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Annual Report 2001

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Bangladesh

Economic performance

GDP growth in fiscal year (FY)2001 (ending 30 June) is estimated at 5.2%, lower than the 5.9% growth rate achieved in FY2000. This relatively robust growth was due to a bumper crop in agriculture and growth in the industry sector of 7.2%, higher than the 6.2% growth achieved in FY2000. Growth in the services sector in FY2001 was 5.4%, against 5.5% in FY2000. Inflation, as measured by the CPI, declined to 1.6% in FY2001 from 3.4% in FY2000, mainly due to depressed food prices. Government revenue increased to 9.6% of GDP in FY2001, compared with 8.5% in FY2000 as a result of improved tax collection, increased imports, and a new compulsory preshipment inspection system. However, the budget deficit remained high at 6.1% of GDP due to a surge in expenditures. Exports, mainly garments and knitwear, grew by 12.4% in FY2001, compared with 8.2% the previous year. However, the current account deficit increased to 2.1% of GDP compared with 1% in FY2000, following a surge in imports and a decline in private current transfers, including remittances. Foreign exchange reserves declined to $1.3 billion or 1.7 months of imports at the end of FY2001, compared with $1.6 billion at the end of FY2000. Because the domestic garment industry and overseas job markets—which have absorbed a large proportion of the population entering the labor market during the last 2 decades—have become saturated, Bangladesh faces the challenge of absorbing 2 million labor force entrants annually, as well as addressing large-scale underemployment.

ADB operations

Operational strategy: ADB’s focus remained on poverty reduction, the most important challenge facing Bangladesh since nearly half the population lives in absolute poverty. The Partnership Agreement on Poverty Reduction (PAPR) concluded in early 2000 also recommended promotion of effective development interventions, increased quantity and quality of social sector investments, and greater attention to good governance.

Policy dialogue: Major emphases in 2001 were reform strategy and regulation for the energy sector, improving performance of the water resource management sector, and the postliteracy and continuing education subsectors.

Loans, technical assistance, and grants: In 2001, ADB approved four loans totaling $297.9 million for the West Zone power system development, postliteracy and continuing education, and second small-scale water resources development sector projects. Twelve technical assistance grants totaling $4.9 million were also approved for funding a poverty assessment; a review of public expenditure; erosion mitigation of the Jamuna-Meghna River; a study on the Jamuna Bridge; improvement of urban governance and infrastructure; review and strategy formulation in the financial, industry, and trade sectors; rural infrastructure improvement; development of the Northwest Road corridor; road network improvement and maintenance; and primary education sector improvement. Three grant-financed projects amounting to $25.4 million were also approved: one for beneficiary participation and project management, and one for the second small-scale water resources development sector, both funded by the Government of The Netherlands; and another for supporting livelihood improvement for the poor through water management associations, financed by the Japan Fund for Poverty Reduction (JFPR).

Project implementation: Since joining ADB in 1973, Bangladesh has received 147 loans, of which 37 were active at the end of 2001. Contract awards totaled $137.9 million, bringing the cumulative figure to $4.7 billion. The contract award ratio was 14.6%, slightly lower than the ADB-wide average of 14.8%. Disbursements during the year totaled $214.9 million, bringing cumulative disbursements to about $4.7 billion. The disbursement ratio was 17.3%, lower than the ADB-wide average of 20.5%.

In 2001, the Government and ADB focused on implementing the measures agreed upon during the 2000 country portfolio review. Efforts were concentrated on improving project readiness, streamlining procurement and recruitment of consultants, and enhancing project implementation and monitoring. A technical assistance grant for strengthening project portfolio performance, training executing agencies’ staff in project implementation, and improving the Government’s institutional capacity in project monitoring is currently being implemented.

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