|
The floods in Bangladesh could have an adverse impact on the economy of the country, particularly on the price of food, warns the World Bank (WB) in a report.
‘Bangladesh Floods 2007: Preliminary Impact Assessment' says that an already high inflation rate of 9.2% in June 2007 could accelerate in the coming months.
“Rising food prices in particular is the biggest concern. The flood is making it worse,” the report notes, adding that inflation could easily rise further in the next couple of months.
The government's biggest challenge will be to tighten the monetary policy, as it might face a dilemma over last month's calls for restraint in the state's bank borrowing, and a 45% boost to private agri-credit growth, with a likely increase in demand for credit after the flood.
“Stronger revenue mobilisation and increased foreign assistance are partial answers to the dilemma,” the report says.
The World Bank also predicted that the estimated 7% Gross Domestic Product (GDP) of the current fiscal year could fall to 6.8% due to the floods.
It adds that the floods are likely to have an adverse effect on agriculture and small-scale industry.
Flood-induced imports of emergency food items and post-flood reconstruction materials could also worsen the balance of payments, especially the trade balance, with frozen food exports likely to suffer.
But, the World Bank says, Bangladesh is fortunate to have a “comfortable” foreign exchange reserve, currently at $ 5 billion compared to $ 3.1 billion in 2004 and $ 1.8 billion in 1998.
The report also says it would be possible to redirect Annual Development Programme funds for post-flood reconstruction, but that was likely to increase the budget deficit for the financial year 2008.
Forty-seven of Bangladesh's 64 districts have been flooded, affecting upwards of 10 million people.
August 23, 2007
|
