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Economists and civil society representatives Monday unleashed an attack on the government for resorting to commercial and short-term borrowing from a foreign commercial bank (FCB) in order to import gasoline.
But the Bangladesh Bank (BB) governor defended the move, saying "external shock" forced the government to take a US$250 million credit from the Standard Chartered Bank as prices of oil shot up in the international market.
"External shock has propelled us to go for the public borrowing. It's not that we like it," BB Governor Salehuddin Ahmed told an elite audience, dubbing the step as a "quick-fix".
"It's unlikely that prices of oil will go down shortly. That is why, we are taking such a loan," he said, referring to the government's obligation to make a plethora of payments besides footing fuel import bills.
The central bank chief's comments came at a CPD-dialogue as noted economist Wahiduddin Mahmud questioned the very logic of resorting to short-term borrowing for oil imports.
Centre for Policy Dialogue (CPD), a multidisciplinary think-tank, arranged the dialogue on "Growth and equity in South Asia: How has Bangladesh performed", with CPD Executive Chairman Rehman Sobhan in the chair.
Although volatile oil prices exerted a substantial pressure on the balance of payment (BoP), Mahmud saw no rationale behind going for short-term credit.
"Oil price hike has created a problem. But what will happen after three months?," he asked, obliquely referring to the ineffectiveness of such ad-hoc measures.
In the dialogue, World Bank official Ijaz Nabi and CPD Executive Director Debapriya Bhattachariya presented separate papers.
The dialogue witnessed an animated debate on the nexus between growth and macroeconomic stability, as the speakers were sharply divided in their opinions.
Turning to the issue, the BB boss said there is a need for "reconstructing growth" so it can reach the target people.
"We've to reconstruct growth … Not only growth is important, but we've to look at the nature of growth," he said.
He added that today, the central bank is giving priority on credits on small and medium-sized enterprises that are labour-intensive.
As Bhattachariya pointed out that despite having macroeconomic stability, Bangladesh remains an under-performer in the South Asian region in terms of growth.
But ex-BB governor Fakhruddin Ahmed said macroeconomic stability is not so much important, but higher growth rate is needed to make a significant dent in poverty, he said.
Making an intervention at this juncture, Mahmud debunked the myth that higher growth rate has exacerbated inequality.
Bangladesh can be considered "a textbook case" of pro-poor growth in South Asia as the situation here is better than that in Sri Lanka and India, he said substantiating his earlier claim.
He also referred to the roles of remittances and workforce in the apparels industry, saying these have fostered pro-poor growth.
"A reasonable and sustainable development is not possible without macroeconomic stability," Salehuddin Ahmed said, adding: "Stability is also required to lure foreign investors as it helps them to assess the investment prospects".
Ijaj of World Bank said despite obstacles such as conflicts, corruption and high fiscal deficits, South Asia has achieved "impressive" economic growth and poverty reduction in the past decade, thanks mainly to economic reforms in the 1990s.
"If this growth accelerates to 10 per cent a year, the region could see single-digit poverty rates by 2015," he presumed.
Striking an optimistic note, the WB official said the dynamism and openness that charactarise South Asia would make the region free of poverty in a few decades.
Also taking part in the dialogue, SR Osmani said that the present income disparity was triggered by the inability to reach resoureces to the poor. He added that though investments were taking place in the country, job creation has failed to keep pace with it.
Meanwhile, Debapriya said low disbursement has turned the foreign aid into Achiles' heel in the 2005-06 fiscal. Besdides, the country growth has not been that much progressive due to snags like port problems and other macroeconomic weaknesses.
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