A tale of two advisors

Dr Akbar Ali Khan and Lt Gen Hasan Mashhud Chowdhury have many things in common.  Both reached the top in their respective fields.  Dr Khan became the country’s top bureaucrat, and is a rare public servant who enjoyed confidence of both Awami League and BNP.   After a distinguished career that included commanding the Bangladeshi contingent in the first Gulf War, Lt Gen Chowdhury also rose to the top of his profession. 

In November 2006, both joined Iajuddin Ahmed’s caretaker government.  At that time, the partisan media dubbed both of them as favourites of Tarique Rahman and the dreaded Hawa Bhaban.   And then in December that year, they both resigned (with two other advisors), saying Iajuddin wasn’t serious about a fair election.  Their actions led credence to the fear of election rigging.  The four advisors were idolised by the media.  And after 1/11, both Dr Khan and Lt Gen Chowdhury were appointed chairmen of agencies that could, in theory, be enablers of fundamental reform.

With the election of the Awami League, both of them found it difficult to stay in their positions.  Both eventually resigned.  No one expects the agencies they led after 1/11 to make any difference to anything.

Even though both had to resign, one of them is a hero in my book, the other a mere has been.  Some of what these two distinguished gentlemen have in common symbolise what has been wrong with Bangladesh.  However, comparing what they don’t have in common perhaps point to how we can improve things. 

On the IMF’s generosity to BB

The IMF has recently offered Bangladesh a $700m soft facility to assist with the  impact of the global economic downturn.  According to media reports, Bangladesh Bank governor Atiur Rahman said: ”We received an e-mail from the IMF … saying it had decided to give the loan assistance to help Bangladesh face the adverse affects of the global economic downturn, and boost the economy.”  The central bank is reported to have received the money earlier this month. 

This post summarises some thoughts on the issue. 

It’s not the syndicates, stupid

Prices are skyrocketing, the Trade Minister is a failure, government is incompetent, corrupt businessmen are holding the nation to a ransom — that’s the sense one gets from glancing through the newspapers, or watching the Deshi channels.  The thing is, this whole narrative based on an obsession with ’syndicates’ — unscrupulous businessmen in cahoots with corrupt politicians — is at most a minor, side story.  Much of the price rises we are seeing are likely to be explained by simple interactions of supply and demand.  

And while the media is busy hunting syndicates, talk show pundits are castigating the Trade Minister, and the Trade Minister is busy trying to preach the businessmen to ‘not make excessive profit’, no one is talking about the real danger: monsoon is about to fail across South and South East Asia, and there is a real danger of skyrocketing rice prices in 2010.

The year of living dangerously: On the selection of the Bank Governor and his challenges

On 29 April, the Government appointed Dr Atiur Rahman as the Governor of the Bangladesh Bank. The appointment has been greeted positively by many because of Dr Rahman’s truly inspirational life story, understanding of development economics, and interest in Tagore’s work. Some has commented that the appointment is an evidence of the Government’s ‘pro-poor’ bona fides. However, little has been said about the judiciousness of the appointment given the challenges before the Bank, and qualifications and experiences that might have helped the Governor in overcoming them.

Some scary numbers

Unless you’ve just come back from outer space, you’d know that we’re in the middle of the worst recession in our lifetime.  Over the next few weeks, in the lead up to the budget in May, I plan to post a few notes on the economic situation facing Bangladesh.  This is the first installment. 

The World Bank’s latest forecast has the Bangladeshi economy growing by 4.5% in 2008-09 and 4% in 2009-10.  The median of blue chip private sector forecasts has the economy growing by 4.4% this financial year, and 4.6% next. 

To put these numbers into context, in 2007-08, GDP grew by 6.2% — fifth straight year of 6% plus growth.  Since 1994-95, GDP growth has topped 4.5% in every year but one (2001/02 — the dot com and 9/11 recession).  And the current Poverty Reduction Strategy aims for a GDP growth of 7.5%. 

So these forecasts are pretty negative.  But it’s easy to show with some quick-and-dirty back-of-the-envelop calculation that under reasonable assumptions, the GDP growth for 2008-09 or 2009-10 could turn out to be as low as 3.6% — lowest rate since 1990-91 (when we were buffeted by the first Gulf War, anti-Ershad uprising, and a devastating cyclone). 

An unexpected honeymoon?

Politics is the price of rice, wrote fellow blogger Rahnuma Ahmed earlier this year. Rising prices, or more accurately, rising inflation, is intricately linked with political fortunes in Bangladesh. Regardless of the election result, could the incoming government receive an unexpected honeymoon from softening inflation?

The recession and Bangladesh

The IMF publishes forecasts for the world economy twice a year. After its April release, I wrote a piece for Daily Star Forum asking ‘How will the global economic slowdown affect Bangladesh?’ — here is the piece.  The October forecasts have recently been published, and this post revisits the question.  Outlooks for the world economy has been revised downward sharply in the past 6 months.  These are detailed first. 

Then we turn to the outlook for Bangladesh.  While the IMF has revised its 2008 forecast upward, 2009 is now expected to be weaker than thought earlier.  Unfortunately, they don’t actually discuss their numbers, but the ADB does.  The ADB’s latest forecasts for Bangladesh are actually quite optimistic for the financial year 2008-09.  After summarising the ADB’s analysis, I finish with some comments – inflation is expected to remain stubbornly high – and note potential risks to the outlook.  It seems to me that the IMF numbers are more likely to come true.

Manila thoughts

I was in Manila recently attending a conference.  I spent a week in the city, though part of it was spent cooped up in the hotel room.  One can never know much about a country from the little one sees in a few day, so none of what I say should be viewed as an expert analysis of the Philippines economy or society.  But what I write is based on what I saw – after all, where else but in a blog post can I ramble on?  Take all of it with a pinch of salt, sure.  But I do hope this provokes some thoughts.

On the monetary policy in Bangladesh

An IMF team has recently concluded a two-week-long visit to Bangladesh for reviewing the country’s economy.  The visit was for the annual ‘Artcile IV’ consultation process.  This consultation process involves IMF economists visiting the member country to gather information and hold discussions with bureaucrats, private investors, and other stakeholders including politicians, labor representatives, civil society organizations, and academics.  The economists then submit a report to the Fund’s Executive Board.  The Board reviews the report and sends it to the country’s government.  At this point, a press release is issued.  If the government agrees to it, the report itself is published. 

As far as I can tell, full reports for Bangladesh were released in 1998, 1999, 2002, 2003, 2005 and 2007.  I’m not sure if a full report is forthcoming this year.  Here is the official press release.  Highlights:

• Macroeconomic performance was remarkably resilient in a year of multiple natural disasters and elevated international food and fuel prices;
• The main priority is to keep control of inflationary pressures stemming from global prices and domestic demand.
• [D]espite the sizeable allocations made in the budget, recent movements in international commodity markets suggest that additional spending for fuel and fertilizer subsidies will likely be required.

The second point has received considerable attention in the media, and is the focus of this post.

On the 2008-09 Budget

The military-backed government of Bangladesh announced the country’s Budget for the 2008-09 financial year earlier this week.  The task of a Bangladeshi finance minister is never easy, regardless of the political persuasion of the government.  And striking the right balance at a time of rising inflation and global economic slowdown would have been difficult for any finance minister in the world.  

Considering all this, the Budget is perhaps not as bad as the habitual knee-jerk reactions by opposition parties suggest.  In fact, it probably is on balance not too dissimilar to what any other government could have achieved in the current circumstances.  That said, I do have some reservations.