IMF says Bangladesh's economy to grow at 6.3pc in 11/12

DHAKA: International Monetary Fund said on Thursday that Bangladesh's economy might grow at the rate of 6.3 percent in the 2011/12 fiscal year compared with 7.0 percent targeted by the government.

An International Monetary Fund (IMF) mission led by David Cowen of the Asia and Pacific Department visited Dhaka and Chittagong September 5-15 to see the health of economy of the country and also to discuss with the ministers and senior officials.

The mission met with among others Minister of Finance Abul Maal Abdul Muhith and Economic Advisor to the Prime Minister Mashiur Rahman.

Cowen told reporters at a news conference that Bangladesh's inflation has been on the rise, pushed up by higher food prices and demand-side pressures.

Despite strong export performance, the balance of payments (BoP) recorded a deficit in the fiscal year of 2010/11 (July-June) mainly because of increased oil, textile, capital goods imports and weak aid inflows. As a result, gross foreign reserves have come down from record levels reached in late 2010.

"Looking ahead, real GDP growth for Bangladesh is currently projected by the IMF at 6.3 percent in the fiscal year that will end on June 2012," Cowen said.

On Wednesday Finance Minister Muhith told reporters after a meeting with the IMF delegation that he sought $1.0 billion assistance to the IMF to ease pressure on balance of payment Bangladesh's annual balance of payments (BoP) has fallen into a deficit as the country's trade gap continued to widen and remittances from expatriate workers grew slowly, a senior official of the central bank said on Thursday.

The BoP swung into a deficit of $635 million in the fiscal year ending in June 2011 compared with a surplus of $2.87 billion a year earlier, the official said.

IMF said that the economy of the current fiscal year is still strong driven by strong garment exports, a firming up of remittances inflows, and better electricity supply.

The headline inflation rate is projected to come down modestly by end-fiscal year, mainly due to more moderate expected increases in global commodity prices. Bangladesh should remain fairly insulated from a global growth slowdown.

Still, BoP pressures are likely to intensify over the near to medium term because of rising oil import volumes and import-intensive infrastructure investment.

The mission stressed that the balance of macroeconomic and financial risks could necessitate further policy adjustments in order to contain external as well as fiscal pressures and to avoid crowding out private investment.

Copyright Reuters, 2011