Thank you, Finance Minister
Finance Minister M Saifur Rahman, who has been often seen inclined to donor prescriptions, for the first time, displayed a competence to react differently when IMF’s Thomas Rumbaugh stressed, among other issues, the raising of fuel prices further.

The finance minister appeared more critical of the role of donors when he said ‘our policies are more effective… they [lenders] come up with policies that are contradictory to their earlier policies. They once told us to give autonomy to the central bank and later suggested intervention in its monetary policies’

The IMF mission made a routine visit that lasted for two weeks to review the status of fulfillment of the conditions for the Poverty Reduction Growth Facility (PRGF) and Trade Integration Mechanism (TIM) loans. The mission that arrived in Dhaka on November 13 pointed to several issues which were hanging fire which include oil price hike and contraction of money supply, foreign exchange reserves position, appointment of an adviser to Agrani Bank, restructuring the boards of nationalised commercial banks (NCBs) and introduction of an audit cell at the National Board of Revenue.

About these issues, the finance minister said, the donors want to see oversight bodies like tax ombudsman and human rights commission. “But where do we find the right persons for these offices," he asked. He was outright to say, "I had to face a lot of hassles from my cabinet colleagues in setting up the Anti-Corruption Commission. We made the legislation, appointed commissioners, gave manpower, but if they don't work, I cannot be held liable for that."

The FM has only stated what needed to be stated that the IMF’s prescriptions for change and the conditionalities that usually go with them do not always reflect ground realities, political imperatives and national sensitivities. While agreeing that as beggars, the least developed amongst us cannot afford to be choosers, it does behoove upon the IMF to be less abrasive in its ministrations. A good doctor is one that has a healing touch and a humane face. The IMF is clearly found wanting on this count. What the Finance has done is to remind them about this.

IMF’s B+ for Bangladesh
On some counts the IMF is pleased. Bangladesh's economy continues to expand despite the impact of higher oil prices and devastating floods. It is expected that the economic growth would reach six per cent by the end of the current fiscal. The IMF in a positive note affirmed that the agency would continue to support Bangladesh's efforts to attain its economic potential and achieve the Millennium Development Goals.

"The growth rate of Bangladesh has been robust but that should not undercut the challenges," IMF team leader commented suggesting, at the same time, that the government should take further measures to improve the investment climate for enhancing Bangladesh's competitiveness
Oil price imbroglio
The present government has so far increased the petroleum prices on eight occasions, the last being in September. Nevertheless, the visiting IMF mission expressed dissatisfaction with the current petroleum price level.
Perceptibly, high global petroleum prices pose a considerable risk to the domestic economy. Higher prices of petroleum have an adverse effect on business investment and contribute to inflationary pressures, and strain the balance of payments. Globally higher petroleum prices could depress demand for Bangladeshi export goods. The heightened pressure on the domestic balance of payments could affect the imports of capital goods and raw materials, negatively affecting economic growth and investment.
Direct inflationary effects of oil price increase so far have been limited due to incomplete pass-through in view of the administered retail prices of petroleum products in the local market. In reality, increased prices of imported goods caused by higher international oil prices combined with the rise in import prices due to taka devaluation has fueled inflationary pressure in the economy. The inflation rate in its latest estimate hovers over 8 per cent.

In the context of South Asia, there is no doubt that fuel prices at the pump are much lower in Bangladesh and on that count a price rise may seem inevitable. Ground realities dictate otherwise. Bangladesh has its own imperatives for hesitating here. The issue is of timing. The timing does not seem right.

Foreign exchange reserves deplete
The foreign exchange reserves stood slightly above US $2.50 billion at the end of third week of November. The downward drift was steep following payments to Asian Clearing Union (ACU) in the first week of November.

The fluctuation in foreign exchange reserves is not a new phenomenon in the country. The reserves stood at $ 1.72 billion on June 30, 1997, at 1.74 billion on June 30, 1998, at $ 1.52 billion on June 30, 1999, at $ 1.60 billion on June 30, 2000, at $1.30 billion on June 30, 2001, at $ 1.58 billion on June 30, 2002, at $ 2.47 billion on June 30, 2003, at $ 2.70 billion on June 2004 and $ 3.02 billion on June 30, 2005.

There is now a market perception that the Taka will get even weaker and both remitters and exporters are waiting to see how the situation evolves. The foreign exchange reserves as well as rate experienced increased pressure and exhibited significant volatility mainly due to import growth, aided by the sharp rise in private sector credit. The taka depreciated by around 5 percent between December 2004 and June 2005. The government must ensure that the flexible exchange is accompanied by the maintenance of gross official foreign exchange reserves to buffer the economy from external shocks.

"Terrorism is a global problem. This problem here will not affect our investment," Alan Rosling of Tata Sons
The Tata group appears firm in its determination to stay the course here. The industrial giant is satisfied with progress in key issues which include gas pricing, land acquisition process, incentives, tax and fiscal benefits and has ruled out withdrawing from Bangladesh.
"Tata is deadly serious about its investment because it is good for both Bangladesh and India. There is no chance of withdrawal of investment proposal unless the talks with the government completely fail," said Alan Rosling, Tata Sons’ Executive Director during a recent visit to Dhaka adding that with a total outlay of US$ 3 billion, this was an unprecedented cross-border investment proposal in the whole of South Asia.

Industries suffer from low gas flow
Industrial units in Tongi, Gazipur and Savar are losing production due to low pressure of gas over the last several weeks. Industrial units, specially located in Tongi and Gazipur, are hit hard and the owners of factories are forced to suspend production of their factories once a day.

The gas supply line that was constructed over a decade ago to feed the industrial units of the region is not able to take extra pressure of gas. When the power plant is in operation, the pressure in the supply line comes down creating gas crisis for other industrial units of the region.

Titas Gas Distribution and Transmission Company Limited, in a letter to the Power Development Board (PDB), recently requested it to keep the power generation from the plant at a limited level to avoid the pressure on the supply line. Instead, it suggested the PDB to run its Ghorasal and Rauzan power plants where the Petrobanga has enough strength to meet the demand of gas. But the PDB is yet to take any steps in this regard.

The present production capacity of 54 wells of 12 gas fields of Petrobangla is 1350 MMCFD against the demand for over 1500 MMCFD. The gas supply network of the industrial region has been facing excessive pressure with the commissioning of the 105mw Tongi Power Plant that is consuming 14 million cubic feet per day (MMCFD).

With the onset of winter, overall gas consumption also goes up by 50 MMCFD on an average and the pressure in the supply lines also fluctuates due to additional consumption.

Individual tax payers more active
The revenue collection from individual taxpayers has increased by 50 percent so far in the current fiscal although only 37 percent of the total individual taxpayers with Tax Identification Number (TIN) earlier submitted tax returns. National Revenue Board (NBR) is also going to conduct a special survey in big cities as the number of tax returns has declined.

Last year, 5.38 lakh individual taxpayers submitted returns in the general category while 1.25 lakh in self-assessment. The total revenue earning from these two categories reached Tk 152.44 crore. The number of tax returns will rise as there are some 31,000 pending applications seeking more time to pay tax. Now, the number of total taxpayers with TIN is around 17 lakh. About 63 percent taxpayers have not yet submitted returns. The NBR source said many take TIN for different purposes but provide fake addresses. Later they cannot be tracked.

The NBR is going to conduct a special survey with the help of school and college students. The survey will be conducted primarily in Dhaka and Chittagong. A high official in the NBR said they are going to send a proposal to the finance ministry seeking money for the purpose. The NBR sources also said until October around Tk 100 crore was whitened and some Tk 75 crore as tax was earned.

As the provision to whiten black money will go from next financial year, the NBR is getting good response from the black money owners.

The last date for submitting income tax returns in the current fiscal year was October 31. Some 5.27 lakh individual taxpayers submitted returns in the general category while 1.52 lakh submitted in self-assessment category. The total revenue earning from these two categories stood at Tk 228.14 crore.