Emergency in B'desh to boost economic growth: Bank Gov

Dhaka, Jan 14 (UNI) The state of emergency in Bangladesh will have a ''positive'' impact on the country's economy as Bangladesh Bank expects it will help face the challenges, mainly political unrest, hindering the economic growth.

Central Bank Governor Salehuddin Ahmed today said the GDP growth projection of 6.5-6.8 per cent was attainable, but sought restoration of conducive political environment and end to disruption in economic activities.

''It's a cautious projection, in fact, the GDP could grow even by seven per cent,'' he told a press conference, releasing the Bank's half-yearly Monetary Policy Statement.

His Deputy Allah Malik Kazemi came up with the view that the state of emergency would help restore peace and discipline in the country, which is essential for the economic activities.

''Of course, it's positive,'' said the Deputy Governor, replying to a question.

''It's a matter of satisfaction that the economy has acquired an inherent strength. The foreign exchange reserve position proves that the economy has the resilience to face adverse situation,'' he said.

His observation followed the remarks by the Governor who picked up from the policy statement that the economic activities in the first half of the current fiscal remained strong, supported by robust export growth and domestic demand, despite recent disruptions from pre-election political unrest.

The monetary policy statement projected that the rate of inflation would remain below seven per cent during the 2006-07 fiscal and said the Central Bank would continue its cautious monetary policy in the second half of the fiscal.

It also suggested sharply bringing down the level of government borrowing from the banking system in the second half of the fiscal.

The Governor said the monetary policy would continue to remain cautious and restrained in the second half of the current financial year in view of the prevailing external situation and the internal risks to price stability.

The policy stance will, of course, be adapted promptly and with flexibility in the face of any unfolding development, with special attention to the credit needs of the sectors promoting and supporting the economic growth, he added.

He said the inflation was projected to be in the 6.85-6.95 per cent range in the second half of the fiscal on balance of positive and negative factors.

The Governor expected that the easing of global commodity prices should further help easing of domestic inflation while the political unrest, if prolonged, would significantly disrupt output, distribution and export activities, creating short supply and new inflationary pressures.

He said the growth of credit to the public sector in the first half of the current fiscal year far exceeded the initial projections, but utmost restraint in bank borrowing by the public sector would be needed in the second half to contain overall credit growth.

Dr Salehuddin stressed the need for ensuring adequate credit needs for output activities in the private sector. He also emphasised on reducing lending rates in this regard.

The policy statement said net foreign receipts fell far short of estimates in the first half while revenue receipts lagged budgetary estimates substantially. The shortfalls in receipts as compared to expenditure have caused bank borrowing of the government to swell unusually.

According to Bangladesh Bank figures, the government's borrowing of Tk 63.50 billion (local currency) has exceeded the budgetary estimate of Tk 54 billion.

''The bank borrowing levels will need to be brought down sharply in the second half by mobilising additional revenues and additional foreign assistance as well as by limiting expenditure, a challenging situation compounded further by the recent political unrest,'' said the statement.

UNI