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Finance Minister AMA Muhith yesterday said the government prefers giving subsidies to direct cash incentives demanded by the sectors affected by global recession to offset their losses.
Muhith said it would be unrealistic to offer cash incentives as bailout packages to exporters at this moment since the government has limited resources.
He said he would seek more financial aid from multilateral donor agencies to address the downturn. "It would be difficult to manage the economy during recession if donor agencies do not increase financial aid," he said.
He gave assurance that the government would act wisely so that inflationary pressure does not increase the prices of essentials. "We must create employment and encourage more investment, otherwise the economy will face serious challenges in the near future," he said.
Muhith was speaking at the inaugural plenary session "Macroeconomic Management in the Global Challenges" at the two-day long conference styled "Development with Equity and Justice: Immediate Tasks for the Newly Elected Government" at Bangladesh-China Friendship Conference Centre.
Centre for Policy Dialogue Chairman Dr Rehman Sobhan moderated the session where CPD Executive Director Prof Mustafizur Rahman presented the keynote paper.
Muhith said as per the suggestion of former finance adviser Mirza Azizul Islam, the government would form an "export stabilisation fund" with different stakeholders to assist exporters and ask the private, public and other stakeholders to contribute to the proposed fund.
Pledging to give financial assistance to migrants returning to the country as a consequence of recession, Muhith said the upcoming budget will have a new item named "public-private participation" for the development of infrastructure and creation of more employment.
He said at present there is a substantial amount of money in the wage earners' fund from where the government can provide financial assistance to these returnees.
The finance minister feared 2010 will be more critical because the government will have to generate more revenues while it will need to give subsidies to the affected sectors. He sought more cooperation from the banking sector to lessen the negative impacts of global recession on domestic economy.
The government will need a lot of foreign aid and pro-active private-public participation to address the harsher days ahead, Muhith added.
Prime minister's Economic Affairs Adviser Dr Mashiur Rahman said the country's bailout packages may not work because competing countries have bigger export volumes and have given bigger bailout packages.
Stressing both market and product diversification for bagging more export earning, he said the country would suffer further as demands from importing countries have decreased.
Mirza Azizul Islam spoke for immediate release of arrear cash incentives to exporters, increasing government employees' salary, revisiting banks' interest rates, developing the power and energy sectors, and reducing duties and taxes to address recession.
Former finance minister M Syeduzzaman urged the government to take even unpopular decisions, if necessary, for the development of the country.
BNP lawmaker MK Anwar suggested that the government reduce the fuel oil price further since its price declined substantially on the international market. The prices of diesel and kerosene may be fixed at Tk 35 per litre from the existing Tk 44, he said.
Pointing out that global recession has also led to the decline in essentials' prices worldwide, he said, "Unfortunately we are threatened by recession. Cost of doing business has greatly increased."
Economist Atiur Rahman emphasised creation and protection of employment, protection of the agriculture sector, especially the poultry, which opens up scope for self-employment, development of infrastructure, more investment in ICT and skills development and constant monitoring.
Quoting a recent World Bank report, Mustafizur Rahman in his keynote paper said almost 40 percent developing countries are highly exposed to the poverty effects of the crisis. He said 56 percent countries are moderately exposed and only less than 10 percent face little risk. The report tags Bangladesh as highly exposed to the poverty effects of recession.
Mustafiz divided the crisis in three parts--the first wave of crisis is a crisis in financial sector, the second wave in credit, and the third one in consumer economy. He said the third wave appears to have started to hit the increasingly globally integrated economy of Bangladesh. The next budget offers an opportunity to undertake medium term anti-recessionary and targeted initiatives in view of the challenges. The first two waves did not affect Bangladesh, he added.
Mustafizur Rahman said the government has three policy choices. First, the government can take advantage of fiscal space in the 2008-09 budget; secondly, targeted measures should be of clear time-bound nature; and thirdly, policy thrust should be on instruments that are relatively easy to monitor and can be more easily targeted. |
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