doing well."

He praised the performance of Prime Minister Sheikh Hasina since she took office two years ago, noting that the country had not had to confront any big natural disasters in that time. "So far she made relentless efforts to achieve promised goals and made her administration to act. The central bank as guardian of the finances has also streamlined the banking sector to be more friendly to productive sectors," Atiur said.

Hasina had promised to attach top priority to agriculture, exports and education, to take Bangladesh beyond its recent past, which had been characterised by corruption, poor law and order and towering animosity between the main political parties. Charges of corruption are still widespread, however.

The governor said inflation of more than 6 percent, often stoked by rising food costs, falling remittances, and rising demands for power and gas were the government's main challenges. He said clearer and upgraded strategies to address these issues would be outlined in the country's sixth five-year economic plan, likely to be rolled out next June.

Ready-made garments -- supplied to major global retailers such as Wal-Mart, Gap, H&M and other buyers -- account for 80 percent of Bangladesh's annual export earnings of around $13 billion. The garment industry and about $11 billion sent home annually by over 6 million Bangladeshis working abroad provide the main pillars of the economy.

Source: Daily Sun/ BAngladesh/ Jan-04-2011

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