Key indicators 'ambitious, devoid of reality'
PRSP likely to get final nod today
AZM Anas and Shakhawat Hossain
The Poverty Reduction Strategy Paper (PRSP), being touted as a strategic document to help cut poverty, is due to be placed before the National Economic Council (NEC) today (Sunday) for its approval.
The NEC meeting, to be chaired by Prime Minister Khaleda Zia, is expected to examine the pros and cons of the poverty-fighting document, prepared by the General Economics Division of the Planning Commission.
"We're going to approve the PRSP, albeit it missed a number of deadlines," a high official of the commission said.
"The PRSP is undoubtedly a comprehensive document. It will serve as a strategic tool for combating the country's pervasive poverty in a more effective way," the official said.
The approval of the long-term anti-poverty document is being viewed as crucial given the pressure from the country's development partners and the need for a budgetary support credit worth US$200 million of the World Bank (WB).
Finance and Planning Minister M Saifur Rahman's recent remarks, made upon return from Washington, suggested that the delay in endorsing the PRSP had caused suspension of the release of the third installment of the Development Support Credit (DSC) for the last couple of months.
Officials at the Planning Commission acknowledged that the government has missed a number of deadlines to finalise the PRSP as desired by the country's top donors.
Also, the delay has put a financial burden on the government's exchequer.
"The government will have to give a hefty amount as remunerations to the two leading consultants involved in the process of preparing the PRSP, whose tenures have been extended by another three months," an official said who asked not be named.
Earlier, the paper was reviewed by a 21-member National Steering Committee on the PRSP headed by Principal Secretary to the Prime Minister Dr Kamal Uddin Siddiqui.
The final draft of the PRSP, which was formally released on January 13, 2005, was drafted in December last.
Meanwhile, the government is going to hold the PRSP Implementation Forum next month to take stock of the document.
The Forum, slated for November 15-17, is expected to be attended by the Local Consultative Group (LCG), a club of the country's bilateral and multilateral donors.
The high-profile gathering is being convened for the first time as the government has decided to discontinue the Bangladesh Development Forum (BDF), which was an annual event.
Unlike the BDF, the PRSP Implementation Forum will be chaired by Finance and Planning Minister M Saifur Rahman, with the government being in the driving seat.
Meanwhile, some important key indicators shown in the Medium-term Macro-economic Framework (MMF) of the Poverty Reduction Strategy Paper (PRSP) by the government seem too ambitious and devoid of reality and that they might draw criticism from the donors.
Economic experts observed that the key MMF indicators like Gross Domestic Product (GDP), rate of inflation and foreign exchange reserves had largely been exaggerated.
Most of the indicators are ambitious or prepared without considering the present internal and external situation and that they might create confusion among the county's development partners.
The PRSP has projected the gross domestic product (GDP) growth at 6.5 per cent, 6.8 per cent and 7.0 per cent for the next three fiscal years.
Although the government set a GDP growth target at 6.0 per cent for 2004-05, it was, however, revised at 5.5 per cent following two spells of floods in the year. But in the end, the GDP growth in the fiscal was estimated at 5.38 per cent.
The GDP growth projection for fiscal 2006-07 at 6.5 per cent is highly ambitious when the country is facing an uphill task to achieve the GDP growth at rate of 5.4 per cent in the current fiscal.
The point-to-point inflation rate has been projected at 7.4 per cent during the current fiscal and 5.5 per cent, 5.0 per cent and 4.5 per cent for the next three fiscal years in the PRSP under which the country is likely to receive US $ 450 million from the donors.
Experts, however, gave their critical views about such projections, especially the point-to-point inflation rate for the current fiscal.
The 12-month inflation rate in August hit at nearly eight per cent. Due to higher cost of petroleum products and price hike of essentials, the inflation might cross double digit for the first time in two decades.
The experts also termed the projection of foreign exchange reserve in the PRSP as too ambitious in view of the fall in foreign grant and higher expenditure on petroleum products and other imported materials.
The PRSP has shown the reserve for the current fiscal at $ 3.024 billion. But with the present reserve at $ 2.7 billion, it will be difficult to achieve the target, they added.
Besides, the foreign exchange reserve for the fiscal year 2006, 2007 and 2008 has been projected at $ 3.7 billion, $4.4 billion and $ 4.7 billion respectively.
The government will sit with its development partners on November 15 in the capital to fix strategies for implementation of the PRSP. The Sunday's meeting titled as the 'PRSP Implementation Forum' will replace the 'Bangladesh Development Forum'.
Following are the key indicators of the Medium-term Macroeconomic Framework (MMF):
Indicators Actual Est. Revised Projection
Real GDP Growth (percent) 5.3 6.3 5.4 6.5 6.8 7.0
GDP deflator (per cent) 4.4 4.1 5.1 5.7 5.0 4.5
CPI inflation (average in per cent) 4.4 5.8 6.5 6.0 5.0 4.5
CPI inflation (point to point) 5.0 5.6 7.4 5.5 5.0 4.5
Gross Domestic Investment (in per cent of GDP) 23.4 24.0 24.4 25.0 25.5 26.0
Total revenue (") 10.4 10.1 10.3 11.0 11.5 12.0
Tax (") 8.3 8.1 8.5 9.0 9.5 9.9
Non-tax (") 2.1 2.0 1.8 2.0 2.0 2.1
Total Expenditure (") 13.7 13.6 14.0 15.5 15.9 16.4
Current expenditure (") 7.8 7.7 8.4 8.6 8.9 9.2
Of which interest payments (") 1.9 1.6 1.8 1.7 1.7 1.7
Annual Development Programme (") 5.3 5.3 5.0 5.9 6.2 6.4
Other expenditure (residual) (") 0.6 0.9 0.8 1.1 0.8 0.8
Overall balance (") -3.4 -3.5 -3.7 -4.5 -4.4 -4.4
Primary balance (") -1.5 -1.5 -2.7 -2.4 -2.4 -2.4
Financing (net) (") 3.4 3.5 3.7 4.5 4.4 4.4
Domestic financing (") 1.3 2.1 1.8 2.0 1.9 1.8
Banking System (") 0.3 0.8 1.0 0.9 0.8 0.8
Non-bank 1.6 1.3 0.8 1.1 1.1 1.0
Foreign financing (") 2.1 1.4 2.0 2.5 2.5 2.6
Money and credit (end of year; percent change)
Private sector (") 12.6 12.0 16.8 14.0 13.0 12.5
Broad money (M2) (") 15.6 13.8 14.4 13.0 13.0 12.0
Balance of payment (percent change)
Exports, freight on board (fob) of GDP (percentage) 9.5 15.9 14.0 14.0 13.0 12.0
Imports, f.o.b of GDP (") 13.1 13.0 20.1 11.0 10.0 10.1
Remittances (") 22.4 101 14.2 14.0 13.0 12.0
External current account balance (in % of GDP) 0.3 0.3 -0.5 -0.4 -0.3 0.2
Balance of Payment (in million U.S. dollars)
Exports, f.o.b (") 6,492 7,521 8,650 9,900 11,235 12,640
Imports, f.o.b (") 8,707 9,840 11,820 13,240 14,695 16,164
Gross official reserves (in million U.S. dollars) 2,470 2,705 3,024 3,700 4,400 4,700
In months of imports of goods and services 2.5 2.3 2.4 2.5 2.6 2.8
Sources: Bangladesh Bank, Finance Division and the Bangladesh Bureau of Statistics.