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Annual Report 2002 : South Asia

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Bangladesh

Economic performance

GDP growth in Bangladesh moderated to 4.4% in FY2002 (ending 30 June 2002) from 5.3% in FY2001 due mainly to contraction in agriculture sector production because of adverse weather, and slower growth in industrial output due to lower export-oriented manufacturing. However, small-scale manufacturing and industrial activities—which are less dependent on global demand, such as electricity, gas, and water—grew, as did the services sector.

The fiscal deficit decreased to 4.4% of GDP, and inflation increased to 2.4% from 1.6% in FY2001. The current account balance, excluding official grants, moved to a surplus of 0.4% of GDP in FY2002 from a deficit of 2.3% in FY2001. This was mainly attributed to a lower trade deficit (as year-on-year exports and imports declined by 7.6% and 8.7%, respectively) and a surge in remittances from overseas workers. Foreign exchange reserves rose to $1.6 billion, or 2.5 months of imports at the end of FY2002, compared with $1.3 billion at the end of FY2001.

ADB operations

Operational strategy: ADB’s strategy to reduce poverty includes continued support for developing basic physical and social infrastructure, with more attention on governance- and environment-related issues. ADB-assisted projects in transport, energy, social infrastructure, water resources, and finance are aimed at supporting key policy and institutional changes to increase private sector participation and improve sector efficiency.

Policy dialogue: In 2002, ADB emphasized local capacity building to support the Government’s decentralization policy and improve municipal and local governance. Reforms to improve corporate governance and sector efficiency were also targeted. These included rationalizing tariffs, and creating and restructuring corporate entities in the power and gas subsectors; establishing an independent energy regulatory body; privatizing the marketing of petroleum products; and promoting private sector participation in the energy sector.

Loans, technical assistance, grants, and equity investment: Six loans totaling $299.8 million for five projects were approved in 2002 to upgrade the road network and rural infrastructure, mitigate erosion at the Jamuna-Meghna River, promote clean fuel in Dhaka, and improve urban governance and the infrastructure sector. Nine technical assistance totaling $4.9 million and a grant of $12 million were approved. ADB also approved a private sector equity investment of $526,000 in a central depository facility, which will enable the efficient mobilization of local and foreign capital, increase transaction processing capacities, and increase domestic and foreign participation in the capital market (see tables 1, 6, 7, 10, 24, and 25 in the Statistical Annex).

Project implementation: Since joining ADB in 1973, Bangladesh has received 153 loans totaling $6,788.4 million, of which 39 were active at the end of 2002. Contract awards in 2002 totaled $202.9 million, bringing the cumulative figure to $4,844.6 million. The contract awards ratio was 18.1%—lower than the ADB-wide average of 22.6%. Disbursements in 2002 totaled $193.1 million, bringing cumulative disbursements to $4,868.8 million. The disbursement ratio was 15.4%—lower than the ADB-wide average of 22.2% (see tables 14–23 in the Statistical Annex).

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