Country Report Bangladesh January 1996 Main report

Summary--Bangladesh 1st quarter 1996.

Outlook: The February general election will be boycotted by the two main opposition parties, diluting the political legitimacy of a re-elected BNP administration. GDP growth will remain below 5% in 1995/96, but some recovery in agriculture should push the rate close to 6% in 1996/97. The trade gap will widen again in 1996/97.

Political scene: The 145 by-elections to the seats boycotted by the opposition have been postponed to a date close enough to the next general election for the prime minister to opt for an early dissolution. The AL and JP will not participate in the February poll. The campaign of sit-in strikes and street demonstrations has continued unabated. The truce in the Chittagong Hill Tracts has been extended again. Only a few of the Rohingya refugees await repatriation.

Economic policy and the economy: The World Bank has urged the government to speed up implementation of the public-sector reform programme and cease its intervention in the labour market. The central bank is maintaining last year's money and inflation targets through 1995/96. The taka has been devalued by 1.3%.

Sectoral trends: The government's open-market sales of rice have had limited impact and widespread hunger has been reported in the north and west. Jute output has fallen sharply but stocks are adequate to sustain exports. Thousands of child workers have been identified in garments factories. A new gas reserve has been found in Bhola. The country's largest digital telephone exchange has been opened.

Banking and finance: The bank rate has been raised. The Chittagong Stock Exchange has started operation. Standard Chartered has opened an offshore banking unit in the Chittagong EPZ.

Foreign trade and payments: Export earnings rose by one-third in 1994/95 but import growth was even faster. Remittances were up one-fifth in 1994/95. Rising prices have brought a sharp improvement in raw jute export earnings. SAPTA tariff reductions have been agreed.

Aid and development: The IDA is aiding flood prevention. The WFP and the EU have provided wheat as food aid. The ADB has given loans for fisheries, irrigation and a cement factory. Donors are considering $729m funding for the electricity sector.

© 1996 The Economist lntelligence Unit Ltd. All rights reserved
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