- ECONOMY: GDP growth for FY2004 expected to reach 5.7%
The gross domestic product (GDP) growth rate during FY2004 is expected to rise to 5.7% from 5.3% in FY2003, as both domestic and external demand recover. Aus crop was good and the production prospect of aman, the second largest crop is promising. During the first four months (July-October) of FY2004, exports rebounded to 10.4% growth while imports (in terms of opening of L/Cs) increased by 21.8% compared with the corresponding period of FY2003. There was notable growth in the imports of industrial raw materials and capital goods, which augers well for increased domestic industrial activity. The rising trend in workers remittances has been maintained. Foreign exchange reserves increased to about $2.5 billion or about three months' equivalent of imports in mid-December 2003. Although revenue collection increased by 9.7% during the first five months of FY2004, it remained slightly below projections. Inflation continued to rise (5.6% in September 2003). However, as the country is expecting good harvests, this is likely to moderate.
- STRUCTURAL AND SECTOR REFORMS: Good progress achieved
There has been good progress in several areas of macroeconomic and sector reforms. The taka has been successfully floated and the Government has embarked on an ambitious program to overhaul the banking sector, which includes giving greater autonomy to the central bank and strengthening the country's banking system. Professional management support is being introduced in three nationalized commercial banks (NCBs), and another NCB privatization is in the works. To stimulate private economic activities, the central bank recently reduced the statutory liquidity requirement (SLR) from 20% to 16% and lowered the bank rate from 6% to 5%. The Government is setting up an independent anticorruption commission, finalizing a land transport policy, creating a road maintenance fund, and finalizing a national water management plan. The energy regulatory commission is also being operationalized.
- ADB OPERATIONS: Key infrastructure and governance the focus
The main focus of ADB operations in Bangladesh during 2003 was on improving key infrastructure and human development, with greater attention to addressing poverty and governance issues. ADB assistance was instrumental in spearheading key governance and sector reforms, particularly in the energy, education, and transport sectors. ADB's policy dialogue also focused on improving transparency and efficiency in public procurement, improving portfolio performance, and streamlining project approval procedures.
- ADB LOANS: $532 million approved in 2003
A record high lending level of $532 million by ADB in 2003 for Bangladesh included a participatory livestock development project, power sector development program, primary education development program, and road network improvement and maintenance project.
The newly approved Second Primary Education Development Program (PEDP II) for $100 million represents a pioneering approach to development in bringing government and 11 development partners together under one coherent program to create an environment for nationwide improvement in primary education. Under the PEDP II, ADB is playing the lead role to assist the Government in implementing a $1.8 billion sector-wide program to bring quality primary education to children in Bangladesh. The PEDP II has four main components in support of improvement of quality of primary education: i) organizational development and capacity building to increase authority and accountability at all levels, ii) school and classroom quality improvement, iii) infrastructure development and iv) promoting equitable access to schools.
The newly approved Power Sector Development Program will help Bangladesh continue its power sector reforms and improve the quality of electricity supply through a loan package totaling $286 million. The program will support the Government's power sector reform policy that was adopted in 1994 to improve governance and build long-term institutional capacity, improve efficiency, and promote private sector participation. The assistance includes a $100 million program loan that will focus on financial stabilization of sector entities created under the reform program. It will also promote corporatization of another four sectoral entities to improve governance and enhance structured competition and financial discipline. In addition, a $186 million project loan will address unreliable power supply by improving peak load generation capacity to reduce load shedding by constructing a 2 x 100-megawatt peaking power plant at Siddhirganj, near Dhaka. It will also introduce competition in generation by investing in a new National Load Dispatch Center in the capital, and will upgrade electricity services in 10 towns in the northwest of Bangladesh.
- TECHNICAL ASSISTANCE: 11 grants approved in 2003
Eleven technical assistance (TA) grants amounting to $5.12 million were approved in 2003. TA grants would provide support for poverty monitoring, expediting privatization, improving governance, and mitigating arsenic contamination. The TA grants will also support preparation of projects for possible ADB financing in the areas of development of Chittagong Port, water resources management, agribusiness development, social protection, urban primary health care, and the financial markets.
ADB has also provided a large number of nonlending products to the country, which provided training to the staff members of government and other agencies on project management, project accounting, project auditing, monitoring and evaluation of project implementation and resettlement management. In addition, quarterly economic updates and several economic, thematic and sector studies were prepared.
- 2004-2006 PROGRAM: $402 million per year in loans planned
The Country Strategy and Program (CSP) Update for 2004-2006 envisages an annual average lending level of $402 million to Bangladesh for the next three years. It exceeds the $391 million per annum programmed in the last CSP Update for 2003-2005. The proposed lending program consists of 17 projects totaling $1.2 billion over the three-year period, comprising $690 million from ADB's Asian Development Fund and $515 million from its Ordinary Capital Resources.
Planned programs include assistance in water resource management, agribusiness, small and medium enterprise development, financial market governance improvement, flood protection, urban health, education, energy, and transport. Strategic priorities will include promotion of the private sector, good governance, gender and development, and regional cooperation.
The lending program will be complemented by 23 technical assistance grants, amounting to about $15 million during 2004-2006, to help the timely preparation of projects and to strengthen capacity of various agencies and address crosscutting issues.
- GOING FORWARD: New CSP planned
ADB has started preparing a new Country Strategy and Program (CSP) for Bangladesh. The last CSP for Bangladesh was prepared in 1999. As part of CSP preparation process, four regional consultation workshops were organized during September-October in Barisal, Sylhet, Rajshahi, and Chittagong. The major challenge for 2004 will be to prepare CSP in a consultative process in parallel with the Government's preparation of a full-blown poverty reduction strategy.
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