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  • Report No. 7596B-D

    Bangladesh Recent Economic Developments and Short-Term Prospects March 13,1989

    Asia Country Department I

    FOR OFFICIAL USE ONLY

    S~~~~~~~~~~~~~~~~

    Document of the World Bank

    This docum~erit has a restricted distribution and may be used by recipients only ini the performance of their official duties. Its contents may not otherwise be disclosed vvith~out World Bank authorization.

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  • CUHRRENCY EQUIVALENTS

    The external value of the Bangladesh Taka (Tk) is fixed in relation to a basket of reference currencies, with the US Dollar serving as the intervention currency. The official exchange rate on January 1, 1989 waS Tk 32.27 per US Dollar.

    US$ 1 - Tk 32.27 'k 1 - US$0.031

    In this report, US$ is sometimes abbreviated to $.

    WEIGHTS AND MEASURES

    I acre - 0.405 hectare (ha) 1 mscf - 1 million standard cubic feet l tpy - 1 ton per year 1 crore - 10 willion

    FISCAL YEAR (FY)

    July 1 - June 30

  • BANGLADESH

    RECENT ECONOM1IC DEVELOPMENTS AND SHORT-TERM PROSPECTS

    TABLE OF CONTENTS

    Country Data

    Executive Summary i

    A. Recent Developme_rts - Macro Economic Performance . . . . . . . . . . 1

    Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . I

    Progress in Macro-economic Adjustment . . . . . . . . . . . . . . . 2

    Macroeconomic Balances and Savings and Investment Trends . . . . . 3

    The Incentive Framework . . . . . . . . . . . . . . . . . . . . . . 5

    B. Production Trends and Short-Term Economic Management . . . . . . . . 8

    Growth and Composition of Production . . . . . . . . . . . . . . . 8

    Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

    Foodgrair Management . . . . . . . . . . . . . . . . . . . . . . . 13

    Poverty Alleviation . . . . . . . . . . . . . . . . . . . . . . . . 16

    Wage and Employment Developments . . . . . . . . . . . . . . 18

    Impact of floods on the poor . . . . . . . . . . . . . . . . 19

    Industry and Trade Policy Reforms . . . . . . . . . . . . . . . . . 20

    Budgetary Developments . . . . . . . . . . . . . . . . . . . . . . 23

    Balance of Payments . . . . . . . . . . . . . . . . . . . . . . . . 27

    Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

    C. Short-Term Prospects . . . . . . . . . . . . . . . . . . . . . . . . 35

    Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

    The Impact of the Floods . . . . . 35

    The Government's Response to the Crisis . . . . . . . . . . . . . . 36

    Economic Prospects in FY89 . . . . . . . . . . . . . . . . . . . . 41

    Prospects for Economic Growth . . . . . . . . . . . . . . . . 42

    Food Management . . . . . . . . . . . . . . . . . . . . . . . 43

    Budgetary Prospects . . . . . . . . . . . . . . . . . . . . . 45

    Prospects for the Balance of Payments . . . . . . . . . . . . 47

    D. Economic Management in the Near to Medium Term . . . . . . . . . . . 49

    Economic Management in the Short Term . . . . . . . . . . . . . . . 52

    Economic Management in the Medium Term . . . . . . . . . . . . . . 55

    Exploring innovative empioyment generation . . . . . . . . . 65

    E. Foreign Aid Trends and Aid Requirements for FY90 . . . . . . . . . . 67

    Foreign Aid Trends. . . ........... 67

    Aid Recommendations for FY90 . . . . . . . . . . . . . . . . . . . 69

    Statistical Appencaix 74

    Map

  • List of Text Tables

    Table 1.1: KEY MACROECONOMIC INDICATORS, FY81-FY88 . . . . . . . . . . . 3 Table 1.2: MACROECONOMIC BALANCES, FY81-FY88 . . . . . . . . . . . . . . 4 Table 1.3: KEY INCENTIVE INDICATORS, FY81-FY87 . . . . . . . . . . . . . 6 Table 1.4: GDP GROWTH BY SECTORS, FY73-FY88 . . . . . . . . . . . . . . 9 Table 1.5: TRENDS IN AGRICULTURAL PRODUCTION AND V.ALUE ADDED,

    FY81-FY89 . . . . . . . . . . . . . . . . . . . . . . . . . 11 Table 1.6: SUMMARY OF THE FOODGRAIN SITUATION, FY81-FY89 . . . . . . . . 14 Table 1.7: TRENDS IN REAL WAGES FOR UNSKILLED LABOR, FY80-FY88 . . . . . 18 Table 1.8: INCOME AND EXPENDITURE OF THE CENTRAL GOVERNMENT, FY81-FY89 . 24 Table 1.9: BALANCE OF PAYMENTS, FY81-FY89 . . . . . . . . . . . . . . . 28 Table 1-10: PATTERN OF EXPORTS, FY81-FY89 . . . . . . . . . . . . . . . . 30 Table 1.11: TRENDS IN IMPORTS, FY81-FY89 . . . . . . . . . . . . . . . . 32 Table 1.12: REHABILITATION AND RECONSTRUCTION PROGRAM . . . . . . . . . . 39 Table 1.13: KEY ECONOMIC PkOJECTIONS, FY88-FY91 . . . . . . . . . . . . . 51 Table 1.14: EXTE"NAL AID - TRENDS IN COW{ITMENTS AND DISBURSEMENTS,

    FY81-FY89 . . . . . . . . . . . . . . . . . . . . . . . . . 68

  • FOR OMCIAL USE ONLY

    List of Abbreviations and Acronyms Used

    ADP - Annual Development Program

    BBS - Bangladesh Bureau of Statistics BJNC - Bangladesh Jute Mills Corporation BOI - Board of Investment BRAC - Bargladesh Rural Advancement Committee BRDB - Bangladesh Rural Development Board BSCIB - Bangladesh Small and Cottage Industries Board BTTB - Bangladesh Telephone and Telegraph Board

    CDST - Customs D.lties and Sales Taxes,

    DEDO - Duty Drawback and Exemption Office DFI - Development Finance Inastitution

    EPZ - Export Processing Zone ERD - External Resources Division

    FFW - Food For Work

    GDI - Gross Domestic Investment GDP - Gross Domestic Product GOB - Government of Bangladesh

    RES - Household Expenditure Survey

    ILO - International Labor Organization

    LLP - Low Lift Pump

    NGO - Non-Government Organization NIP - New Industrial Policy

    O&M - Oneration and Maintenance

    PE - Public Enterprise PFDS - Public Food Distribution System PFP - Policy Framework Paper Proshika - Rural Development Center

    RIP - Revised Industrial Policy RPP - Rural Poor Program

    SABRE - System for Autonomous Bodies Reporting and Evaluation STW Shallow Tubewell Swarnivar - Self-reliance Movement

    TA - Technical Assistance

    This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

  • -ii-

    UNDP - United Nations Development Program USAID - United States Agency for International Development

    VCD - Vulnexable Group Development

    UFP - World Food Program

    XP?S - Export Performance Benefit Scheme

  • TITLE: RECENT ECONOMIC DEVELOPMENTS AND SHORT-TERM PROSPECTS

    COUNTRY: BANGLADESH

    REGION: ASIA COUNTRY DEPARTMENT I

    SECTOR: COUNTRY ECONOMIC

    R8PORT TYPE CIASSIF MM/YY LANGUAGES 7596-BD CEM Restricted 03 89 English

    PUBDATE: 8903

    ABSTRACT: In the mid-eighties, Bangladesh made good progress in stabilizing its economy, achieving a reasonably good rate of economic growth with some improvement in the poverty situation, and initiating much needed policy reforms in many areas. Ir. the last two years, however, floods of unusual severity dealt a major setback to the economy. Although the Government handled the immediate crisis caused by these disascers very well, the floods, as well as insufficient attention to short-term economic management, contributed to a deceleration of economic growth, a slowdown in the policy reforms and an apparent reversal in the improving trend in the poverty situation observed in the mid-eighties. Given widespread poverty, however, Bangladesh will need to reorient its economic policies from a preoccupation with stabilization to resuscitate the economy quickl3, to accele:ate economic growth to at least 5% per annum, and to take meaningful steps to alleviate poverty. Against this background, this report evaluates Bangladesh's recent economic performance and short-term prospects; needed improvements in economic management in the short-term; policy reforms required over the medium term to achieve economic growth and poverty alleviation objectives; and external aid requirements in FY90 to assist these efforts.

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    COUNTRY DATA - DANGLADESH

    AME PCitnUCI0 (1985) DEPSITY (198S) 143,998 km2 100.6 million 699 per km2 of total area

    Rate of Growth: 2.4 1.062 per km2 of cultivable lISM

    POPULATION HARACTERISTICS (1985) REALSH '.f Crude Birth Rate (per 000) 39.0 Population per physician: 5.900 Crude Death Rate (per '000) 15.0 Population per hospital bed: 3,600 Infant Mortality (per .000 live births) 125.0

    INCOME DISTRIBUTION (1982) DISt.IBRUTION OF LAND OWNERSHIP (1978)

    X of natlonal incom. ttSheet quinttle: 42 2 owned by top 102 of owners: 49

    X of nAtional income, lowest quintile- I: owned by smallest 10S of owners: 2

    ACCESS TO PIPED WATER (1980) ACCESS TO ELECTRICITY (1980)

    X of population - urban: 26 2 of population - urban. 3.5 X of population - rural 40 2 of population - rural:

    NIUTRISION (1983) EDUCATION

    Calorie intake as 2 of requirements: 84 Adult literacy rate (2) (1980181) 292

    Per capita protein intake (8ramas) 42 Primary school enrollment (X) (1985) 602

    GNP PER CAPISA IN 1986; USS160 I-

    GROSS DOMESTIC PRODUCT (1987188) ANNUAL RATE OF GROWTH (2. constant price

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