Bangladesh Managing the Adjustment Process -An Appraisal

Report No. 8344-BD

BangladeshManaging the Adjustment Process-An Appraisal

March 16, 1990

Asia Country Department I

FOR OFFICIAL USE ONLY

l~~~~~~~~~~~~~~~~~

Document of the World Bank

This document has a restricted distribution and may be used by recipientsonly in the perforrnance of their official duties. Its contents may not ?therwisebe disclosed without World Bank authorization.

CURRENCY EQUIVALENTS

The external value of the Bangladesh Taka (Tk) is fixed in relation to abasket of reference currencies, with the US Dollar serving as theintervention currency. The official exchange rate on March 12, 1990 was Tk33.88 per US Dollar.

US$ 1 Tk 33.88Tk 1 = US$ 0.0295

In this report, USS is sometimes abbreviated to $.

WEIGHTS AND MEASURES

1 acre = 0.405 hectare (ha)1 mscf = 1 million standard cubic feetl tpy = 1 ton per year1 crore = 10 million

FISCAL YEAR (FY)

July ; - June 30

rOR OFFICIUL USE ONLYList of Abbreviations and Acronyms Used

ADP - A-nnual Development Program

BADC - Bangladesh Agricultural Development CorporationBB - Bangladesh BankBBS - Bangladesh Bureau of StatisticsBCIC - Bangladesh Chemical Industries CorporationBMR - Balancing, Modernization and RehabilitationBOGMC - Bangladesh Oil, Gas and Minerals CorporationBPDB Bangladesh Power Development BoardBPC - Bangladesh Petroleum CorporationBRAC - Pingladesh Rural Advancement CommitteeBRDB - Bangl&desh Rural Development BoardBSB - Bangladesh Shilpa BankBSCIC - Bangladesh Small and Cottage Industries CorporationBSRS - Bangladesh Shilpa Rin SangsthaBWDB - Bangladesh Water Development Board

CARE - Cooperative -.or American Relief EverywhereCCCN - Customs Cooperative Council Nomenclature

DEDO - Duty Drawback and Exemption OfficeDFI - Development Finance InstitutionDSL - Debt Service LiabilityDTW - Deep Tubewell

MLE-U - Energy Monitoring UnitERD - External Resources Division

FDC - Flood Control and DrainageFFW - Food For Work

GOB - Government of Bangladesh

HES - Household Expenditure SurveyHS - Harmonized SystemHTW - Hand TubewellHYV - High Yielding Variety

IDA - International Development AssociationIMFD - Implementation, Monitoring and Evaluation DivisionIMF - International Monetary FundIPO - Import Policy OrderISC1 - First Industrial Sector Credit

LRMC - Long-run Marginal CostLFS - Labor Force Survey

MR - Modified RationingMUV - Import Unit Value

NBR - National Board of RevenueNCB - Nationalized Commercial Bank

This document has a restricted distribution and may be used by recipients only in the performanceof their official duti( Its not * be * - *

NCMBC - National Commission on Money, Banking and CreditNGO - Non-Government Orgaunization

O&H - Operation and Maintenance

PDP - Primary Distribution PointsPE - Public EnterprisesPFDS - Public Food Distribution SystemPFP - Policy Framework Paper

QR - Quantitative Restriction

RDP - Rural Development ProgramRPA Reimbursable Project AidRWP - Rural Works Program

SIFAD - Strengthening the Institutions for Food-Assisted DevelopmentSTWs - Shallow Tubewells

UNDP - United Nations Development ProgramUSAID - United States Agency for International Development

VGD - Vulnerable Group DevelopmentVGF - Vulnerable Group FeedingVTE - Vocational and Technical Education

WFP - World Food Program

XPB - Export Performance Benefit

TITLE X MANAGING THE ADJUSTMENT PROCESS - AN APPRAISAL

COUNTRY t BANGLADESH

REGION : ASIA COUNTRY DEPARTMENT I

SECTOR : COUNTRY ECONOMIC

REPORT : TYPE CLASSIF MM/YY LANGUAGES8344-BD CEm Restricted 03 90 English

PUBDATE t 9003

ABSTRACT: In FY87, Bangladesh adopted a three-year adjustment programdesigned to accelerate economic growth and development andstructural reform. Despite some initial success, the programhas largely failed to achieve its objectives. Two major floodsundoubtedly contributed to this slippage in performance; but aweakening of the reform effort and conflicting economic policiesalso contributed to it. Over the past year, the macro-economicsituation has deteriorated rapidly, in large part due to over-expansionary fiscal policies and inadequate commitment tostructural reform. This deterioration poses a major threat tothe incipient recovery in the real economy now under way, and inthe medium term to Bangladesh's prospects for acceleratingeconomic growth and development in order to alleviate widespreadpoverty. Against this background, this report evaluatesBangladesh's recent economic performance under the three-yearadjustment program (FY87-89); reviews necessary actions tostabilize the economy in the short-term, focussing in particularon public resource management; and discusses the priorities inthe development agenda for accelerating economic growth andalleviating widespread poverty over the medium term. The reportalso discusses ways and means of improving the poverty impact ofpublic expenditures and enhancing the role of women in thedevelopment process.

BANGLADESH

MANAGING THE ADJUSTMEN PROCESS- A.N APPRAISA

TABLE OF CONTENTS

Country Data

Executive Summary ..... .. i

I. Recent Economic Performance and Short-Term Economic Prospects .... 1

A. Recent Economic Performance. 1Introduction and Background. 1Overview of Recent Economic Performance. 4Economic Growth Performance. 9Agrieulture and Food Policy .12Agriculture .13Flood Management .18Food Management .20

Industrial and Trade Policy ......................... ...... 24Industry .24Trade Policy .......... 28

Financial Sector Reforms .33Fiscal Policies .35External Policies .39Poverty Alleviation .51

B. Short-Term Economic Prospects .56Prospects for Economic Growth .56Food Management ............................................ 57Budgetary Prospects .58Balance of Payments Prospects .60The Government's Short-Term Stabilization Program .62

II. Fiscal Policy in the Current Economic Situation . .64

A. Macroeconomic Linkages in the Present Econok4 .c Situation 66

B. Priorities for Reform in Public Resource Management .70Controlling Current Expenditu:es .71Prioritizing the Public Investment Program .79Public Revenue Mobilization .84Foreign Aid Utilization .87Budget Management and Expenditure Control .88Management of the Food Budget .94The role of Exchange Rate Management .98

III. Alternative Growth Scenarios and Aid Recommendations ............. 103

A. Alternative Growth Scenarios ... * ................. 103

B. Aid Recommendations .......................... ............. 112Recent Aid Utili=ation Performance ......................... 112Aid Recommendations ........................................ 121

IV. Improving Poverty Impact of Government Expenditures andRole of Women in Development ............. .............. 127

A. Poverty and Government Expenditures ...... .................... 127Introduction . .............................................. 127Fiscal Structure and Incidence ........ ..................... 127Evaluation of Programs to Enhance Earning Capacity ......... 132Evaluation of Direct and Indirect Income Transfer Programs.. 135Policy Conclusions . ........................................ 136

B. A Strategy for Enhancing the Role of Women in Development .... 140Introduction ........................................... .... 140Cirrent Status of Women ...................................... 141Government Strategy and Sector Priorities ..... .............. 142

Annex A - A Survey of Major Development Issues .......................... 147

Annex B - Impact of Food Operations on the Budget ...... ................ 159

This report was prepared by a seam led by Para Suriyaarachchi and consistingof Syed Nizzamuddin, Nadaraja Ramachandran, James Sackey, Vidya Shetty andRichard Westin. Important inputs were also provided by Thomas Maxwell, AlbertAgbonyitor, Peter Nicholas and Fahretin Yagci. Prudence Lehaney, DakshiSebastian and Sultan Ahmed Khan prcvided administrative and secretarialsupport. A draft of the report was discussed with the Government ofBangladesh in late Februarylearly March 1990.

List of Text TablesPage

Table 1.1 STRUCTURAL ADJUSTMENT PROGRAM - KEY MACROECONOMICTARGETS, FY87-FY90 ..... ... ................ . 4

Table 1.2 KEY INDICATORS OF ECONOMIC PERFORMANCE FY81-FY90. 6Table 1.3 MACROECONOMIC BALANCES, FY81-FY90 .8Table 1.4 GDP GROWTH BY SECTORS FY73-89 ............................. 10Table 1.5 TRENDS IN AGRICULTURAL PRODUCTION AND VALUE

ADDED FY81-FY90 ......................................... 15Table 1.6 SUMMARY OF THE FOODGRAIN SITUATION, FY81-FY90 ............. 21Table 1.7 NUMBER OF FOUR DIGIT CATEGORIES COPITAINING

BANNED OR RESTRICTED ITEMS FY85-0 .............. . ........ 29Table 1.8 CHANGES IN FOUR-DIGIT CATEGORIES OF RESTRICTED

IMPORTS, FY89-91 ........................................ 30Table 1.9 BANGLADESH: INCOME AND EXPENDITURE OF THE CENTRAL

GOVERNMENT, FY81-90 ................................... 37Table 1.10 BALANCE OF PAYMENTS, FY81-FY90 ...... ...................... 41Table 1.11 PATTERN OF EXPORTS, FY81-FY90 ............................. 45Table 1.12 TRENDS IN IMPORTS, FY81-FY90 .............OI ................ 49Table 1.13 CHANGES IN TERMS OF TRADE, FY81-90 ..... ................... 50Table 2.1 TRENDS IN KEY MACROECONOMIC VARIABLES, FY81-90 .... ........ 68Table 2.2 FUNCTIONAL CLASSIFICATION OF CURRENT

EXPENDITURES FY85-90 .................................... 74Table 2.3 TRENDS IN NOMINAL AND REAL CASH COMPENSATION ... ... 76Table 2.4 FINANCING OF ADP EXPENDITURES FY84-89 ...... 80Table 2.5 DISTRIBUTION OF FUh'DING IN THE FY90 ADP ...... 82Table 2.6 BLOCK GRANTS AND PROJECTS IN FY90 ADP WITH LOC.AL

FUNDING ALLOCATIONS OF TK 20 CRORE ($6.1 million) ...... 83Table 2.7 CENTRAL GOVERNMENT REVENUES, FY84-90 . . . 86Table 2.8 BUDGET TARGETS AND ACHIEVEMENT, FY85-90 ..... .............. 90Table 2.9 REVENUE ESTIMATES VERSUS ACTUAL COLLECTIONS, FY85-90 ...... 92Table 2.10 NET CREDIT OUTSTANDING TO THE PUBLIC SECTOR, FY87-89 ...... 93Table 2.11 RATES OF CASH FOOD SUBSIDY UNDER MONEITZED

CHANNELS, FY90 ........ .................................. 95Table 2.12 TRENDS IN FOODGRAIN PRICES, FY87-90 ....................... 97Table 2.13 MOVEMENTS IN REAL EFFECTIVE EXCHANGE RATES, 1980-1990 ..... 99Table 3.1 SUMMARY OF BASE CASE SCENARIO: MODEST GROWTH .......... .... 106Table 3.2 SUMMARY OF HIGH CASE SCENARIO: ACCELERATED GROWTH ......... 108Tabel 3.3 FY91-96 POLICY AGENDA ASSUMED IN TWO ALTERNATIVE

GROWTH SCENARIOS ........ . .. . . . ....................... . .. ............ 110Table 3.4 EXTERNAL AID: TRENDS IN COMMITMENTS

AND DISBURSEMENTS, FY81-FY90 ............................ 113Table 3.5 PROJECT AID DISBURSEMENT RATIOS, FY81-89 ................... 115Table 3.6 PROJECT AID DISBURSEMENT PERFORMANCE IN FY89 BY

DONORS AND KEY SECTORS .................................. 117Table 3.7 AID PLEDGES AND ACTUAL COM4ITMENTS, FY81-FY90 ............. 119Table 4.1 CURRENT EXPENDITURE AND TAXY INCIDENCE (FY86) .... .......... 131Table 4.2 EMPLOYMENT GENERATION TeROUGH THE RWP .... ................. 135

COUNTRY DATA - RANGIADEJO

mu POPUTAThflIO (1988) ME (1988)143,998 km2 109 million 757 per k*2 of total area

Rate of Growth: 2.4X 1,087 per km2 of cultivable lanai

POPULSTxON CRARACTERISS1CS (1985)Crude Birth Rate (per '000) 39.0 Population per physictan: 5.900

Crude Death Rate (per '000) 15.0 Population pot hospital bed4 3,600

Infant Mortality (per '000 liv. births) 125.0

ICOME DISTRIBUTI0I (1982) D-STRIW ST0N OP LAND OWNERBRIP (1976)I of national Income, highst qulntile: 42 X awned by top 101 of ownras: 49

X of national lnsome, lowart quintile: 12 X ownsd by smallest IOX of owneras 2

ACCESS TO PIPED WATER (1980) ACCESS TO ELECTRICl (1980)X of population - urban 26 X of population - urbant 3.5

2 of population - rural: 40 X of population - rural:

NUTRTTI0N (1983) rwUCATIOq

Ca bori intake as S of requirements: 84 Adult literacy rate (2) (1980181) 292Per capita proteln intake (grses): 42 Primary sohool enrollment (X) (1985) 601

GNP PER CAPITA IN 1988: USS170 JA

GRDfi DOMBSTIC PRODUCT (1988189) ANNUL RAT OF CROWTH (X, constnt prites)

mill, USS .. Y7-80 FY81-85 EM69 -

CDP at Market PrIces 20,222 100.0 7.5 3.8 3.3

Gross Dometi Investment 2,364 11.7 01

Gross National Saving 961 4.7

Current Account Balance 1,402 6.9

Exports of Goods, fob 1,286 6.4 4.7 2.5 12.8

laporra of Goods. -f 3,375 16.7 6.2 1.1 3.1

OWTPUS LABOR FORCE, AND PRODVCTIVITY IN 1988/89

Value Added Ak La ur Force jL V. A. Per Workec JA

Agriculture 8,960 .4.0 16.7 58 536 77

Industry 2,911 14.0 S.3 11 882 126

Servlces 8 351 42.0Q 9M Q 1 S fTotal/Average 20,,722 100.0 29.0 100 697 100

CENTRAL GOVERNMENT PINANCB

(bill Tak ) I of GDP

FY89x F Y9

Current Revenues 59.02 8.8 9.1

Current Expenditures 57.85 6 6 89

Current Surplus 1.17 2.2 1.2

Capltal Expenditures 49.41 13.3 7,6

External Asaistance (net) 47.73 9.8 7.3

js World Bank Atlas methodology: base 86-88

lb At market prices.

lI Civilian labor force# 1984/85 data.

ld 1984/85 data.- Not available.

- Not applicable.

PaSe 2 of 2

COUNTRY DASA - 3AUGLADESU

HQE]Y. CUEDIT APD PRSCSS JunJfl - 19St "LIMal -_,iLIMt.2 June 19SS June 1986 June I98 JuneIS. l Sunl9S9

(blLlion lTa outetandinzg. nd of period)

Noey and Quasi 16no;7 41.3 45.5 59.0 .3.9 105.3 123.4 136.5 164.1 190.8

Bank Credit to PublicSector 36.9 43.9 44.4 50.0 55.7 65.1 64.0 65.3 63.6

Bank Crodit to PrivateSector 17.6 23.6 31.0 49.1 68.9 83.6 89.6 109.0 133.6

(Percentages or Index N_mbers)

money ad Quasi Moneyas 1 of CDP 17.8 17.2 20.5 24.o 25.3 26.7 25.7 27.8 29.3

General Price Index(1973174-100)Ia 255.0 296.5 325.9 357.5 396.6 436.0 481.7 536.0 578.9

Annual percentagechanges in:

General Price Index la 12.5 16.3 9.9 9.7 10.9 9.9 10.4 11.4 8.0

Bank credit to PublicSector 45.3 19.0 -1.1 12.6 11.4 16.9 -1.7 1.7 -2.6

Bank credit to Private

Sector 23.1 34.0 31.3 58.4 40.3 21.3 7.2 21.5 22.6

IA&AECE OF PAYMENTS VE2C9DISS EXPORTS d1938I8/9(ill. US8

198181 1988189 mill. USS

Exports of Goods, fob 711 1,286 Baw jute 97 7

Imports of Goods, cif iM -S37 Jut- good" 280 22Trad Gap (deficit - -) -1,822 -2,089 Te, 40 3mon-factor services. net s8 -45 Leather 137 11

Workers' Reaittpe.,.* 379 768 P'1, 5 shbripa 141 11

Other Factor Payc. - naet) -23 -36 Gearnts 471 37

Current Account Balance -1,428 -1 4G2 Others 120 9

Direct Foreign InVestment - - Total 1.286 100

Het HLT Borrowing 502 720

(DLsbursements) 584 924

(Amortization) 82 204 EX5ERNAL DEST. December 1988

mill. VSS

Capital Grant 563 800

D1W faciLities, net 199 -68 PubiLe Debt, inl. Guaranteed Private Debt 9,329.7

Other Capital, net 146 -129 Mon-Guaranteed Private DebtTotal Outstanding L Disbursed 9,329.7

ChanSe In Reserve C- - increase) 24 -57

DEBT SERVICE BATiO FOR 1988189

Gross Reserves (end of yer) 251 913Public Debt, acL. Guaranteed Private Debt 25.7

RATE OP EXCHANGg ("Mrch 5, 1990) Ron-Guaranteed Private DebtTotal

US$1.00 - Tska 33.88

IBRD/TIA LEUDIFU. December 1988 (million US$)

Outstanding i Disbureed 65.8 3,188.7

Undisbursed - 1.338.5Outstanding, incl. Undisbursed 65.8 4,527.2

n- ot available.

March 1990

Executive Summary

i. Introduction and Background. With a large population and a percapita income of only $170, Bangladesh faces a poverty problem of unusualdimensions. The economy is also characterized by major structural problemsin regard to the balance of payments, export earnings currently finance onlyabout 38? of the import bill, while on the fiscal side, total governmentrevenues account for only about 56? of government expenditures. Consequently,Bangladesh is exceptionally dependent on external assistance for financingdevelopment activity and for bridging its sizable fiscal and externaldeficits.

ii. In the early to mid-eighties, faced with mounting economicdifficulties, Bangladesh undertook a major stabilization program. Thisfocussed largely on demand management and financial stabilization, but alsoincluded structural reforms to reduce its dependence on imported oil, and alarge scale denationalization of public enterprises. Over the next few years,fiscal and external deficits were reduced from about 10? of GDP to about 7z;non-traditional exports grew rapidly by over 20Z p.a. (aided by a flexibleexchange rate policy); the balance of payments position strengthened; andgross foreign exchange reserves increased considerably. However, thereduction in the fiscal and external deficits was achieved primarily bycutting back investment (especially public investment), which fell from 162 ofGDP in FY81 to 12Z in FY86, undermining the productive potential of theeconomy. Economic growth in the productive sectors - agriculture and industry- barely kept pace with the population growth rate of 2.7?. Although anaverage GDP growth rate of 4X p.a. was achieved, this was primarily due toincreased construction and services activities, and still represented asubstantial deceleratijn from the 5.8Z p.a. achieved in the FY73-80 period.

iii. It is, however, widely recognized that, given Bangladesh's structuralproblems, its extraordinary vulnerability to natural disasters and itsoverwhelming poverty situation, economic growth of this order and nature isnot sufficient; and a much more aggressive developmental posture is needed.Accordingly, in FY87 the Government embarked on a three year structuraladjustment program, with assistance from the IMF and the World Bank. Theprincipal objectives of this program were to accelerate overall economicgrowth to over SZ p.a. and significantly improve the poverty situation, whilemaintaining macro-economic stability and reducing the rate of domesticinflation to about 8?. To increase incomes and employment, a significantimprovement in agricultural and industrial growth and overall investmentlevels (by at least 2 percentage points of GDP over the three year period) wasenvisaged, with complementary savings efforts to finance such investment. Theprogram also recognized the need for strong policy reforms to address sectoralproblems, alleviate key structural constraints and to generally improve theeconomic climate. Key policies to achieve economic targets included: taxincreases, improved public pricing and cost recovery policies to enhancegovernment revenues; better expenditure management to raise the level andquality of public investment; flexible exchange rate management and trade andindustrial policy reforms to encourage exports and efficient importsubstitution; and major improvements in sectoral policies in agriculture,energy and financial sectors to promote growth and investment and to improvethe capability of institutions to support private sector activities. Theadjustment program also recognized the need for special targeted programs toalleviate poverty among the disadvantaged groups who might not directlybenefit from the growth process.

iv. The program got off to a reasonably good start in FY87, but itsimplementation slowed down in FY88 and FY89. Major floods which affectedeconomic activity in these two years undoubtedly contriblted to this slowdown.But the flcods also masked a weakening of the reform effort. The initiationof necessary reform- in a number ot key sectors (such as energy and financialsectors and tax reform) was significantly delayed. Some of the policiesintroduced earlier were also reversed (for example, large-scale food subsidieswere re-introduced and the real exchange rate was allowed to appreciate). 1-addition, available resources could have been more effectively utilized tostimulate public investment, which dec±ined compounding the adverse effects ofthe floods on economic growth. Due to these developments, significantslippages in a number of key areas of the three-year structural adjustmentprogram took place. Although macro-economic stability was still maintained,this was more a reflection of depressed activity levels and low levelequilibrium in the economy, rather than a consequence of improved economicperformance; and at the micro level, problems with regard to the trends inpublic expenditures and expenditure priorities conLinued.

v. T, FY90, with a return to normal weather and recovery of activitylevels these deficiencies have Lacome more apparent. Agricultural production(benefitting from good weather and a welcome improvement in agriculture sectorpolicies) and in turn overall economic growth are expected to rebound thisyear. But, the macroeconomic situation has deteriorated further, withunexpected rapidity. The fiscal deficit has become unsustainable while thebalance of payments situation has also come under considerable strain,Foreign exchange reserves which stnnd at $1,150 million - the equivalent of4.1 months' imports - in February, 1989 fell sharply to only about $!;00million, or about 1.7 months of imports by end-December, and have sinc.'remained at that level. However, the extent of this macroeconomicdeterioration has been recognized only recently by the Government, which hasbegun to take actions to stabilize the situation; but, systematic andconcerted efforts to address the underlying causes of this deterioration mustbe sustained over the coming months. Against this background, the next twosections review economic performance during the adjustment program period(FY87-89), its impact on the poor, and the emerging prospects for FY90.Necessary actions to stabilize the economic situation and to accelerate growthand development, and aid recommendations for the next fiscal year (FY91) arethen discussed.

vi. Progress in Implementing the Adiust;ment Program. Actual economicperformance during the program period (FY87-89) has been significantly lessthan expected in many areas. Initially, continued flexible exchange ratemanagement helped non-traditional exports to grow rapidly by 30-40Z p.a. inFY87 and FY88 and to reduce the external deficit to belo,.! 6Z in both years,while foreign exchange reserves rose steadily to the equivalent of _.4 months'imports. Since then, however, these favorable exterr,al sector trends havebeen reversed. Budgetary performance has been particularly disappointing.Government revenues as a proport:.on of GDP, instead of improving as expected,have actually fallen below FY86 levels. Structural weaknesses in the patternof expenditures persist. Current expenditures, as a proportion of GDP, hasrisen significantly. However, much of this current expenditure growth has notsupported activities of a developmental nature, such as operations andmaintenance O&M) and recurrent expenditure needs of social sector programs;but has led to increased spending on wages and salaries, defense and, morerecently, food and non-food subsidies. As a result, the overall budgetdeficit was contained at slightly above program levels only by sharply cuttingback public investment. These policies have affected project implementation

and aid disbursements (project aid) adversely. Total investment, after aminor rebound in FY87, declined well below program targets, primarily due tocuts in public investment. Domestic and national savings followed a similarpattern; after a strong recovery in FY87, domestic and national savingstapered off steadily in both F'88 and FY89, with a further decline in nationalsavings projected in FY90. Real GDP growth averaged only about 2.8Z duringthe program period. Given the stagnation of the economy and the effects ofthe floods, the improving trend in the poverty situation which was observed inthe mid-eighties appears to have been reversed.

vii. Economic growth decelerated from 4.02 in FY87 to about 2Z in bothFY88 and FY89, well below the population growth rate. In large measure thiswas due to the adverse impact of major floods which caused extensive damage tocrops, housing and infrastructure. As a result, there was no growth in valueadded in the agriculture sector; the stagnation of rural incomes in turndepressed domestic demand for manufactures, limiting growth in that sector toonly about 2.7Z on average in the two years. In addition, fiscal managementby the Government exacerbated the depressive effect of the floods on theeconomy; the Government failed to fully vtilize available local currencyresources to expand development activit which could have provided somestimulus to the manufacturing sector. Givea the stagnation of the dominantagriculture sector, even a 2Z growth rate was achieved mainly because ofincreased construction and rehabilitation activities associated with flooddamage and services growth.

viii. In agriculture, production fell far short of the 3.5-4.0 p.a. targe*envisaged under the adjustment program. However, there were significantimprovements in sector policies. After the floods in both FY88 and FY89, inorder to promote winter crop production, the Government liberalized the importand distribution of minor irrigation equipment and relaxed regulations forlocating tubewells and improved input distribution, permitting greater scopefor private sector participation in these activities. The success of theseinitiatives -- boro production rose by 182 in FY88 and by a further 232 inFY89 -- was considerably facilitated by the formulation of a revised policyframework to accelerate foodgrain production. The new policy frameworkbroadly reaffirms the strategy which was initiated in the early eighties toincrease foodgrain production, but which was allowed to fall into disarray inthe mid-eighties --namely private sector-led expansion of winter crops(particularly boro rice) through expansion of minor irrigation facilities forwhich there is considerable scope. The adoption of this policy is likely toimprove considerably the prospects for agricultural development, provided thatit is backed by effective action to ensure remunerative prices to farmersthrough domestic procurement policies. The Government's fuod operations,however, have not succeeded in doing so on a consistent basis (see ix),although there was some improvement recently in this regard. The goals ofincreasing expenditure allocations for O&H and investment in agriculture andimproving the effectiveness of public sector institutions such as BADC andBWDB as envisaged in the program also met with 13mited success.

ix. Efficient food management is important in Bangladesh for ensuringboth availability of sufficient food stocks in the country at reasonablystable prices to consumers and remunerative prices to producers. Although theGovernment has been quite successful in ensuring food security, insufficientattention is paid to protecting incentives to producers. Time and again,large scale commercial imports have teen made, eve,a when bumper domestic cropsnecessitated increased domestic procirement. But, these commercial importshave preempted limited storage capacity and financial resources, undermining

sharply below announced support prices in FY88. Commercial imports have alsocontributed significantly to the serious deterioration in the budget and thebalance of payments this year. Moreover, to accommodate tnese commercialimports, aid-financed imports have had to be postponed from time to time inrecent years. This year, a significant decline in farmers' prices has beenaverted so far through a determined procurement effort; but in view ofpresently high stock levels and expectationb of record wintcr crops, the foodsituation needs to be monitored carefully. Since domestic foodgrain pricesare now substantially below world prices, the Government should considersubstituting domestic procurement for commercial imports. This should helpreduce food subsidies, alleviate pressure on the balance of payments andsupport agricultural de.elc ient.

x. The adjustment program envisaged that efforts to improve industrialgrowth, efficiency and exports would be continued in three related areas -industrial policy, trade policy and financial sector reforms. In industry,the Government's Revised Industrial Policy of 1986 aimed at substantiallyexpanding the role of the private sector. In FY87, the Government narroweddown the areas "reserved" for the public sector and expanded the "free"sectors open to private participation; and relaxed private investment approvalrequirements to some extent. These efforts initially provided some stimulusto private investment, although it has stagnated since then. Depresseddomestic demand in the last two years coupled with substantial overcapacity inmany sectors has discouraged investment for the domestic market, while asubstantial anti-export bias (despite recent improvements in the tariffregime) and the lack of strong incentives for exports have hampered investmentfor export production. A poor financial system which has failed to providethe necessary investment financing has also been another impediment. Whileefforts to sustain reforms in the industrial sector to encourage investmentand efficiency continued during FY88 and FY89, progress was much more limited.More recently some restrictions have been reintroduced, by expanding the sizeof the "Discouraged List" from 12 to 25 sectors, correspondingly reducing thesize of the free sectors.

xi. In July 1989, the Government announced a reform program for the jutesector, foctssing mainly on improving the short-term liquidity position of themills titrough export subsidies and a three-year moratorium on interestpayments on outstanding debt. However, subsidies on this scale (currentlyprojected at Tk 2.5 billion, equivalent to about 6? of the developmentprogram) are not sustainable. Effective steps must be taken to rationalizethe industry by phasing out excess labor and production capacity and physicaland financial restructuring. The Government is cognizant of these needs andwill be undertaking a comprehensive program of studies to provide theanalytical basis for reform.

xii. In trade policy, good progress has been made in reducing import bansand restrictions (with reductions in the number of 4-digit headings subject tocontrols by about 20? per year). However, the target of eliminating importbans and restrictions by the end of FY91 as envisaged is unlikely to beachieved. There are still about 353 4-digit headings (equivalent to 29Z ofthe total number in the harmonized trade classification system) subject tocontrols, includir.g many product which compete with domestic production; andthese should be allowed to be imported over time to ensure competition for,and improve the efficiency of, domestic production. There has also beenconsiderable progress towards tariff rationalization. However, much remainsto be done in reducing average and maximum tariffs in order to mitigate theanti-export bias and excessive levels of protection to domestic production.

xiii. A comprehensive reform program for the financial sector (to enhancemarket competition, reduce direct government intervention, liberalize interestrate determination, and strengthen the NCBs) has been under preparation overthe past two years. Some aspects of these reforms have already beenimplemented. Credit ceilings, for example, have been abolished, and theexisting refinancing programs of the central bank have been replaced with ageneral rediscount facility at bank rate for commercial banks. Theimplementation of other key aspects of the program however, has beenconsiderably delayed, largely due to difficulties in establishing anappropriate interest rate policy. In November 1989, a new system of interestrate determination which enables banks to adjust their lend-ing and depositrates freely within certain narrow bands was initiated. The Government alsotook a number of steps to strengthen financial institutions; for example, torecapitalize BSB--the industrial development bank. However, other proposedmeasures to improve ,oan recoveries and greater autonomy in operations need tobe pursued more aggressively. A new system of accounting and provisioning forbad debts of NCBs and a reclassification of NCBs' loan portfolios (essentialfor making adequate provisions and recapitalization of these institutions),have been initiated recent'y. Although much behind schedule, these reformsmark the beginning of a transition toward an efficient market-determinedfinancial system.

3iv. In the area of fiscal policy little progress was made in attainingthe objectives of improving revenue mobilization, restraining the growth ofcurrent expenditures and substantially expanding the development budget.Revenue performance was disappointing; the revenue/GDP ratio, instead ofrising to 10.5Z of GDP as envisaged, essentially stagnated around 9Z, and inFY89 was still below the FY86 level. This was in part due to the depressiveeffects of the floods (on incomes, import demand and tax collections), butmore importantly to the inelasticity of the tax system, and the deterioratingfinancial conditions of most public enterprises and financial institutions(which reduced non-tax revenues). Although technical studies for tax reformwere carried out by the IMF and the Bank as envisaged under the program, theGovernment has taken its time to consider long-term structural tax reformwhich is necessary to improve revenue yield (as well as equity and allocativeefficiency of the tax system). More recently, the Government has taken anumber of encouraging steps to consider the potential for a major reformprogram.

xv. In public pricing, although significant effortc have been made in theenergy sector, progress in other areas has fallen short of expectations.Despite recent adjustments, prices charged by many agencies are inadequate tocover their revenue needs, particularly since these prices have changed verylittle in recent years. The Government also has not adjusted food ration andfertilizer prices sufficiently to reflect increases in international pricesfor these commodities during the past two years.

xvi. There was little progress in controlling the growth of currentexpenditures (excluding food subsidies), which increased from 7.7Z of GDP inFY87 to 8.9X in FY89. In part, this was due to the impact of the floods,which necessitated increased allocations for relief and targeted programs; butalso to large increases in pay and allowances for civil servants (particularlyfor lower-grade staff, averaging 18Z per annum between FY86 and FY89); higherallocations for defense and law enforcement servicer (equivalent to about 40?of the increase in non-relief related current expenditures); and subsidies forBangladesh Railways. In addition, food subsidies also increased sharply inFY89 and FY90. Consequently, local resources available for the development

exacerbated by the failure to utilize a large portion of the bank cred.itavailable under agreed IMF credit ceilings to finance development activities.Thus, the utilization of net credit by the Government fell by approximatelyTk.1.2 billion - FY88 and by Tk.6.5 billion below the targets envisaged underthe credit ceilings compounding the local currency shortage for thedevelopment program. As a result, the ADP stagnated even in nominal terms(implving a sharp cutback in real terms) in both FY88 and FY89, contrary tothe expectations of the adjustment program.

Xvi'.. Tangible actions to review priorities in the expenditure program andto improve its quality and efficiency of resource use have not been taken sofar. The Government has continued to allocate a large share (nearly half) ofthe available funds to locally funded projects, thereby spreading theremaining funds too thinly over many aided projects. As a result, projectimplementation and aid utilization have suffered. In order to improve projectimplementation, it is necessary, as discussed below, to carefully scrutinizeboth locally financed and externally funded projects and reprioritize theexpenditure program. A study on public administration has been recentlycompleted after considerable delay; but, there is not yet a consensus on howto deal with many of the major structural constraints affecting the quality ofpublic administration.

xviii. On the external side, the main objectives of the adjustment programwere to limit the external deficit to about 72 of GDP p.a., encouragediversification and rapid growth of non-traditional exports (through aflexible erchange rate policy and special promotional measures), unify theexchange rate and expand the secondary foreign exchange market (to eliminatemultiple currency practices), and improve aid utilization. The real effectiveexchange rate was steadily depreciated by 5Z (on top of a 122 depreciation inFY85 and FY86). However, this process was effectively suspended in November1988. This, combined with a pick up in domestic inflation and a recovery ofthe U.S. dollar led to a sharp appreciation of the real effective exchangerate by nearly 112 in FY89, erasing the gains from flexible exchange ratemanagement achieved over the past four fiscal years. In parallel, thesecondary exchange market was expanded so that it now covers 702 of non-aidedimports and most exports. Concurrently, the premium in the secondary marketover the official exchange rate was reduced from about 92 in FY86 to 1.82 inNovember 1988. Given the small differ"ntial which now exists between theofficial and secondary market rates, the rationale for dual foreign exchangemarkets is now weak; and consideration should be given to the full unificationof these markets in the near future. A number of measures to assist exporters(such as simplification of the duty drawback system and expanding the ExportPerformance Benefit Scheme), were implemented in FY87 and F-88 as planned,with some fine-tuning last year. However, the usefulness of these specialmeasures to exporters has been limited. More generalized incentives forexports through a flexible exchange rate policy, therefore, should beconsidered, particularly in view of the recent significant appreciation of theexchange rate.

xix. Reflecting these policy developments and depressed import demand, thebalance of payment position strengthened considerably in FY87 and FY88. Non-traditional exports more than doubled in nominal terms in the two years, andthe current account deficit was reduced to less than 62 of GDP. The externalposition, however, weakened in FY89. The growth of non-traditional exportsdecelerated sharply and private transfers from abroad stagnated. The 1988floods had some adverse impact on exports; but the primary causes of thestagnation were weak external demand and prices for a number of export

a of i iel 1 reness at these prices, given rising domestic

costs and the appreciation of the exchange rate. Imports, on the other hand,rose rapidly by 132 in nominal terms, mainly reflecting increased privatedemand and to a lesser extent higher import prices. Given these disparatetrends, the current account deficit widened to 6.9Z of GDP; though this wasstill within the program target, the weakening of policies, the stagnation ofexports and the rapid build up of import demand set the stage for anunexpectedly rapid deterioration in the external position in FY90.

xx. One of the principal objectives of the adjustment program has been toalleviate poverty through the expansion of employment opportunities andtargeted relief programs and accelerated efforts at human resourcedevelopment. A detailed evaluation of the impact of selected governmentprograms on the poor has been undertaken in a recent Bank report -"Bangladesh-Poverty and Public Expenditures", January 1990. The findings ofthis report indicate that, given the stagnation of the economy, the objectiveof expanding employment sufficiently was not achieved; in addition, real wagesin agriculture declined, suggesting that average incomes and purchasing powerof the poor have fallen since PY86. Given these trends, it is likely that thesituation of poorer women and children may have deteriorated even more.Recognizing this, the Government expanded substantially relief programs forthe poor (such as VGD and FFW) especially after the floods in FY88 and FY89.While this helped to mitigate hardships, significant improvements in theseprograms are required in order to change their predominantly relief nature, toreach the target groups effectively and increase their development impact.Longer term efforts to improve the prospects of the poor through expansion ofhuman resource development programs in such areas as education, health andfamily planning also need to be intensified. The proportion of governmentexpenditures devoted to these programs has declined in recent years, while theeffectiveness of these programs in reaching the poor could be improved throughbetter targeting and sharpened expe.nditure priorities within some programs andstrengthened program implementation. To improve the utilization andeffectiveness of these programs, tighter controls over costs, improvedallocation/targeting of rcsources within these programs and strengthening ofimplementation agencies are essential. Similarly, appropriate cost recovery(in progrsms such as education and health) and community participation inplanning and implementation of programs should be encouraged. Attentionshould also be given to the situation of women - a special aspect of thepoverty situation which is discussed in para xxxvii. Although the Governmenthas recognized that NGOs can play a valuable role in reaching target groups byproviding training, credit, income generating opportunities and services,there is a need to simplify arrangements for approval of NGOs and facilitatetheir activities. The recentiestablishment of a foundation to provide fundingfor programs for poverty alleviation, however, is a step in the rightdirection.

xxi. Thus, economic performance fell significantly short of expectations inboth FY88 and FY89. Some slippages were inevitable, given the extraordinaryimpact of natural disasters during this period. Understandably, theGovernment was reluctant to push through necessary reforms and priceadjustments in an environment of economic hardship. However, the floods alsohelped to conceal the impact of growing problems with structural weaknesses inthe balance of payments and the budgetary and financial systems. Bydepressing economic activity, incomes and import demand, the floods kept theeconomy operating on a low-level equilibrium without any apparent demandpressures. This low-level equilibrium in the economy and improving foreignexchange reserve position created a sense of stability and comfort not

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situation laid the basis for the rapid emergence of financial difficulties inthe current fiscal year.

xxii. Economic situation in FY90. In the current year, two major developmentsare taking place: (a) a long-awaited recovery in the real economy; coupledwith (b) a concurrent deterioration in the macroeconomic situation. Foodgrainproduction, benefitting from good weather and improved agricultural policies,is expected to increase by about 15Z over Fhe last year's flood-affectedlevels. Although value-added in agriculture is expected to grow much lessrapidly due to low foodgrain prices, overall GDP growth is expected to reach5.52. On the macroeconomic front, however, both the budget and the balance ofpayments have come under considerable pressure. A large shortfall in revenuesbelow budget targets, combined with continued rapid growth of currentexpenditures and a large deficit on food operations have sharply reducedresources available for development spending. The Government has resorted toconsiderable bank borrowing (such borrowing increased by Tk 12.7 billion byend February compared to Tk 0.2 billion in the FY90 budget) to financeincreased expenditures, exacerbating inflationary pressures. On the externalside, rapid growth of imports coupled with a slowdown in exports, remittancesand aid inflows have exacerbated balance of payments pressures and led to asubstantial drawdown of foreign exchange reserves to about $500 million, theequivalent of 1.7 months' imports. Both these trends cannot co-exist, sincecontinued deterioration in the macroeconomic situation, unless quicklyreversed, will inevitably undermine the incipient economic recovery.

xxiii. A careful analysis suggests that the roots of the present economicproblems lie in inappropriate economic policies over the past two to threeyears. The immediate cause is the Government's fiscal policy. Poorexpenditure priorities, overly ambitious fiscal planning and budgeting and abreakdown of expenditure control and monitoring have weakened the budgetaryposition in recent years despite its apparent stability. In addition, fiscalpolicy has swung abruptly from ar. excessively contractionary posture over thepast two to three years to an extremely expansionary stance this year.Substantial increases in current expenditures (including large wage increasesand subsidies) have widened the budget deficit and added to inflationarypressures. These pressures in turn have spilled over into the balance ofpayments either directly through public sector imports (such as foodgrains),or indirectly by increasing private incomes and consumption, coinciding with arecovery in the economy and fuelling private demand for imports. At the sametime, declining competitiveness (due to rising wage costs and the appreciationof the taka) have undermined exports, while aid inflows are stagnating due tothe continued compression of the investment program, reductions in food andcoumodity aid for relief purposes (with a return to more normal circumstances)and delays in finalizing economic reform programs which are supported byquick-disbursing assistance from multilateral agencies. As a result, foreignexchanges reserves have been run down rapidly.

xxiv. Recognizing the deterioration of the macroeconomic situation, theGovernment has recently initiated a short-term program in order to stabilizethe budget and the balance of payments over the remaining months of FY90. Tocontain the rapid growth of imports in order to maintain foreign exchangereserves at the present level of $510 million, the Government in late Februaryimposed a 50X deposit requirement for opening letters of credit on allimports; and tightened the availability of bank credit for financing importsby reducing the duration of post-shipment credits for imports and limiting theaccess of banks to refinancing facilities at the Central Bank. In earlyMarch, a 5X depreciation of the Tpka, signalling the resumption of flexibleI Iange rate management, was also announced. This adjustment is welcome, but

still falls significantly short of even restoring the real effective exchangerate to its early FY89 level. To improve the budgetary situation, theGovernment is expected to announce shortly new measures designed to mobilizeadditional revenues of Tk 2 billion during the next few months and to limitcurrent expenditures to the levels assumed in the original FY90 budget throughrestraints on new expenditure authorizations, subsidies and the wages andsalary bill. In this context, the Government has just raised ration pricesfor wheat and rice distributed through the PFDS by 1-1/2Z; while the exchangerate adjustment would help reduce export subsidies. These measures areexpected to limit the budget deficit to about 7.4? of GDP in FY90, and helpreduce net government borrowing f om the banking system from Tk 12.7 billionat the end of February to about Tk 8.5 billion by end June. However, giventhe difficulties of making these measures effective on a timely basis, thereis considerable uncertainty whether these targets will be achieved. Based onits estimates of resource availabilities and expectations of increased projectaid disbursements on a few large projects, the Government hopes to finance adevelopment program (ADP) of roughly Tk 47 billion --considerably short of theoriginal target of Tk 58 billion, but higher than the approximately Tk 39billion anticipated in the absence of additional budgetary efforts, and aboutTk 43 billion indicated by staff estimates (on the basis of somewhat lowerproject aid disbursements). Finally, in order to reduce domestic demand andinflationary pressures, the growth of credit to the private sector and publicenterprises is expected to be reduced to a level consistent with a broad moneygrowth target of 16? for the year; this will require considerable restraint onboth private and public borrowing over the next four months. These steps inturn are expected to prepare the ground for discussions on a possible ESAFarrangement with the IMF beginning in FY91.

xxv. These measures represent a much needed beginning to stabilize themacroeconomic situation. While the Government has already made a start inimplementing the program in some areas, other measures are yet to beannounced. The timely implementation of this program is crucial in order toprevent a further deterioration in the financial situation. Without suchefforts, the attainment of the revised targets for the balance of payments andthe budget is likely to be difficult. To regain a greater measure offinancial stability, much more needs to be done over the coming months,particularly in mobilizing revenues, restraining current expenditure growthand restructuring the public expenditure program. While the Government hasindicated its commitment to the formulation of a strong reform program, itsimplementation poses a special challenge.

xxvi. Priorities for Public Resource Management. As noted, public resourcemanagement has become a major concern. A significant factor in this regardhas been the increasingly unrealistic nature of budget projections over thepast two to three years. Until recently, budget estimates for both revenuesand current expenditures have been relatively conservative, and actualperformance has been reasonably close to these estimates. However, in FY89actual current expenditures exceeded budget estimates by almost 18Z. Asubstantial overrun in such expenditures in relation to budget estimates isagain likely this year. Revenue estimates in the last two years have beeneven more unrealistic. In FY89 the budget projected revenue growth of 19Z,while actual collections were only 11Z. The FY90 budget projected revenuegrowth at 37?, far exceeding historical growth rates ranging from 11-14? p.a.in recent years, even though new revenue measures in the FY90 budget have beencomparable to earlier years. Actual revenues however are expected to grow byonly about 15Z this year, even with some additional new revenue measures nowcontemplated by the Government (para. 113). These unrealistic revenue targets

the a an

the budget, which is now being carried out (and even exceeded) undermining thehard-earned macro-economic stability. But, because of the weakening ofrevenue and expenditure monitoring mechanisms, the needed adjustments inexpenditure programs have not been made so far on a timely basis.

xxvii. Rapid growth of current expenditures has been one of the mostimportant factors contributing to declining development expenditures andcontinuing problems with aid utilization. These expenditures have risen at anannual rate of 19? in nominal terms, far ahead of revenua growth over theFY85-89 period. Viewed from another perspective, they have grown from theequivalent of little more than one-half of the ADP in FY81 to nearly one andone half of the ADP in FY89, or from 302 of the overall expenditure program to54? over the same period. Much of this increase occurred without a carefulconsideration of alternative priorities for the use of scarce publicresources. Although there are many areas of the recurrent budget that aresubstantially underfunded and deserve higher allocations (particularlyoperations and maintenance and the social sectors), these are not the areaswhere the Government has provided additional funding in recent years.Instead, the additional current expenditures have reflected the demands oflabor unions, public enterprises, (including growing deficits of BangladeshRailways), and the defense establishment, which accounts for the largest share(222) of cash current expenditures. Restraining the growth of currentexpenditures, therefore, is likely to be difficult, and will depend criticallyon the willingness of the Government to contain wage pressures and resistdemands for additional funding allocations. Such actions will be essential ifthe Government is stabilize the fiscal situation and reorient tiie pattern ofpublic expenditures towards higher levels of investment and economic growth.

xxviii. ContinuIng problems with local currency resources for sustainingdevelopment activity underscores the need for both mobilizing additionaldomestic revenues, as well as for more effective use of such resources.Bangladesh's public revenue effort is one of the lowest in the world; and thisperformance must be improved in order to increase investment levels withoutsignificantly widening the budgetary and external deficits. Government has sofar relied mainly on ad-hoc measures such as surcharges on imports and incometaxes to raise revenues each year. But, these have been offset by increasedexemptions and concessions to domestic industry, reductions in import tariffsas a part of tariff reform, considerable incentives for tax evasion andinefficiencies in tax administration. However, given the in-builtinelasticity of the tax system, there is little prospect for substantiallyincreasing revenues without a fundamental reform of the tax system, includingintroduction of a VAT, and improvements in tax administration as recognized bythe Government. In view of the reliance on increases in the developmentsurcharge and the recent introduction of subsidies on jute exports, theGovernment should also consider exchange rate adjustments as an alternativeway of raising revenues in addition to its benefits for exports.

xxix. Since FY84 local currency resources for the development program havenot increased even in nominal terms. The ADP in nominal terms has increasedonly because external donors have provided additional project aid, which hasrisen from 37Z of the ADP in FY84 to 57Z in FY89. Moreover, even in terms ofthe taka component, there has been continued substitution of counterpart fundsprovided by donors through commodity aid for government funds. (Thus, thedonors' share increased from 502 of local resources in FY84 to 81? in FY89.)In effect, the large increase in donor resources over this period has had noimpact on increasing the level of public investment and only served to permitthe Government to divert its own contribution from the development budget torelatively low priority current expenditures. Moreover, there are serious

problems with the way the Government allocates even these limited local funds.Although it is generally recognized that the availability of local resourcesis the most critical macroeconomic factor determining the pace of projectimplementation, only 50Z of the available local funds have been allocated todonor-aided projects which constitute 782 of the FY90 ADP (while the remaininglocal funds have been allocated to fully locally financed projects). Thus,even within current funding levels, the Government could significantlyimprove project implementation and increase the inflow of foreign resources byreallocating funding from relatively low priority projects and block grants todonor-aided projects.

xxx. Given its development needs, it is essential for Bangladesh to increaseits investment program substantially in order to achieve its objectives. Forthis to happen, the Government must control the diversion of local fundingresources from the development budget to relatively lo- priority currentexpenditures, and establish a clearer sense of priorities on the allocation oflocal funding within the ADP itself, with tighter restraints on the share ofresources going to locally financed projects and block grants. Until actionsare taken to address these issues, other efforts to prioritize the ADP (e.g.,by designating a "core" investment program or speeding-up the closure ofindividual projects) will be largely cosmetic and will have little effect onrestoring public investment levels.

xxxi. A major problem in budget management which has surfaced in recent yearsis the lack of effective monitoring of expenditures, leading to an increasingdivergence between the expected outcome of the ADP as indicated by Ministry ofFinance fund release data and the actual ADP outcome as indicated byBangladesh Bank cash expenditure data. This situation reflects a growingproblem in cash management in the context of an increasingly decentralizedbudgetary system. Traditionally, the Ministry of Finance has relied onmonitoring the release of funds from its general account with Bangladesh Bankas its main instrument for determining the overall level of publicexpenditures. However, this approach has become increasingly less reliable inrecent years because of delegation of authority to government departments andautonomous and semi-autonomous bodies to hold and manage their own cashdeposits. Moreover, there is little control and supervision in practice overgovernment departments with check-writing powers, which contribute to theexpenditure control problems noted earlier. This has resulted in asubstantial build up of cash deposits by government departments and agencieswith the banking system, at a time when the ADP has been starved of localcurrency resources. These problems illustrate the need for the Ministry ofFinance to upgrade its ability to effectively monitor and control the publicexpenditure program through a better system for expenditure monitoring.

xxxii. While the utilization of foreign aid has been increasingly affectedby problems in the management of local resources, procedural bottlenecks ofvarious types impede project implementation in almost all sectors.Recognizing these problems, the Government in 1986 initiated studies in orderto identify specific actions to improve the utilization of project andcommodity aid. These studies were completed in 1988 and have been reviewed byjoint working groups of the Government and donors which have made specificrecommendations to the Government for implementation. However, no actionshave been taken so far to implement these reforms. Most of therecommendations made by these working groups are non-controversial, and focuson removing redundant steps in project approval procedures, and their earlyadoption should help improve aid utilization.

xxxiii. Contrary to the widely-held view in government circles that foodsubsidies are merely accounting subsidies and have little impact on thebudget, there are now large cash subsidies on food operations estimated at Tk4.8 billion in FY90. These cash subsidies have stemmed from a substantial(55-60Z) increase in import prices of commercially purchased foodgrain whiledomestic ration prices have been raised by only 82 over the past two years,considerable distribution and overhead (cash) costs of the food department onboth monetized and non-monetized operations, and provision of food tobeneficiaries substantially below average unit cost under some monetizedchannels. including the effect of a large build-up of food stocks partly as aresult of domestic procurement to support farmgate prices, the net cash impactof food operations this year will be nearly Tk 6 billion more than envisagedin the FY90 budget. Given the continued need for domestic procurement tosupport expected record crops, some short-term accumulation of foodstocks willbe inevitable. However, the -overnment should reduce such stocks to moremanageable levels through ration sales during lean months between crops inorder to minimize their budgetary costs. In this context, foodgrain imports(including aid imports) should be managed carefully and if necessarypostponed, to alleviate stock management problems. Moreover, in order toprovide local resources for the development budget, the Government should takesteps to reduce cash subsidies on food by adjusting ration prices over time.Since domestic grain prices are now below international prices, unlike inrecent years, there is little economic justification now for commercialpurchases abroad. Replacing cash imports with domestic procurement to meetPFDs needs should also help to reduce cash food subsidies significantly andsupport domestic agricultural development.

xxxiv. The need for exchange rate adjustment should not be judged by short-term perceptions (particularly short-term elasticity pessimism regardingexports) and the fact that the secondary market rate's differential inrelation to the official exchange rate is now less than 2Z. The secondarymarket rate is a managed rate; and it is unlikely to change so long as thecentral bank supports it by providing foreign exchange including from its ownreserves, as it has done in both FY89 and FY90. The decline in foreignexchange reserves, as well as increasing demands for subsidies from exportersto compensate for their present lack of competitiveness are strong indicationsof the need for exchange rate adjustment. The behavior of Bangladesh's majorregional competitors, who have depreciated their exchange rate aggressivelyover the past ten years reinforces this need. Moreover, in view of thelimitec purchasing power of the domestic market (despite its large but mainlypoor population) and the scarce natural resource base, Bangladesh mustincreasingly look to labor-intensive export processing activities to providethe necessary foreign exchange and employment opportunities to sustain futuregrowth. For this to happen, however, a much more aggressive posture topromote exports through an active exchange rate poliLy and continuedimprovements in trade policy are required. A significant adjustment of theexchange rate will also help to eliminate large budgetary subsidies forexports. On the balance of payments side, exchange rate adjustment shouldhelp restrain import growth without reimposing quantitative restrictions; andcombined with selective increases in tariffs, to reduce the importation ofspecific items for smuggling to neighboring countries, which has become aconcern of the Government.

xxxv. Medium Term Development Prospect. The immediate task facing theBangladesh Government is the need for restoring financial stability. In theshort term, therefore, the Government must take vigorous action, in thecontext of a renewed commitment to economic stabilization and structuraladjustment, to restrain current expenditures (especially in such areas as

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subsidies, wages and defense expenditures), substantially increase revenuemobilization (including structural reform of the tax system), and to allocatesuch resources to development activity. Over the coming months, a majoreffort should also be made to streamline the development program, and withinthis program, establish clear priorities for a more limited number of highpriority projects which can be implemented quickly. These actions must becomplemented on the external front by efforts to address the fundamentalstructural constraints in the economy by promoting competitiveness of exportsand efficient import-substitution through an aggressive exchange rate policy.Subsecuent measures should include steps to improve food management (throughenhanced domestic procurement) to support agricultural development; and thlerapid implementation of financial sector and trade policy reforms to improveresource allocation and promote private sector activity.

xxxvi. The accomplishment of macroeconomic stability should prepare the stagefor more serious efforts over the medium term to address the centraldevelopment issue of alleviating widespread poverty. This will require, giventhe current rate of growth of the labor force, the creation of about 1.0million jobs a year, (compared to about 600,000 jobs created annually so farthis decade) and accelerating economic growth to at least 5.0-5.5Z p.a. overthe medium to long term. Bangladesh must also raise its rate of aggregateinvestment (including both public and private) to at least 14-152 of GDP overthe next few years, and significantly improve the efficiency of resource use.Increased foreign assistance will be needed to achieve a higher investmencrate. But, this inflow must be matched by greater efforts to increasedomestic revenues and savings and exports, since budgclary and externaldeficits will have to be limited to around 7Z of GDP in order to maintainmacroeconomic stability. These in turn call for a renewed commitment tostructural reform, improved co-ordination among the economic ministries, and,given the limited capacity of public sector institutions, considerableemphasis on the private sector for the creation of productive capacity and theprovision of inputs and services.

xxxvii. Priorities in the agenda for long-term social development and povertyalleviation (which must complement reform measures on the macroeconomic front)include population control, human resource development, expansion of targetedassistance to the poor, environmental issues (especially managerent of floodsand frequent natural disasters), and improvements in public administration.Even with more rapid economic growth, progress in improving living standardsand alleviating poverty is bound to be exceedingly slow and difficult unless asignificant reduction can be achieved in the currently high fertility andpopulation growth rates. To achieve this, miwh greater emphasis needs to beplaced on programs aimed at raising the very low literacy rate and improvingthe primary health care delivery system and access to basic services.Although a higher rate of economic growth and improved social services arenecessary conditions for addressing the pervasive poverty problem, these alonewill not be sufficient. Special targeted interventions will be required toprovide a minimum safety net for the poorest sections of the population(including rural landless households and destitute women) who might nototherwise benefit from the economic growth process. A recent Bank report(Bangladesh - Strategy Paper on Women in Development", February 1990)suggests that special efforts are needed to increase the productivity of womenwho are constrained by lack of access to economic opportunities. In thiscontext, improved access of women to education (by speeding up femaleenrollment at primary level, expanding vocational and technical education andadult literacy programs for women), and expanded extension and credit programsto facilitate their participation in intensified homestead and otherproductive activities are needed.

xxxviii. Given the limited absorptive capacity in the country, however, it isunrealistic to expect Bangladesh to progress equally rapidly on all thesefronts simultaneously; and it is important to introduce a stronger set ofpriorities into the development agenda. Key economic policies which comprisea minimum core to achieve macro-economic goals are identified in the policymatrix in Chapter III while a more detailed policy agenda is given in Annex A.The report also outlines two alternative growth scenarios for this decadebased on assumptions about the degree of the Government commitment tostructural reform in the outlined areas.

xxxix. These projections show that, with renewed Government commitment tostructural reform and sound economic management, total investment in theeconomy can be increased from 11.7Z of GDP in FY89 (and projected 11.12 inFY90) to about 142 in FY95, while GDP growth rate can be raised to an averageof about 5.2Z p.a. This would require sustained agricultural and industrialgrowth, continued high export growth (given the structural imbalances betweenexports and imports) and a strong commitment to significantly improve domesticresource mobilization and public resource management. Other critical policyneeds include improved food management and sustained minor irrigation policiesto promote agricultural growth, and an aggressive exchange rate policy toimprove competitiveness of exports, combined wIth successful implementation offinancial sector reforms to facilitate private sector-led industrial growth.Progress in these areas would help reduce external and fiscal deficits toabout 6-72 of GDP. Rapid growth in per-capita incomes would support asignificant improvement in per-capita consumption and provide the resources tobegin making inroads into widespread poverty. While this "high case" scenariowould require a significant increase in external assistance (i.e., newcommitments of foreign aid growing on the order of 52 per year in real terms),this is not overly ambitious in the context of a credible structuraladjustment program.

xl. While there are several possible downside alternatives to thisoptimistic scenario, the "base case" represents a continuation of the presentstance of intermittent progress in key policy areas. Under thesecircumstances, the economy could grow at around 3.5Z p.a., close to theaverage growth rate achieved in the last decade. Economic growth of thisorder would permit only marginal gains in average per-capita privateconsumption levels. Given the slow growth of agricultural production and thecontinuing high rate of population growth, exper'ence indicates that theposition of the poorest members of society would inevitably deteriorate.

xli. Aid Recommendations for FY91. External assistance will continue toplay a critical role in Bangladesh's development in the foreseeable future.External aid inflows are indispensable for sustaining investment levels anddevelopment activity a.id, given the large structural imbalances in the budgetand the balance of payments, for maintaining budgetary and external stability.Notwithstanding the critical importance of external aid to the Bangladesheconomy a number of concerns have been expressed by donors about theutilization of aid by and its effectiveness in Bangladesh. The analysis inthis report indicates that there is indeed some basis for these concerns inthe light of aid utilization trends and economic performance over the past fewyears. Generally, project disbursement rates have been very good only for alimited number of highly capital intensive (turnkey type) projects and for afew others receiving special emphasis from the Government or largely fundedand more or less managed by donors themselves. Although the averagedisbursement rate for all projects is now around 192, aid utilization ratesfor the bulk of aid-financed projects are far below this average rate.

Second, external assistance has not had the expected impacc on expandingdevelopment activity over the past few years, as donor funds have merelysubstituted for the Government's own resources in funding the developmentprogram, facilitating the allocation of government funds to currentexpenditures, particularly in areas which do not directly support developmentactivity, such as defence expenditures and subsidies. Third, there isconsiderable evidence to show that aided projects receive proportionately lessfunding than purely locally financed projects, which implicitly receive muchhigher priori.y. Finally, the Government has not been able in the last fewyears to translate new aid pledges by doniors (both project and commodity aid)into actual commitments on a timely basis. In all these areas significantimprovements are needed to increase the effectiveness of asid justification foradditional aid.

xlii. Thus, recent aid utilization performance has weakened the justificationfor increased external assistance to Bangladesh at this juncture, even thoughthe inherent need for increased aid is obvious. The primary ustification forcontinued hign levels of external assistance to Bangladesh is to promoteeconomic development both in the short and the longer term. Bangladesh'sdeep-seated poverty undoubtedly provides a strong rationale by itself forexternal aid; but poverty alleviation on a sustainable basis can be achievedonly through vigorous efforts to accelerate economic growth, improve access ofthe poor to economic opportunities and promote human resource development.The country's extreme vulnerability to natural disasters creates short-termneeds for relief and rehabilitation; but these are of a transient nature anddo not warrant sustained high levels of aid on a long term basis. Similarly,Bangladesh's structural imbalances with regard to the budget and the balanceof payments are important considerations in the determination of externalassistance needs; but these imbalances by themselves are not reasons forproviding additional external aid. It is only if the Government pursues soundand pragmatic economic policies to address these constraints, and yet thesestructural constraints continue to hamper investment, growth and development,that additional external assistance can be justified to bridge structuraldeficits. Finully, additional external assistance should not be used forfinancing government consumption and other less essential currentexpenditures. It is only if additional external assistance is allocated andactually utili7ed for expanding development activity that increased aid can bejustified.

xliii. In the light of the deterioration in the economic situation inBangladesh, it is necessary in considering aid recommendations for next yearto distinguish between at least two possible situations : (a) a continuationof present economic policies with modest actions by the Government to dealwith current economic problems (corresponding to the "base case" scenario) and(b) greater commitment to policy reform and pragmatic and decisive actions torestore macroeconomic equilibrium, and accelerate economic growth anddevelopment (corresponding to the "high case" scenario). The implications foraid recommendations under the two scenarios vill be quite different. Forexample, if present trends in the economy continue, it w.ill be difficult tojustify substantial additional aid to Bangladesh, since there is no assurancethat such additional aid will be well utilized for supporting developmentactivity. On the other hand, if the Government were to take the necessarysteps to accelerate economic growth and development, the need as well as thejustification for additional external assistance will increase significantly.While the Government has begun to take corrective actions very recently, muchstronger efforts need to be made and sustained in the coming months. Undersuch circumstances increased disbursements of external assistance of the orderof about 5-6% p.a. in real terms would be needed in order to increase

investment, bridge the external and fiscal deficits which will still hoveraround 6-7Z of GDP even with strong export and revenue growth, and build upforeign exchange reserves from the low level of 1.7 months' imports equivalentto which they have fallen.

xliv. In regard to pEiect aid, the opening pipeline at the beginning ofFY91 is quite large --about $5.0 billion. Moreover, even under the high case,there is an urgent need to limit the number of projects in the ADP andredefine priorities in order to ensure that the most important projects can beallocated more resources and implemented more rapidly. This process ofconsolidation will require that new project starts should be limited next yearto essential high priority projects, even under the "high case'. TheGovernment, however, will be seeking new aid commitments for flood managementwhich it considers to be very high priority. The cost of this program ispresently estimated at $500 million for various projects and studies spreadover a five year period, with new commitments of about $150 million over thenext 2-3 years to finance studies and pilot projects. It should be possible,however, to accommodate this within the normal level of project aid pledgesthis year, given the need for restraint over new project initiatives discussedabove. The Government also attaches high priority to the Jamuna Bridge (FY92)project for which new commitments are expected to be made only next year(1991). However, the Government will need to review and establish clearpriorities within the ADP over the coming months, so that these projects canbe accommodated without undermining the pace of implementation of the rest ofthe development program. Accordingly, total new project aid commitments ofabout $1.1 billion is recommended under the high case for FY91, compared with$800 million under the low case for FY91 and $1.1 billion recommended in FY90.

xlv. If thb Government adopts meaningful steps to accelerate economic growthand development, the need for commodity aid to support the development programwill also increase. According to staff estimates, disbursements of about $600million should suffice to meet local currency needs for the ADP next year,provided that these resources are fully utilized for expanding the developmentbudget. New commitments of about $700 million should be sufficient to providedisbursements of $600 million next year, with appropriate actions by theGovernment (through the implementation of associated policy reforms) toexpedite the finalization of such program/commodity aid commitments; this issignificantly higher than the $500 million recommended under the base case.In regard to food aid, the Government's foodgrain stock position is presentlyvery good, and there is considerable optimism regarding prospects forfoodgrain production, with coordinated action on the food management front.However, in view of Bangladesh's extreme vulnerability to natural disastersand the need to provide for programs such as VGD and FFTW, a certain minimumamount of food aid up to $200 million would be needed. Given the expectedinternational price trends for wheat for next year and the present size of VGDand FFW programs in Bangladesh (about 882,iOO tons of foodgrain will bedistributed through these programs in FY90), new food aid commitments of thisorder should permit a substantial expansion of food-assisted programs. TheGovernment, however, should take care to manage actual imports from thesecommitments in a manner which will not disrupt domestic production and todevelop a better system to improve food stock management, in particularcriteria governing commercial imports.

xlvi. Thus, if the Government were to simply take minimum action to containthe present crisis through some modest financial stabilization, but without astrong commitment to structural reform and economic development. it isrecommended that total new aid commitments for FY91 should be scaled back toabout $1.5 billion (including $800 million in project aid, $500 million in

-xvii-

commodity aid and $200 million in food aid), compared with a recommendation of$2.0 billion made last year. However, if the Government were to indicate astrong commitment to structural reform and prudent macroeconomic policies andto accelerate economic growth and development activity, total new commitmentsof about $2.0 billion (including $1.1 billion in project aid, $700 million incommodity aid and $200 million in food aid) would be warranted.

xlvii. On the basis of recent indications by the Government, the prospectsfor the high case scenario are better now than they were at mid-fiscal year.However, a firm basis for making an unqualified endorsement of the high casedoes not yet exist. Accordingly and in view of the uncertainties cf theeconomic policy environment in Bangladesh, it is recommended that donors,while pledging higher levels of assistance, ensure that their policy-basedoperations/commodity aid programs are effectively addressing the fiscal andmacroeconomic issues that have been identified, and that their support forlarge projects be evaluated in the context of much needed reforms torationalize the public expenditure program. An essential minimum short listof actions to 1- taken should include : First and foremost, implementing amajor program of financial stabilization and substantial structural measuresover the coming months; second, a thorough review of the public investmentprogram with a view to p-otecting a core of high priority projects andlimiting the numbeL of projects to improve project impiementation and aid -utilization and stri3gent controls on the growth of non-essential recurrentexpenditures as a part of the FY91 budget process. The Government should alsotake steps to fully implement the recommiendations of the joint Government-donor task forces on project and commodity aid utilization; third, initiationof measures to implement structural reform of the tax system and improve taxadministration to enhance revenue collections; and fourth, in the area of foodmanagement, a clear announcement of government policy giving priority todomestic procurement and to take steps to implement this policy inconsultation with major food donors.

xlviii. The Government's own estimate of the necessary level of aidcommitments for FY91 is $2.5 billion - $1.4 billion in project aid, $850million in commodity aid and $250 million in food aid. This is about $500million higher than the Bank's own high case scenario, and mainly reflects theGovernment's desire for a substantially larger development effort during theFourth Five Year Plan. If Bangladesh's macroeconomic management andabsorptive capacity were to improve substantially more than what is assumedunder the Bank's high case scenario and if the development budget could beenlarged and better prioritized, then under such circumstances external donorsshould be willing to provide increased assistance to Bangladesh of themagnitude requested by the Government.

CHAPTER I

Recent Economic Performance and Short-Term Prospects

A. Recent Economic Performance

Introduction and Background

1. With a per capita income of $170. Bangladesh is one of the poorestcountries in the world. A limited resource base and a large population(estimated at 110 million in 1988) contribute to widespread poverty. 11 Theeconomy is also characterized by major structural problems: in regard to thebalance of payments, export earnings currently finance only about 38Z of theimport bill; while on the fiscal side, total government revenues account foronly about 562 of government expenditures. Consequently, Bangladesh isexceptionally e3pendent on external assistance for financing developmentactivity and for bridging its sizable fiscal and external deficits.

2. Against this background, the second oil shock of the early eighties, asharp deterioration in its terms of trade and reduced availability of externalaid created seri us macro-economic imbalances in the Bangladesh economy. Theensuing adjustment program focused largely on demand management andstabilization of the economy, but also included significant structural reformsin a number of important areas, such as development of domestic natural gasresources which significantly reduced dependence on imported petroleum, and amajor denationalization of public enterprises.27 Over the next few yearsthrough FY86, the task of stabilizing the economy was successfullyaccomplished. Fiscal and external deficits were reduced from about 102 of GDPin FY81 to around 72 of GDP in FY86. The rapid growth of non-traditionalexports (at over 20? p.a. in real terms) and remittances, aided by a flexibleexchange rate policy, helped to strengthen the balance of payments andincrease gross foreign exchange reserves from the equivalent of 1 month'simports in FY81 to 2.5 months' imports by FY86. However, the reduction in thefiscal deficit was achieved primarily by curtailing public investment whichfell from 8.72 of GDP to 62 over the same period. As a result, overallinvestment declined from about 162 of-GDP in FY81 to only about 12Z in FY86,undermining the capacity of the economy to realize its productive potential.Associated with this decline and a breakdown in the implementation of policiesdesigned to encourage foodgrain production in the mid-eighties, agriculturalgrowth stagnated, while generally constrained domestic demand contributed to asluggish growth performance in the industrial sector. Thus, the productivesectors of the economy barely kept pace with the population growth rate of2.82 p.a. But, because the construction and services sectors grew somewhat

l/ The percentage of population below the poverty line (defined as 2122calories per day) was estimated at 512 of rural and 562 of urban population in1985/86.

2/ For a detailed assessment of Bangladesh's stabilization effort in theearly and mid-eighties, see "Bangladesh: Adjustment in the Eighties andShort-Term Prospectsn, World Bank Report No. 7105-BD, March 10, 1988.

rapidly, Bangladesh managed to achieve a 42 GDP growth rate between PY81 andFY86 - still a substantial deceleration from the 5.8Z p.a. achieved in theFY73-80 period. Given Banglidesh's structural problems, its extraordinaryvulnerability to natural disasters and its overwhelming poverty situation, itis widely recognized that economic growth of this order and nature is notsufficient; and a much more aggressive posture is needed to accelerateeconomic growth and alleviate pervasive poverty.

3. In the ensuing year - FY87 - the Government embarked on a three yearstructural adjustment program, with assistance from the IMF (under itsStructural Adjustment Facility) and the World Bank, aimed at consolidating andbuilding on the progress achieved in the Parly to mid-eighties. The principalobjectives of this adjustment program were to accelerate overall economicgrowth to over 52 p.a. and significantly improve the poverty situation, whilemaintaining macro-economic stability and reducing the rate of domesticinflation to about 82. To increase incomes and employment, a significantimprovement in the agriculture and industrial sectors' growth performance wasenvisaged. The adjustment program stressed the need for raising the level oftotal investment by two percentage points of GDP over the ensuing three vearperiod, and complementary savings efforts to finance such investment. Tneprogram recognized the need for strong policy reform efforts in order toimprove economic performance and achieve structural change. Accordingly, acomprehensive policy package to address sectoral problems, alleviate keystructural constraints and to generally improve the economic climate wasenvisaged. Key policies to achieve economic targets included, on the fiscalfront, tax increases and improved public pricing and cost recovery policies toenhance government revenues; and improved public expenditure management toraise the level and quality of public investment. On the external front,flexible exchange rate management and trade and industrial policy reform wereexpected to encourage exports and efficient import substitution. Miajorimprovements in sector policies in other key areas, such as agriculture,energy and financial sectors to promote growth, increase investment andimprove the capability of institutions were also envisaged. While theimplementation of these policies was expected to increase incomes andemployment and to generally improve consumption and living standards of thebulk of the population, the adjustment program also recognized the need forspecial targeted programs to alleviate poverty among the disadvantaged groups.

4. The program got off to a reasonably good start in FY87, but in the nexttwo years - FY88 and FY89 - its implementation slowed down markedly. Majorfloods in the last two years, by adversely affecting economic activity anddiverting the Government's attention to short term crisis nanagement,undoubtedly contributed to this slowdown. But the floods also masked aweakening of the reform effort which was so necessary for achieving economicobjectives. The initiation of necessary reforms in a number of key sectors(such as energy and financial sectors and tax reform) was significantlydelayed. Some of the policies introduced earlier were also reversed (forexample, large-scale food subsidies were re-introduced in FY89 and the realexchange rate was allowed to appreciate in the second half of FY89). Inaddition, inappropriate fiscal management further compressed publicinvestment, compounding the adverse effects of the floods on economic growth.

Due to these developments, significant slippages in a number of key areas ofthe three-year structural adjustment program took place, although macro-economic stability continued to be maintained. The latter, however, was morea reflection of depressed activity levels and low level equilibrium in theeconomy, rather than a consequence of improved economic performance.

5. Major floods last year contributed to, as well as masked, these policyshortcomings (which were noted in the Bank's economic report last year)3 /;but, with a return to normal weather and recovery of activity levels thesedeficiencies have become more apparent in the current fiscal year - FY90. Onthe positive side, reasonably good weather and a welcome improvement inagriculture sector policies (one of the bright spots in economic performancein FY89 - (paras 18-28), are expected to contribute to a rebound inagricultural production and overall economic growth this year. However, atthe same time, the macro-economic situation has deteriorated further, causingthe unexpectedly rapid emergence of a potential financial crisis. Over-ambitious budgetary planning and lack of restraints on current expendituresand excessive commercial food imports have created major budgetary problems,which are now being addressed by the Government, but which will depress publicinvestment again for the third consecutive year. The expansionary effects ofrecent policies (which have entailed large increases in subsidies and wagesand salaries) on domestic demand, together with the recovery in theagriculture sector, have combined to increase imports sharply. At the sametime, an erosion of competitiveness due to rising domestic costs and therecent appreciation of the exchange rate are hampering the growth of exports,while the growth of remittances from abroad has also slowed down. As a resultBangladesh's foreign exchange reserves which stood at their peak at $1,150million - the equivalent of 4.1 months' imports - in February, 1989 havefallen sharply to only about $500 million, or about 1.7 months of imports byend December. This situation has the potential for further deterioration, andcalls for a sustained commitment by the Government to take the necessaryactions in a timely manner.

6. Against this background, chapter I of this report reviews theGovernment's recent economic performance in the light of economic objectivesand targets specified in the Government's economic adjustment program over thepast three years. It assesses progress made by the Government in effectingstructural reforms in important areas and achieving the primary objectives ofaccelerating economic growth and alleviating poverty, as well as more specificmacro and sectoral targets. This analysis takes into account the impact ofthe floods in FY88 and FY89, as well as the appropriateness of economicpolicies and the effectiveness of economic management on economic performance.While fiscal management issues are touched upon in this chapter, a n,oredetailed assessment of these issues is made in Chapter II, which examines thecritical role of public resource management in this regard. Chapter III looksahead to the need for effective actions in the near term to deal with thecurrent economic crisis and, more importantly, to the prospects and policy

3/ World Bank Report No.7596-BD, "Bangladesh - Recent Economic Developmentsand Short-Term Prospects", March 13, 1989.

requirements for accelerating economic growth and development in the mediumterm. In the light of this analysis, the concluding section of Chapter IIIpresents aid recommendations for the next fiscal year -- FY91. Chapter IVreviews the poverty impact of government expenditure programs and makesspecific recommendations for improving their effectiveness, and for enhancingthe role of women (who form a large underprivileged group) in the developmentprocess. A concise summary of major development issues is provided in Annex Afor the benefit of readers who do not have the time to read the more detailedanalysis provided in Chapters I, II and IV of the report.

Overview of Recent Economic Performance

7. The key macro-economic targets of the three year adjustment programadopted by the Government in FY87 are summarized in Table 1.1. As shown inthat table, overall GDP growth was envisaged to exceed 52 p.a. _n the FY87-90period, with a significant improvement in investment/GDP ratio and savingsperformance, and a moderation of the domestic inflation rate to around 72.Government revenues were expected to rise from about 9% of GDP in FY86 toabout 112 by FY90 to enuble a modest recovery in the public investment ratio,while reducing the overall budget deficit (as a percentage of GDP) slightly.Similarly, strong growth of total exports by othr 102 p.a. (propelled by rapidgrowth of non-traditional exports) was expected to provide the necessaryfinancing for imports, and to maintain the external deficit at around 7% ofGDP. Aid utilization was expected to improve and fully finance the externaldeficit and provide for a modest build-up in foreign exchange reserves. Asnoted earlier, wide-ranging structural reform policies were expected to beadopted in order to achieve these targets,

Table 1.1: STRUCTURAL ADJUSTMENT PROGRAM-KEY MACROECONOMIC TARGETS, FY87-FY90

FY87 FY88 FY89 FY90Original ! Rev.b/ Original / Rev.b/

GDP Growth Rate(Real) 4.7 6.2 5.1 6.4 5.0 5.8GDP Deflator 8.0 8.6 6.3 7.0 6.8 8.0Consumer Prices n.s. n.s. n.s. 8.0 n. . 8.0Gross Investment/GOP 12.9 18.6 14.8 13.4 14.8 13.5Public Investment/GOP 6.8 6.8 7.0 6.7 7.2 6.9Domestic Savings/GDP 3.6 4.3 4.9 8.3 6.3 3.4National Savings/GODP 6.2 6.9 7.4 6.3 7.7 7.0Government Revenue/GDP 9.5 10.0 10.6 9.6 10.9 9.6Govt Budget Balance/GDP -7.2 -7.3 -6.9 -7.1 -8.7 -7.7Overall Export Growth/GDP 18.4 13.8 10.0 10.0 10.5 14.9Non-trad. Export Growth/GDP 30.6 18.6 18.6 18.7 18.7 21.7Cur. Acct. Balance/GDP -6.7 -6.8 -6.9 -7.1 -7.1 -6.5Aid Disbursements(gross)/GOP 8.2 8.1 8.3 8.7 8.6 7.5

n.s. 3 Not specified.x/ As specified In the first year Policy Framework Paper (PFP) finalized in January, 1987.

Revised In subsequent PFPs in light of actual performance In preceding year and modifiedexpectations.

Source: Policy Framework Papers dated January 15, 1987; October 27, 1987; and November 14, 1988.

8. Actual economic performance during the program period FY87-FY89 asevident from key indicators summarized in table 1.2, has been significantlyless than expected in a number of areas. Real GDP growth averaged only about2.8Z during the program period, although a recovery to about 5.5Z is expectedin FY90. Total investment, after some rebound in FY87, continued to declinewell below program targets, primarily due to a decline in public investment.Domestic and national savings followed a similar pattern; after a strongrecovery in FY87, domestic and national savings tapered off steadily in bothFY88 and FY89, with a further decline in national savings projected in FY90.Budgetary performance has been particularly poor. Government revenues as aproportion of GDP, instead of improving as expected, have actually fallenbelow FY86 levels. Since current expenditures, as a proportion of GDP, haverisen significantly over the same period, the overall budget deficit has beencontained at slightly above program levels only by sharply cutting back publicinvestment. These policies affected project implementation ard aiddisbursemen.s (particularly project aid) adversely, and as discussed inChapter II, have had unfavorable consequences on the economy. On the externalfront, exports, particularly non-traditional exports, rose strongly in FY87and FY88, aided by a flexible exchange rate policy. However, export growthtapered off in FY89, and is expected decelerate further in FY90, coincidingwith a significant appreciation of the real exchange rate. Import growth wasgenerally sluggish in FY87 and FY88, helping to reduce the external deficit tobelow 6Z of GDP in those two years; but a recovery in import demand in thesecond half of FY89 and PY90 has led to renewed balance of payments pressures,with the current account deficit rising to nearly 72 of GDP in both years andforeign exchange reserves declining sharply. Domestic inflation was generallykept in check, declining to 82 in FY89. However, most indicators show aweakening economic performance, with substantial further deteriorationprojected for FY90.

Table 1.2: KEY INDICATORS OF ECONOMIC PERFORMANCE, FY81-FY90.

FY81 FY82 FY83 FY84 FY85 FY86 FY87 FY88 FY89 FY9Oal

GDP Growth (Real) 6.8 0.8 3.6 4.2 3.7 4.7 4.0 2.1 2.3 5.5GDP Delator 10.8 12.7 9.9 16.4 11.0 5.8 12.2 7.2 7.7 10.0Consumer Prices/b 12.5 16.3 6.0 9.7 14.9 9.9 10.4 11.4 8.0 10.0Gross Investment/GDP 15.9 15.0 13.6 12.3 13.0 11.8 12.4 11.9 11.7 11.0Public Investment/GDP 8.7 8.7 8.6 7.3 6.7 6.7 7.3 6.0 5.7 5.0Domestic SavingsjGDP 3.4 1.1 0.7 1.5 2.7 1.8 3.5 2.5 1.1 1.6National Savings/GDP 5.8 3.0 5.2 5.6 5.1 4.7 6.9 6.0 4.8 4.3Government Revenue/GDP 9.3 8.9 8.8 8.2 8.6 9.2 8.9 9.0 9.1 9.1Govt. Budget Balance/GDP- 9.1 -8.7 -11.2 -9.2 -7.5 -7.6 -8.4 -7.8 -7.4 -7.4Overall Export Growth/GDP 11.4 4.0 4.8 4.7 -3.4 11.0 22.4 7.3 6.5 1.6Non-trad. Export Growth/GDP 59.1 -0.7 20.1 30.7 39.9 10.5 43.2 30.7 12.0 -3.7Cur. Acct. Balance/GDP -10.0 -12.0 -8.4 -6.7 -8.2 -7.0 -5.5 -5.9 -6.9 -6.7Aid Disbursements(gross)/GDP 8.0 9.3 11.1 9.0 7.8 8.3 9.0 8.7 8.3 7.1

a/ Staff estimate.b/ Based on movements in the urban middle class consumer price index.

Source: Bangladesh Bureau of Statistics; Bangladesh Bank; Planning Comuission; Ministry of Finance; ExportPromotion Bureau and Staff estimates.

9. Table 1.3 on macroeconomic balances 4I provides some interestinginsights on recent economic performance. It shows that although GDP growthwas low during FY88 and FY89, total resource availability increased morerapidly due to resource transfers from abroad. mainly from rising levels ofremittances and higher levels of external assistance, including those forrelief and flood rehabilitation. However, the additional resources were fullytranslated into increased consumption. The investment/GDP ratio in factprogressively declined. Total consumption appears to have risen strongly inFY88 and FY89, reversing a significant decline in FY87. Relief and relatedconsumption expenditures sanctioned by the Government to mitigate the lossesand suffering caused by floods in the last two years explain some part of theincrease in consumption expenditures. In addition, however, substantialincreases in subsidies and other current expenditures also took place. Thisstance in government policy favoring consumption has continued in FY90, withsubstantial increases in wages and allowances and subsidies, so that totalconsumption has remained hIgh in FY90. As a result, domestic and nationalsavings, after a substantial improvement in FY87, have fallen sharplythereafter. Conversely, Bangladesh's dependence on foreign savings forfinancing investment has increased in the last three fiscal years, reversing adeclining trend observed in the FY8Z-FY87 period. Staff estimates suggestthat, contrary to the Government's expectations, the share of total investmentfinanced by national savings (which is an appropriate indicator of the degreeof self reliance in financing investment), has declined from a peak of 56Zachieved in FY87 to 41Z in FY89, and to 39Z in FY90.

4/ These estimates of consumption, savings and investment in Bangladesh aredeficient in many respects, given the limitations of data and the estimationprocess. Nevertheless, they are useful for indicating broad trends, althoughtheir reliability as indicators of absolute levels of these macroeconomicvariables is suspect.

Table 1.3: MACROECONOMIC BALANCES, FY81-FY90(as percent of GDP in current prices)

FY81 FY82 FY83 FY84 FY85 PY86 FY87 FY88 FY89 FY90 a/

Gross Dom. Product(GDP) 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Resource Balance 12.5 13.9 13.3 10.8 11.0 10.0 8.9 9.4 10.5 9.4

Resource Availability 112.5 113.9 113.3 110.8 111.0 110.0 108.9 109.4 110.5 109.4

Consumption 96.6 98.9 99.7 98.5 98.0 98.2 96.5 97.5 98.9 98.4

Private n.a. 91.9 93.9 91.9 90.9 89.5 87.8 88.2 90.7 89.4

Public n.a. 7.0 5.8 6.6 7.1 8.7 bl 8.7 9.3 8.2 9.0/b

Gross Investment (GDI) 15.9 15.0 13.6 12.3 13.0 11.8 12.4 11.9 11.7 11.0

Private 7.2 6.3 5.0 5.0 6.3 5.1 5.1 5.9 6.0 6.0 00

Public 8.7 8.7 8.6 7.3 6.7 6.7 7.3 6.0 5.7 5.0 1

Annual Growth RatesGross Domestic Product 6.8 0.8 3.6 4.2 3.7 4.7 4.0 2.1 2.3 5.0

Memo ItemsDomestic Savings/GDP 3.4 1.1 0.7 1.5 2.0 1.8 3.5 2.' 1.2 1.6

National Savings/GDP 5.8 3.0 5.2 5.6 4.8 4.7 6.9 6.0 4.8 4.3

Foreign Savings/,/GDP 10.0 12.0 8.4 6,7 8.2 7.0 5.5 5.9 6.9 6.7

Foreign SavingsLd/GDI 62.9 80.0 61.8 54.5 61.6 59.2 44.2 49.6 59.0 60.9

a/ Estimate.b/ Substantial part of the increase reflects wage increases to government employees.

c/ Equals current account balance.d/ Ratio of foreign savings to domestic investment.

Source: Bangladesh Bureau of Statistics and Staff estimates.

III I .

Economic Growth Performance

10. As noted, overall economic growth decelerated to only about 2.8Z p.a.during the FY87-89 period, significantly less than the program target of 52p.a. and the 41 p.a. rate achieved in the FY81-86 period. In both FY88 andFY89, overall growth was only about 2Z p.a., well below the population growthrate, indicating some decline in per capita incomes. The poor growthperformance especially in these two years in large measure reflects theadverse impact of major floods and a cyclone in late 1988, which causedextensive damage to housing, standing crops and infrastructure, and adverselyaffected economic activities. However, inappropriate economic management bythe Government also exacerbated the depressive effect of the floods on theeconomy. As discussed in para. 68, the Government failed to fully utilizeavailable local currency resources in order to expand development activity.Such an expansion would have helped to provide some stimulus to the economythrough an increase in construction activities and by enhancing demand fordomestic industrial goods which was severely depressed at that time. In theevent, public sector development activity declined in these two years by about20Z cumulatively, in real terms; and contributed to the fall in the overallinvestment/GDP ratio noted in Table 1.2. '"While -L is difficult to establish adirect causal relationship between year-to-year changes in investment andgrowth, a prolonged decline in investment inevitably undermines the economy'scapacity for achieving higher growth. In that context, the continued declinein the investment/GDP ratio over the past three years is a matter for concern.

11. In both FY88 and FY89, value-added in major commodity producing sectors- agriculture and industry - stagnated or declined, pulling down the overalleconomic growth rate. Thus, value added in agriculture declined by 12 inFY88, while there was virtually no growth in FY89; similarly, growth in theindustrial sector averaged only about 2.7Z p.a. in the two years. Given thedominant position of agriculture in the economy, an overall economic growthrate of around 2Z p.a. was achieved only because the construction andutilities and the services sectors grew somewhat rapidly.

12. Utilities have been the fastest growing subsector during this decade,due to continued development and exploitation of natural gas resources, itsincreased use in electricity generation and the expansion of distributionfacilities in both gas and electricity. Annual rate of expansion in gas andelectricity combined has averaged about 21Z in FY88 and FY89.5

SI However, increased value-added and production have not been generallymatched by revenue growth of utilities, because of substantial systems losses--presently estimated at 341 in the case ot electricity and 6Z in the case ofgas--and delays in billings and collections.

Table 1.4: GDP GROWTH BY SECTORS, FY73-89(percent growth per annum, constant FY73 prices)/a

Share of GDP cJFY73-80 P73x-d6 FY86 FY87 FY88 FY89 FY9Obl FY81 FY89

Agriculture 3.5 2.9 4.0 0.1 -0.9 0.3 6.8 48.7 43.2(Crop Sector) ( 4.0) ( 2.8) ( 4.4) (-0.2) (-1.8) ( 0.0) (8.0) (38.6) (33.5)(Others) ( 1.6) ( 3.3) ( 2.8) ( 1.2) ( 2.2) ( 1.2) (2.4) (10.1) (9.7)

Manufacturing 13.9 3.0 1.8 6.4 2.7 2.7 4.1 10.6 10.1Construction &Utilities 7.4 9.8 3.0 8.6 12.8 8.8 6.7 4.3 6.9

Services 7.6 5.1 6.6 7.4 3.9 3.5 4.3 36.4 39.8

GDP at MarketPrices 5.8 4.0 4.7 4.0 2.1 2.3 5.5 100.0 100.0

a/ A consistent series of national accounts data covering the present decade is available only on thebasis of FY73 prices. The Government has recently issued a preliminary set of national accounts data.based on FY85 prices, for the FY85-88 period. However, this series needs to be extended back to earlyeighties and the qualtty of some of the estimates improved, before it can be used as a basis ofcomparison of growth performance over the entire decade.

b/ Preliminary estimates.c/ At constant prices.

Source: Bangladesh Bureau of Statistics; staff estimates.

13. In both FY88 and FY89 construction activity benefitted from therehabilitation and reconstruction of infrastructure and private housing atterthe floods. However, all of post-flood repairs and rehabilitation was notadditional, as some of this work was financed by postponing normal civil worksunder ADP projects. In addition, the disruptions in project implementation onaccount of the floods and shortage of taka funds may have reduced associatedcivil works. On the other hand, rural infrastructure built under the FFWprogram is estimated to have increased considerably (as this program wasexpanded significantly); repairs of private dwellings in rural areas alsoincreased.

14. The stagnation of value added in agriculture, in the last two yearsmainly reflects setbacks to foodgrain production, in large measure due toflooding. In FY89, flood damage reduced the aman and aus crops by 1.0 milliontons or by 92 below their actual (flood-damaged) FY88 levels. Although theGovernment made strenuous efforts after the floods to augment boro and wheatproduction, total foodgrain production in both FY88 and FY89 remainedvirtually stagnant at the FY87 level (Table 1.5). In addition, raw juteproduction declined by about 62 due to flood-related losses of harvestedcrops; while minor crops such as pulses and oilseeds, which are importantsources of nutrition, have either stagnated or declined in acreage andproduction since FY84. In FY89, value-added in sub-sectors other than crops,such as fisheries, forestry and livestock, was also quite limited, in part due VA

to losses incurred during the floods, but also to the lack of dynamism inthese areas in recent years.

15. Growth in the manufacturing sector continued to be depressed in bothFY88 and PY89. The reasons for this stagnation are complex, although the mostimportant has been weak domestic demand. Given the dominance of theagricultural sector in the economy, flood damage to successive aman cropsgenerally reduced incomes and domestic demand for industrial goods. Domesticindustries which supply inputs for reconstruction and agricultural croprehabilitation were not hindered by such demand constraints. The effect ofdomestic political disturbances in FY88 and the floods in FY88 and FY89 haveoverlaid these more fundamental problems. In both years, the more aynamicsub-sectors as well as individual firms within other sectors which have notbeen hampered by demand constraints have been able to cope with disruptions tothe availability of raw materials and production schedules. It is in thiscontext that the adverse effects on economic growth of shortcomings ofgovernment policies in failing to accelerate development spending should beseen. A more aggressive strategy of expanding public investment byeffectively utilizing available domestic financial resources would have helpedto increase domestic demand for the industrial sector, and expand productionand incomes in the industrial sector while triggering additional aiddisbursements.

16. In the event, a few sub-sectors supplying domestic reconstruction andrehabilitation needs and export markets increased their production in FY89.These included chemicals (weight of 232 in the industrial production index),mainly fertilizer for the irrigated boro crop and for export; and basic metals(weight 10X), mainly metal fabrications and iron and steel for construction,

both of which increased their prcduction by 152: cement, where domesticproduction rose by 112; and ready--made 8arments where exports increased bynearly 6Z. On the other hand, a broad range of industries producing for thedomestic market stagnated or suffered declines in production -- foodprocessing, edible oil, flour milling, cotton textiles, tobacco, sugar (thelatter mainly due to shortfalls in cane production and diversion of canesupplies to gur making). Production of jute goods (which has a weight of 242in the industrial production index) also declined by 52 in part due toexternal demand.

17. Following depressed levels of irdustrial activity in the last 3-4years, output in some sub-sectors catering for the domestic market iscurrently lower than the levels achieved in FY82, for example, in sugar,tobacco manufacturing, pharmaceutical, insecticides and iron and steel. Inthe dominant textile sector, output in FY89 (excluding garments) was only 182above the FY82 level, while jute production was 132 below the FY82 level dueto weak external demand. While the factors underlying this phenomenon arevaried, complex and sub-sector specific, weak domestic demand has been a majorconstraint. In a number of industries this situation has been complicated by rover-!nvestment, as well as inappropriate product mix, leading to substantialunder utilization of rated capacity. This sluggish performance of theindustrial sector, however, represents a continuation of a longer termstagnation beginning in the early eighties; and raises fundamental questionsabout the performance of public enterprises and the incentives to improveefficiency and expand production for the industrial sector as a whole. Forexample, there is considerable evidence that the incentive regime forpromoting exports and efficient import substitution is not appropriate (para.75), especially with the recent appreciation of the exchange rate. There arealso questions about the dominant role of public enterprises in commanding(limited) resources and their contribution to productive growth and the roleof the private sector in the economy.

Agriculture and Food Policy

18. The medium-term adjustment program sought to accelerate foodgrainproduction to 3.5-4.0 p.a., reversing the slowdown in the growth of productionsince FY85. Such an acceleration was expected to help increase employment,incomes and per capita consumption, ensure food security, and together withimproved food distribution policies targeted at disadvantaged groups, to V.alleviate the poverty situation. Policy improvements for achieving thesegoals included: expansion of minor irrigation facilities and effectivedelivery of inputs, expanding the role of the private sector in suchactivities, and providing effective price support to farmers to ensureadequate incentives. Complementary efforts to improve the efficiency ofpublic sector institutions, by reorienting the policies of BangladeshAgricultural Department Corporation (BADC) to improve input distribution andto support the role of private sector in such activities; revitalizing thecooperative system to address the needs of small farmers by reorganizing theactivities of Bangladesh Rural Development Board (BRDB); and strengthening thecapability of public sector institu-ions for crop research and extensionservices were also stressed. It was also envisaged that the government would

review 0 & M needs of existing and new agriculture infrastLucture and increaseallocations for 0 & M accordingly: and review public expenditure programs inagriculture and irrigation in order to determine priorities for new projectsand for rehabilitation and maintenance. In the area of food management, itwas envisaged that steps will be taken to rationalize the public foodgraindistribution system (PFDS) so as to target a larger part of food aid to ruralpoor and other vulnerable groups, and to eliminate food subsidies tcrelatively affluent urban groups.

19. The objective of accelerating agricultural growth over the medium termwas complicated by the effects of the devastating floods during FY88 and FY89which created new short-term imperatives, such as providing relief to theaffected population, short-term rehabilitation of damaged crops, and ensuringfood security. The necessary pursuit of these short-term objectives at timescreated conflicts with the objective of accelerating agricultural growth.However, the experience gained through short term efforts to promote wintercrops in response to the floods helped to crystalize and accelerate theevolution of structural policies for promoting foodgrain production. Indeed,agriculture stands out among the few areas wnere government policies over thepast three years have been encouraging, even though the results have been slowto materialize until recently.

20. Agriculture. As shown in Tab'e 1.5, there was virtually no increasein total foodgrain productioL over the FY87-89 period; (but a major rebound isunder way in FY90, as discussed in para. 98). The stagnation in productionover the program period, however, conceals significant differences in theproduction pattern of individual crops; production of aman and aus,traditionally the most important foodgrain crops which are also the mostsusceptible to flood damage, declined by 1.7 million tons or nearly 15%between FY86 and FY89. Over the same period, boro rice, grown in the dryseason with the help of irrigation under more controllable weather conditions,increased by a phenomenal 2.2 million tons or 592 (at an annual rate of nearly17Z), while wheat production remained unchanged. The rapid growth of boro hasbeen principally the result of significant policy improvements focussedparticularly on expanding minor irrigation facilities and acreage under boro(para. 22); while the sharp decline in aman in the last two years has beenmainly the result of the floods. Recent performance in the agriculturesector, therefore, should be judged not simply by reference to trends in totalfoodgrain production, but by the efforts made in the context of the floods tosustain production levels by rapidly expanding the boro crop.

21. In both FY88 and FY89, the floods affected the aman crops 6/ severely.The government responded to these crises by launching a crop replanting andintensification program aimed at expanding winter crops, particularly boro.The program included free distribution of seeds and fertilizer to smallfarmers, and the procurement, repair and rehabilitation of minor irrigationequipment. The availability of credit to farmers was improved by reschedulingcrop loans and expanding the eligibility for such loans. (As a result, netcredit to farmers increased to Tk. 0.6 billion in FY88 and Tk. 2.1 billion inFY89 compared to a net repayment of Tk. 4.4 billion in FY87). Farmersresponded very well to these initiatives and substantial improvements in minorirrigation policies (para 22); and acreage under boro crop expanded by 202 inFY88 and 22Z in FY89. In addition, the demand for fertilizer continued to bestrong, with a 14? increase in PY88 and a 131 increase in FY89, comparable tohigh rates of fertilizer use achieved during early to mid-eighties. Inaddition, the boro crop in both years benefitted from improved soil moistureand soil quality (both indirect benefits from the floods). Thus the boro cropincreased by 18? to a record level of 4.7 million tons in FY88, and by 23? toa new high of 5.8 million tons in FY89, helping total foodgrain production tostay at the FY87 level of 16.6 million tons.

6/ The aus crop also suffered sa~me minor damage due to some localized floodingbefore the major floods in 1988. In FY88, a significant portion of initiallyprojected crop losses was recotuped through a crop rehabilitation program,which provided free inputs (including fertilizer, seed and credit), limitingcrop losses to only 580,000 tons, or 72 below a reasonably good aman cropachieved in FY87. In FY89, the aman crop loss alone turned out to be about830,000 tons. Together with minor losses to the aus crop, total crop lossesin FY89 were about 960,000 tons or 9? below the actual FY88 crop levels (orabout 2.0 million tons or 17? below the government target for the FY89 amanand aus crups), significantly less than the Government's initial estimates ofsuch losses (2.5-3.0 million tons).

Table 1.5: TRENDS IN AGRICULTURAL ?RODUCTION AND VALUE ADDED, FY81-FY9O

FY81 FY82 FY83 FY84 FY85 FY86 FY87 FY88 FY89 FY90a/

Production (million tons unless indicated otherwise)

Foodgrains 14.97 14.59 15.30 15.87 16.21 16.19 16.59 16.55 16.66 19.15Rice 13.88 13.63 14.21 14.51 14.62 15.04 15.41 15.41 15.55 17.95Aus 3.29 3.27 3.06 3.22 2.78 2.83 3.13 2.99 2.86 2.48

Aman 7.96 7.21 7.60 7.93 7.93 8.54 8.27 7.69 6.86 9.47Boro 2.63 3.15 3.55 3.35 3.90 3.67 4.01 4.73 5.83 6.00Wheat 1.09 0.96 1.09 1.21 1.46 1.04 1.09 1.05 1.02 1.20Others b/ n.a. n.a. n.a. 0.15 0.13 0.12 0.09 0.09 0.09 n.a.

Jute ('000 bales) 4943 4646 4881 5216 5111 8610 6753 4700 4436 4639Cotton ('000 bales) 10 54 58 46 29 29 22 37 35 n.a.Pulses c/ n.a. n.a. n.a. 0.53 0.51 0.50 0.49 0.52 n.a. n.a.Oilseeds c/ n.a. n.a. n.a. 0.47 0.48 0.42 0.44 0.45 n.a. n.a.Sugarcane 6.60 7.14 7.48 7.29 7.00 6.64 6.90 7.21 6.90 n.a.Potatoes 1.00 1.08 1.17 1.19 1.18 1.10 1.07 1.28 1.09 n.a.Sweet Potatoes 0.70 0.69 0.73 0.70 0.68 0.61 0.55 0.56 0.54 n.a.

IATea (thousands tons) 40.00 39.00 41.00 42.00 38.00 43.00 38.00 41.00 0.44 n.a.Tobacco (thousands tons)48.00 51.00 51.00 49.00 50.00 46.00 40.00 42.00 0.39 n.a.

Real Growth in Value Added (2 p.a.)

Crops 5.90 -0.70 4.90 1.10 1.20 4.40 -0.20 -1.76 0.00 8.00Livestock 2.50 5.80 2.40 1.90 2.30 2.40 2.50 2.52 2.51 2.75Forestry 7.90 10.50 1.90 9.30 -6.50 6.00 -1.30 2.34 0.00 2.24Fisheries 0.20 5.80 6.80 0.70 2.30 0.80 1.30 1.60 0.16 2.00Total Agriculture 5.30 0.90 4.60 1.60 0.90 4.00 0.10 -0.90 0.27 6.75

n.a. - not available.a/ Estimate.bL Total includes other cereals.c/ Bebinning in FY84 data have been revised. Comparable figures for prior years are not curr-ently availalle.

Sources: Bangladesh Bureau of Statistics; Ministry of Agriculture; World Food Program, Dhaka; and Staffestimates.

22. Associated with this boro crop intensification drive, a number ofimportant policy changes took place in FY88 and FY89. Thus, minor irrigationpolicies (the implementation of which had languished in the mid-eighties) werepursued with renewed vigor; restrictions 7 which had been imposed to regulatethe import of equioment for and use of shallow tubewells (STWs) weresuspended. The private sector has been allowed to freely import anddistribute STWs, as well as to make bulk purchases of surplus stocks held byBADC for internal distribution. These measures helped to increase sales ofminor irrigation equipment by 40Z in FY88 and by a further 1009 in FY89.

23. Progress has also been made in improving input distribution andexpanding the role of the private sector in this regard, particularlyfertilizer. Retail distribution of fertilizer has been successfullyprivatized since early 1980s. Until recently, the wholesale trade remained aBADC monopoly. In April 1989, however the Government initiated privateparticipation in the wholesale trade too, by permitting direct lifting offertilizer by private dealers from the BCIC plants; (earlier, private dealershad to purchase fertilizer from Primary Distribution Points (PDP) of BADC.More recently, the Government has introduced direct lifting by private dealersfrom the ports, as well as import of fertilizer by the private sector.

24. In other areas progress has been less satisfactory. The provision ofinstitutional credit for agriculture continues to be problematic. The mainproblem is poor recovery. This had improved somewhat in FY87, but since thenrepeated natuzal calamities have led to a relaxation of credit discipline, sothat the recovery rate fell to 242 in FY88 and only 20? in FY89. To ensuresustainability of the credit system, which is essential to agriculturalgrowth, enforcement of credit discipline is necessary. The banking systemshould not be used to fund the costs of relief and crop rehabilitationprograms. Obviously, in unusual years (as in the case of last two years),relief and crop support programs would be essential; but, the costs of theseprograms should be charged to the budget. Over time, as the institutionalcapacity develops, crop insurance programs to deal with such eventualitiesshould ba considered.

25. Significant progress has also been made in the formulation of anappropriate policy framework to improve the agriculture sector's performance.A major review of the agriculture sector, completed by the UNDP in 1989 (withcomplementary inputs from the Bank and other donor agencies) provided thebasis for an extended dialogue within the Government and with external donorsfor reform of agricultural sector policies 8/. From this dialogue a broad

71 Thus, regulations which banned the use of STWs in certain parts of thecountry and specified optimum distances between STWs in locating them, as wellas standardization requirements for import of STWs, together with all customsduties and sales taxes on imports of such equipment and power tillers, werewithdrawn in 1988.

8/ The UNDP report and complementary studies prepared by the World Bank werediscussed in a meeting of Government officials and aid donors, chaired by theBank, in April 1989 in Dhaka.

consensus on future directions of agriculture policies and necessary actionsemerged. The new agricultural policy has broadly reaffirmed the policiesorig..nally initiated in the early eighties to increase foodgrain production(which were allowed to fall into disarray in the mid-eighties, but wererenewed with vigor during the crop intensification drive in the last twoyears, with great success). The new agricultural policv recognizes that:priority should be given to promoting foodgrain production as the focus ofagricultural development policy with the objective of achieving self-sufficiency in foodgrains over the medium term; considerable potential existsfor increasing foodgrain production by about 4 - 4.5Z per annum by promotionof winter (particularly boro) crops through expansion of irrigationfacilities; minor irrigation is the most effective way of expanding wintercrop areas; private sector should play the leading role ias providing minorirrigation equipment and other modern inputs (such as fertilizer); while moreefficient and streamlined public sector institutions could play acomplementary role in this regard, in providing flood control and drainage(FCD) works in areas suitable for minor irrigation, and improved research andextension services for farmers. The new policy also stresses the need forefficient delivery of modern inputs (including fertilizer, HYV seed andcredit) and the critical role of providing adequate incentives to farmersthrough effective food management/price support to increase foodgrainproduction and diversify the production process.

26. The adoption of this new policy has considerably strengthened the policyframework for supporting agriculture and improved the prospects foraccelerating agricultural growth. However, the effective implementation ofthis policy to realize the sector's potential requires sustained commitmentand complementary actions in a number of critical areas, particularly foodmanagement (see below).

27. Progress, however, has been less clear cut and satisfactory in otherareas, particularly in the important area of ensuring adequate incentives tofarmers to encourage domestic grain production. The Government increasedprocurement (floor) prices for rice by 132 in FY87, by 32 in FY88 and by 5Z inFY89. However, these announced prices have not been made effective on aconsistent basis, as food management operations until recently have not paidsufficient attention to the objectives of agricultural development, preferringto procure grain abroad rather than domestically. Thus, at critical timeswhen bumper domestic crops were being harvested, domestic farmgate rice pricesha-e collapsed due to poor domestic procurement efforts by the Food Ministry,reducing farmers' incomes and incentives. Thus in FY88, prices received byfarmers for a record boro crop were nearly 25Z below the announced procurementprice, substantially eroding the potential income gains of farmers. A similardecline seemed probable in the current year (FY90) because of excessive foodimports in the face of bumper crops; but this has been so far averted througha vigorous procurement drive recently (para.39).

28. Efforts to improve the effectiveness of public expenditures andefficiency of public sector institutions in agriculture have also met withlimited success. Studies to redefine the role of the Bangladesh AgriculturalDevelopment Corporation (BADC) initiated in FY87 have been completed recently.Similarly a review of the Bangladesh Rural Development Board (BRDB) and

Bangladesh Water Development Board (BWDB) initiated in FY87 (with theobjective of revitalizing the cooperative system for small farmers) was alsofinalized in early FY89. However, action plans to operationalize the keyrecommendations of these reports have not yet been implemented. A number ofstudies have also been undertaken and completed to improve the efficiency ofpublic expenditures in agriculture (for example, a 1987 study on operation andmaintenance needs in irrigation and flood control and a public expenditurereview by the Wcrld Bank in 1989); but they have had very little operationalimpact on O&M allocations and expenditure decisions so far.

29. Flood Management. The severity of the 1987 and 1988 floods 9/ promptedthe Government to undertake a comprehensive review cf flood policy. Thisreview centered on UNDP-financed studies of flood policy and floodpreparedness, both completed in early 1989. In addition, three other studiesof thie flood problem and its possible solutions were prepared in 1989: a"Prefeasibility Study for Flood Control in Bangladesh' prepared by a team ofexperts representing the Governments of Bangladesh and France; an "EasternWaters Study" sponsored by USAID; aad a "Report on Survey of Flood ControlPlanning in Bangladesh' prepared by the Government _f Japan. These studieslook primarily at the flood problem from a number of different perspectives,although they all concur in emphasizing the importance of flood preparednessmeasures. The GOB-UNDP and GOB-France studies look at the potential for long-term structural solutions (principally embankments and drainage canals) overthe next 15-20 years, with the GOB-UNDP study proposing embankments anddrainage systems for the three main rivers and the GOB-France study taking amore ambitious approach involving embankments also on many of the threerivers' tributaries and distributaries. USAID's Eastern Waters Study takes abroad view of water resource development in the Ganges and Brahmaputra basins,and points to the engineering problems and the costs and benefits in confiningthe main rivers of Bangladesh through an extensive system of embankments. TheJapanese report examines a range of alternatives and is cautious on structuralsolutions, except where needed to protect urban areas. All studies agree onthe value of improvements in the niatural drainage system.

30. Recognizing the need for a coordinated and cost-effective approach tothe flood problem, the Government requested the Bank in June 1989 to help incoordinating the findings of these studies and subsequent international actionregarding flood control. As part of its coordinating role, and following ameeting of experts in Washington in July 1989, the Bank prepared in late 1989an "Action Plan for Flood Control".10/ The Action Plan draws on the findingsof the four studies in charting a course for flood control initiatives overthe next five years and beyond. These initiatives which would encompass aprogram of non-structural measures, such as flood forecasting, flood warning,flood preparedness and disaster management, would be carried out in

9/ For a discussion of the impact of the 1988 flood see last year's Bankreport, "Bangladesh: Recent Economic Developments and Short-Term Prospects"(Report No. 7596-BD, March 13, 1989), particularly paragraphs 32-34 and 60-72.

0/ The Action Plan benefitted from considerable contlibutions from GOB andfrom experts involved in the four studies mentioned above.

conjunction with agricultural development programs. The Action Plan includesa number of studies and pilot projects, estimated to cost about $150 millionover the next 2-3 years, which would lead to investments totalling perhaps$500 million.

31. The projects that have tentatively been selected for inclusion in theAction Plan address high priority problems and have the best prospects fortechnical and economic feasibility. They include: strengthening of theBrahmaputra right embankment and improvement of flood control and drainage inthe north-west region; measures to control flooding on the Brahmaputra's leftbank and development of the protected area by means of drainage and watercontrol works, particularly in the north-central region; measures to controlflooding on the right bank of the Ganges, the Padma and the Lower Meghna, andimprovements in water and drainage in the south-west and south-centralregions; measures to control flooding on the left bank of the Meghna,including improvements in water control and drainage in the south-east region;a study of the north-east region leading to a regional water managementprogram; rehabilitation of the coastal embankments to protect against cyclonesand tidal surges; flood protection and drainage works for the Greater Dhakaarea, and bank protection for towns such as Chandpur, Sirajganj, and BhairabBaza; strengthening of the flood forecasting and early warning system; anddevelopment of a flood preparedness program.

32. In December, 1989 the Action Plan was endorsed by members of the Bangla-desh Aid Group at a meeting hosted by the British Government in London.Donors indicated that they would support the series of pilot projects andstudies proposed in the Plan. The meeting stressed the need to pay closeattention to the environmental and social impact of the proposed embankmentsand other physical works, with particular attention being paid to fisheriesand to ensuring full consultation with intended beneficiaries and those likelyto be adversely affected. The meeting also stressed the importance ofincorporating the Action Plan into the Government's Economic Development andPublic Expenditure Program, paying attention to both investment and operatingcosts of the Plan's components, and taking into account overall availabilityof resources, as well as the economic justification of the Plan's componentswithin the context of the priorities of the overall public expenditureprogram.llU In subsequent meetings between donor representatives and theGovernment held in Dhaka, considerable progress has been made in establishingterms of reference and initiating the procurement of consultant services, andagreement was also reached between GOB and the Bank on a "Special Programme"which provides for streamlined institutional arrangements for the preparationand implementation of the Action Plan, to overcome some of the usualbottlenecks encountered in project preparation and implementation.

33. Food Management. The Government has endeavoured to achieve amultiplicity of objectives through the operations of its Public FoodgrainDistribution System (PFDS) in recent years; to ensure adequate availability of

111 For recommendations on prioritizing expenditures and investments, see"Bangladesh: Public Expenditure Review" (Report No. 7545-BD, dated March 13,1989).

foodgrains in the country at all times (food security), without excessiveprice fluctuations (price stability); to provide food to the needy anddisadvantaged groups through its relief, Food For Work (FFW) and VulnerableGroup Development (VGD) programs (poverty alleviation); and to providerenumerative prices to farmers through domestic procurement operations(agricultural development). These objectives were to be achieved in a cost-effective manner by better targeting of food distribution to underprivilegedgroups and reducing (and eventually eliminating) food subsidies.

34. Over the past three years significant progress was made in ensuring foodsecurity, preventing sharp escalations of domestic food prices and improvingfood distribution; but relatively less in supporting agricultural developmentobjectives. After considerable progress in reducing food subsidies throughFY88, food subsidies have reappeared on a large scale in botb FY89 and FY90.In FY90, excessive commercial imports have also exacerbated budgetary andbalance of payments pressures.

35. The Government has been quite successful in ensuring adequate foodavailability, despite major crop losses caused by natural disasters in FY88and FY89. In both years, the Government responded promptly to prevent foodshortages by obtaining additional food aid and purchasing large quantities offoodgrain commercially on its own, and by initiating crop rehabilitationprograms domestically (para. 21) to recoup crop losses. Thus, theGovernment's commercial imports totalled 1.1 million tons in FY88 and 782,000tons in FY89, with another 500,000 tons contracted in the latter part of FY89arriving in Bangladesh in early FY90. External donors also respondedgenerously to the Government's pleas, providing an extra 600,000 tons offoodgrain in FY88 and another 300,000 - 400,000 tons in FY89, on top of theirusual commitments. Thus, foodgrain imports totalled 2.9 million tons in FY88and 2.1 million tons in FY89, enabling the Government to expand total PFDSdistribution to 2.5 million tons in FY88 and 2.3 million tons in FY89respectively - the latter an all-time record (Table 1.6). The timelyavailability of foodgrain, combined with active open-market operations, helpedto prevent sharp escalations in domestic market prices for foodgrain in bothyears, despite the severity of the floods. However the preoccupation with thefood security objective has affected agricultural incentives from time to timeand caused serious budgetary and balance of payment problems (para. 101).

Table 1.8: SUtMARY OF THE FOODGRAIN SITUATION, FYsI-FY9o(Thousand metric tons, unless stated otherwise)

FYs1 FY82 FY83 FY84 FY8s FYs8 FY87 FY8s FY89 FYO0_------------------------------------------------------------------------------------------------------------------------------__--

Domestic productionGross 15,026 14,650 15,361 15,748 16,124 16,084 16,501 16,460 16,566 19,10Net at 13,523 13,185 13,825 14,182 14,612 14,475 14,851 14,814 14,909 17,285DomnstTk supply, 13,481 18,066 18,696 14,216 14,316 14,602 14,725 14,643 14,617 17,285Not kl

Govern- nt operations:Domestic procurement 1,088 802 192 270 844 849 190 a70 416 mImports 1,076 1,266 1,848 2,069 2,S90 1,202 1,763 2,911 2,138 1,877- own rtsources 264 100 700 569 1,286 113 843 1,184 782 526- aided 812 1,186 1,148 1,488 1,884 1,089 1,480 1,777 1,856 1,851Total distribution 1,546 2,067 1,937 2,062 2,680 1,541 2,120 2.603 2,941 2,287

Ration sales: 1,141 1,468 1,824 1,834 1,459 780 1,185 1,084 1,067 1,146

Statutory rotioning 848 812 8o0 29 282 160 210 188 202 161Priority groups 611 6s 648 841 712 487 a"8 532 559 485Modified rationing 182 491 a86 400 465 108 257 314 326 500_~~~~~~ _- - --- -- - - -- - - -- - -- - - - -- - - - - -- - --- - -- -- -- - y - - - - -

Vulnerable groupprograms: 406 441 495 687 708 678 728 1,112 1,424 882-- - -- - -- - --- - - - --- - ------- - - -_- -- -- -- -- -- -- -- ---- - - - - -- - - - -- - - -- -.- _- - -- -- - -- - - -- - - - -- -- -- -- - -- - - __Relief 94 103 23 55 la 818 72 248 885 230Vulnerable Group

Feeding 28 89 67 92 28 152 176 310 501 1esFood for Work 289 299 406 440 T72 386 480 566 689 467--- _--------------------------------_-------- ------------------------- ---------------------- --- -- _----_ _--_Market mlegs / - 176/d 118 286 as7 138 257 857 429 2S6LoAss 104 104 103 88 137 52 62 127 141 147Closing stocks 1,249 616 e6o 803 1,004 976 751 1,417 960 1,580Total availability 18,914 14,681 15,441 15,998 16,551 15,780 16,6608 16,781 17,065 16,401- - ----- ---------------- - ------------------ - --------------------- - --- - ----------------_- - --------- - --- -- -- -_ -- -- -- -- -- -- -- -. .- -- -- -- --- Population,mid-year,million 69.84 91.67 94.06 96.50 99.01 101.5s 104.07 106.57 109. 1 111.75Per capita availability

kg/yer 156.1 161.08 164.2 165.8 167.1 155.4 160.1 157.3 16.4 164.7g/day 428 448 450 460 458 430 489 431 428 451ounces/day 15.1 15.6 15.9 16.0 16.2 16.2 16.5 16.2 16.1 15.9Public distribution as Uof total availability 11.1 18.9 12.5 12.8 15.6 9.8 12.7 14.9 17.2 12.4* Gross production minus 10X for feed and waste.

Adjusted for crop cycle overlap with fiscal year (Ovorlap: boro 27X, wheat 18X).Includes markot operations.Includes export sales of 20,000 M.T.Includes private imports of 80,000 M.T.

Source: World Food Programme; USAID; Ministry of Food; and staff estimates.

36. There have been significant improvements in the foodgrain distributionsystem, by reducing over time its former bias in favor of the relatively well-off urban population. During the last two flood-affected years, a deliberateeffort was made to channel more food to the vulnerable groups through relief,VGD and FFW programs, so that the share of targeted programs rose from 442 inFY86 to 48Z of a considerably expanded PFDs distribution in FY89. Inaddition, the Government in April 1989 introduced a new rural rationing schemewhich provides subsidized foodgrain to rural households at a price which is25Z less than the statutory ration price, in place of the previous ModifiedRationing (MR) channel. The share of PFDS distribution channelled torelatively better-off consumers (mostly government employees and urbanconsumers) has accordingly declined from 562 in FY86 to 412 in FY89.

37. To reduce budgetary subsidies, the Government continued to adjust rationprices of foodgrains sold by the PFDS through its market channels 11 in bothFY87 and FY88. Thus, ration prices for rice and wheat were raised by 62 inFY87, and by a further 6! and 52 respectively in FY88. Together with somereductions in ration quotas provided to ration card holders (from about 2 kgper week in FY86 to 1.5 kg per week in FY87), these ration price adjustmentshelped to eliminate the food subsidy by FY88 from Tk. 1.4 billion in FY86. ByFY88. the subs4dy to consumers under most of the monetized channels werevirtually eliminated, with the notable exception of the 'essential priorities"channel, which provided food to the armed forces at exceedingly low prices,involving an 802 subsidy. However, as noted, food subsidies have againincreased sharply in FY89 and FY90. In part this has been due to sharpincreases in international foodgrain prices for both rice and wheat in thesetwo years. As noted, the Government imported large quantities of foodgrainson commercial terms in both years and offtake reached record levels in FY89.The Government, however, did not raise ration prices in FY89; and although an82 increase was announced in FY90, it was far from sufficient to cover thesharply higher costs of food operations. As a result, the food subsidyreached a record level of Tk 6.0 billion, equivalent to 9Z of total governmentcurrent expenditures in FY89. (But the budgetary impact of this increase wasnot fully felt in FY89 because PFDS stocks were drawn down by 532,000 tonsduring the year generating additional receipts of about Tk 3.6 billion whichpartly cushioned the impact of higher food subsidies on the budget. (para.156). In FY90, the food subsidy is expected to remain at comparable levels.

12/ The distribution channels broadly fall into two groups; monetized ormarket channels and non-monetized channels. The monetized channels consist ofStatutory Rationing (SR) for government employees in six specified districts,Modified Rationing (MR) for rural poor, Essential Priorities (EP) mainly armedforces, Other Priorities (OP) for government employees outside statutoryrationing areas, Large (industrial) Employers (LE), Flour Mills (FM) and OpenMarket Sales (OMS). There are four non-monetized channels--Food for Work(FFW), Vulnerable Group Development (VGD), Canal Digging (CD), and GratuitousRelief (GR)--through which PFDS distributes foodgrains in return for ruralpublic works or as welfare benefits. The monetized channels are managed bythe Ministry of Food. The non-monetized channels are under the control of theMinistry of Relief and Rehabilitation.

38. The Government's reluctance to adjust ration prices and the decision toincur large food subsidies last year in the context of the devastation andsubstantial income losses caused by the floods is understandable to someextent. However, the continuation of these subsidies (as well as theintroduction of other cash subsidies for exports - para 83) in FY90 has littlejustification in view of the budgetary constraints and the trade-offsinvolved. Such subsidies are necessarily at the cost of other investmentswhich are essential for improving future economic growth and incomegeneration. This situation has been compounded by the substantialappreciation of the exchange rate noted earlier (para. 72). Much neededadjustments in the exchange rate in the near future will increase themagnitude of the necessary adjustments in ration prices, making it even moredifficult to bring down food subsidies. It is therefore important to takesteps to reduce food subsidies as soon as possible by replacing relativelyexpensive commercial imports with domestic procurement and raising rationprices over time. (para. 158).

39. Another major area where government policies have fallen short of theirobjectives is in providing effective price support to farmers which isnecessary to promote agricultural development. The Government's foodmanagement operations have been generally geared to achieving the foodsecurity objective, without paying due regard to other equally importantconsiderations, such as price support to farmers and budgetary implications.Thus in both FY88 and FY90 excessive commercial imports led to unnecessarilylarge build-up of stocks at a time when record domestic crops were beingharvested, preempting both storage capacity and financial resources needed toeffectively support domestic procurement. In effect, in the last quarter ofFY88, post-harvest prices for boro collapsed in many procurement areas in theface of a bumper boro crop of 4.7 million tons, 18? above FY87 production. InFY89, a similar situation was averted mainly bec:use of substantial aman croplosses due to floods which depleted private stocks. In the current year also,excessive commercial imports, (contracted in June 1989 even though a recordboro crop of 5.8 million tons was being harvested at the time), have led toserious stock management problems. A substantial decline in rice prices inthe face of a record aman crop has been avoided so far through an exceptionalprocurement effort - the Food Department is expected to purchase about400,000 tons of aman rice, far above the levels in recent years. However,given the high stock levels at prerent and expectations of bumper winter (boroand wheat) crops, food imports (including aid-financed imports) need to behandled carefully over the coming months (para.102) to avoid depressingdomestic prices.

40. The repeated episodes of excessive commercial imports stem primarilyfrom the over-emphasis of the food security objective, without recognizing itsinter-linkages with domestic agricultural deveLopment policy; second, the twoobjectives are being pursued by two government ministries, with littlecoordination at the ministry or higher levels of government; third, it issubstantially easier for the Food Ministry which is in chu.ge of food securityto undertake large external purchases than equivalent domsstic procurement;fourth, estimates of crop losses (especially after natural disasters), PFDS

distribution needs and consequently import needs have been frequentlyoverstated; finally, in the absence of effective coordination of inter-ministerial (institutional) objectives, government policy has generallypreferred to err on the side of over-importing. In the event, the FoodMinistry has continued to purchase commercially abroad, even when there isevidence to suggest that large scale domestic procurement to support farmers'incentives would be needed in the face of bumper crops. (The implications ofthis policy for budget management and agricultural development are discussedlater in paras. 153-161).

Industrial and Trade Policy

Al. Considerable progress had been made in the early eighties to increasethe role of the private sector in industrial activity through a majordenationalization of public enterprises and by opening up for privateinvestment areas which had been reserved for the public sector. Theadjustment program endeavoured to build on these initiatives and to improveindustrial efficiency and exports through actions in three related areas -industrial policy, trade policy and financial sector reforms. The programspecified that in industry, to facilitate private investment, investmentsanctioning procedures would be further liberalized and simplified byexpanding the number of sectors where investment is unrestricted, reducing thenumber of regulatory bodies and increasing the authority of financialinstitutions to sanction investment; and to improve efficiency of publicenterprises, greater autonomy and accountability would Ike provided byimplementing the Public Enterprise Management Ordinance of 1986 and developingand implementing a system of performance monitoring and evaluation system. Inaddition, government policy continued to stress further divestment of theseenterprises. In trade policy, it was envisaged that in order to improveresource allocation and liberalize the access of domestic industrial producersto imports, the restricted and banned lists of imports would be progressivelyreduced and eventually eliminated (except for certain items which woutld becontrolled for social, religious and public safety reasons) by end of FY91;and that the tariff structure would be rationalized by replacing quantitativerestrictions with tariffs, lowering tariffs, and reducing the number ofcustoms and sales tax rates. Towards this end, initial steps were to includea significant reduction in tariffs for the textiles, steel and engineering,chemicals and electronics sectors in FY87 and FY88, with nominal tariffs forthe first two sectors ranging from 0 to a maximum of 85Z. Other reforms toimprove industrial sector performance by encouraging industrial exports andimproving the financial system are discussed in paras. 74 and 56 respectively.

42. Industry. Under the Revised Industrial Policy of 1986 (announced atthe beginning of FY87) the Government sought to move vigorously in thedirection of expanding the role of the private sector, making the publicenterprises (PE) more efficient, liberalizing the trade regime and providingincentives for export growth. Supported by IDA under its first IndustrialSector Credit (ISC I), these efforts contributed to a more favorableenvironment for industrial activities and gave some initial impetus to privatesector in such areas as readymade garments manufacturing, textiles and foodprocessing. While efforts to sustain reforms continued during FY88-FY89,

progress was much more limited as implementation was hesitant and piecemeal.In some cases, as noted below, reforms tended to send mixed signals; privateinvestment stagnated in the last few years, and average industrial growthhardly reached 3Z.

43. To promote private investment, between FY87 and FY89, the Governmentcontinued with measures to limit the growth of the public sector and expandprivate sector involvement in industrial activiLy. In FY87 the areas"Reserved" for public sector investment, for example, were narrowed downessentially to military goods, commercial energy and capital intensive basicutilities; and all sectors not listed on the "Reservedn and 'D.Iscouraged"lists wvere considered "free" sectors and open to private participation. In thefree sectors, (i) the limits on the approval of private investment wereabolished irrespective of the size of projects, provided they are financedfrom own resources or approved Supplier's Credits, and imports are purchasedthrough the secondary foreign exchange market, and (ii) the requirement ofGovernment approval for projects with a raw material import content exceeding502 was dropped. For other private investment projects, centralized controlwas reduced by raising the ceiling on the size of investment exempted fromgovernment approval and expanding the sanctioning authority of financialinstitutions and regional offices. Sanctioning limits were eliminated forprivate banks, and the sanctioning powers were increased from Tk. 60 millionto Tk. 100 million for the development finance institutions (DFIs), and fromTk. 30 million to Tk. 50 million for nationalized commercial banks. Lastly,to strengthen financial institutions and industrial credit delivery,Government instituted credit recovery measures, together with recapitalizationof the DFIs. However, the pace of this recovery effort, as noted in para 57,has slackened in the last two years. Similarly there has been a reimpositionof restrictions recently by expanding the size of the Discouraged List from 12to 25, which correspondingly reduced the size of the free sectors. Governmenthas been also considering over the Ia;t two years broader financial sectorreforms, such as the pursuit of more flexible interest rate policies andstrengthening financial institutions through adequate provisioning andrecapitalization programs; but, the finalization of these reforms has beenconsiderably delayed (para 58).

44. These changes in policies have provided more flexibility for privateinvestment. However, private investment appears to have stagnated in recentyears. A number of factors have contributed to this situation. Depresseddomestic demand in the last two years coupled with substantial overcapacity inmany sectors has discou_aged new investment for the domestic market.Similarly, given the substantial anti-export bias resulting from relativelyhigh protection still afforded to import-substituting industries despiterecent progress in tariff reform, and in the absence of an aggressive policystance to promote new exports, little investment for export production (otherthan shrimp processing and ready-made garments) has been forthcoming. A poorfinancial system which has failed to provide the necessary investmentfinancing has been another impediment.

45. In this context, recent government actions also seem to be providingmixed signals to the private sector and need to be reviewed. For example, the

Government has pursued the objective of streamlining the institutionsresponsible for private investment decisions by centralizing such decision-making through the establishment of the Board of Investment (BOI) in 1989.Originally thought of as a promotion agency with major responsibility forattracting direct foreign investment, BOI has been given a broad bureaucraticoverview and wide regulatory powers over both domestic and foreign investment.The ccope of its work includes arranging financing; resettling sickenterpr'qes; and approving terms of loans, transfer of technology andemployment of foreigners, etc. Though the limits on investment sanctioningwere relaxed for direct foreign investment, BOI has yet to provide a clearpolicy concerning constraints on foreign equity participation and limits onthe sources of funding (domestic or external) allowed for foreign inveators.There is yet no announced change in the tendency to pressure foreign investorsto hold minority shares in joint ventures. The objectives of BOI need to bereviewed to bring its role as a promotion agency into sharper focus and toeliminate inappropriate overlapping with other agencies. In this capacity, BOIcould take the lead in simplifying regulations and guidelines regardingprivate foreign inivestment; and facilitating access to existing incentives,infrastructural facilities and services. The recent reimposition ofrestrictions on the size of the free sectors by expanding the Discouraged listis a matter for concern. Various other lists (e.g. the Indicative InvestmentSchedule) which outline regulations and guidelines for investment by sectorsare also maintained. The Discouraged list and other Indicative and PriorityLists should be abolished as they usurp private investment decision making.They undermine potential improvements in industrial efficiency by shelteringexisting, even inefficient, enterprises and inhibiting the entry of new firmswhich is necessary for creating a competitive environment for industrialactivity.

46. An appropriate regulatory framework also needs to be developed for theparticipation of both public and private sector in some of the key areas (suchas energy) which are on the Reserved list. In energy, such a framework needsto be supplemented by other policy actions that will build investorconfidence. These policy measures should include (i) a clear indication thatthe power sector is to be removed from the list of industries reserved for thepublic sector, (ii) streamlining the approval process for private ventures inthe energy sector, and (iii) the elimination of remaining distortions inenergy prices. Following the receipt of several recent proposals forinvestments in the power, gas, and coal subsectors from potential privateinvestors, a rapid implementation of this policy package is likely to yieldgood results in terms of mobilizing resources for investment from the privatesector. The most promising prospects that should now be followed up includepower generation, coal development, petroleum exploration and development, andthe production and distribution of liquefied petroleum gas for household use.

47. To improve public enterprises' (PEs) efficiency, a system of performancemonitoring to enforce accountability and improve PE performance has beeninitiated; and the first phase of the program involving the development of aninformation base for PEs has been completed. But, since FY87, there has beenno significant progress in the second phase concerning the development ofperformance indicators mainly because of inadequate staff and inability to

attract skilled technical personnel. Measures were also introduced in FY88providing some autonomy to PEs in their operational decisions by selectivelyderegulating PE output pricing and zetaining administrative controls overpricing mainly for monopoly and 'basic needs" goods (e.g. fertilizer, gas);however, periodic adjustments of these administered prices are required topromote financial viability and sustain production of the enterprisesconcerned. A partial (49Z) privatization program for profitable manufacturingPEs was started in FY87; but its scope is limited as continuing Governmentmajority shareholding enables the state to maintain effective control,restricting the operational authority and the initiative of enterprisemanager3. Moreover, GOB has yet to adopt a clear policy to restructure thepotentially viable PEs and phase out the unviable ones. Notwithstanding theselimited efforts to improve PE efficiency, the performance of PEs remains poorwith large financial losses; their net claims on the Government budget rosefrom O.8X of GDP in FY86-FY88 to 3.ZZ in FY89. Thus, recent Governmentpolicies have had little impact on improving the situation.

48. As stated in its Policy Framework Papers, the Government has tried toimprove the performance of Jute, traditionally the largest manufacturingindustry Jr Bangladesh - through rehabilitation and modernization programs atthe factory level. However, these palliatives have proved to be of littleavail. The main problems of the industry - weak external demand and excesscapacity - have been exacerbated by substantial over-employment, rising wagecosts and declining labor productivity; and in the public sector mills 13/ byunclear performance objectives and insufficient managerial autonomy andaccountability as well. These problems have led to persistent large lossesand accumulated debts of the mills which impose a serious burden on thefinancial sector and the budget.

49. Accordingly, in May 1989, the Government initiated a comprehensivereform program to address a wide range of issues in jute cultivation, domesticmarketing, and jute manufacturing and trade. The principal objective of theprogram which is to be phased over a number of years, is to rationalize bothpublic and private jute mills. The main elements of the program include:phasing out excess production capacity and labor in the public mills;rationalization of the compensation system for labor; financial restructuringand BMR programs for the mills; and organizational and managerial changes. Inaddition, measures to expand demand and diversify overseas markets and tostabilize domestic raw jute prices are also envisaged. The Government hasrequested IDA assistance and has initiated preparatory studies to provide theanalytical basis for the reforms.

50. In July 1989. the Government announced certain measures to implement theprogram. However, these have focussed mainly on improving the short-termliquidity position of the mills through export subsidies to jute goods rangingfrom 10-20Z and a three-year moratorium on interest payments on outstanding

13/ 35 of the 68 jute mills in operation are publicly owned, and account forabout 60Z of total jute manufacturing capacity and export.

debt (about Tk 10 billion is eligible for this purpose). These subsidies arelinked to a drive to reduce production costs of mills to a national averagewhich will be established on the basis of beet 20 mills in the cointry (10 inthe public and 10 in the private sector). On the basis of current exportsubsidy rates, these jute subsidies are expected to be abou4 Tk2.5 billion -equivalent to about 62 oi the projected development program for this year.However, subsidies on this scale are not sustainable, in view of the weakbudgetary position. But, given the present trends in domestic productioncosts and weak exterral demand and prices for jute, the need for some form ofassistance will persist for quite some time, unless effective steps are takento improve the industry's competitiveness over the near-term, and to addressthe more fundamental problems facing the industry (identified above) over themedium term. As discussed elsewhere, declining competitiveness of jute and abroad range of exports, (as well as the limited availability of budgetaryresources), provide a strong justification for exchange rate adjustments torestore competitiveness in the near future. But serious efforts must also bemade to initiate much needed rationalization, if the Jute industry is tobecome competitive on a sustained basis.

51. Trade Policy. In this area, the adjustment program is expected tostrengthen and carry forward a reform process which was initiated in January,1985. At that time, the import control system was converted from a "positivelist" (specifying items which could be imported) to a "negative list" (whichspecified items that could not be freely imported), with the implication thatany item which was not on this list could be imported, either freely or byfulfilling specified requirements. 14/ The reforms proposed in the adjustmentprogram sought to further remove quantitative restrictions (QRs) andrationalize and reduce tariffs. In order to phase out QRs, the program soughtto reduce the number of headings containing banned items by 202 per year (asshown under "target" in table 1.7), with priority being given to removing bansin the steel, chemical, textile anJ light engineering sectors. No such globaltargets were announced for the Restricted List; but the Government intended toremove the restrictions on 60 industrial raw materials included in this list.These expectations were realized, though with some delays. The import policyorder (IPO) for FY88, published in July 1987, did not include the necessarychanges; but an interim IPO issued in May 1988 fulfilled the reformexpectations with regard to the reductions in import bans and restrictions.The IPO for FY89, according to I overnment estimates, appears to have madefurther significant reductions I5 (Table 1.7). Thus, there has been goodprogress in the reduction of 4mport restrictions during the period under

14/ In July 1988, the government adopted the Harmonized System (HS) ofnotation as the basis for classification of trade restrictions. By bringingall trade related transactions under a common classification system andremoving the ambiguities that plagued the previous system, this resulted in asignificant simplification.

5/ See footnote "c" to table 1.7.

review, although there is still a considerable way to go. The remaining itemsinclude many products which compete with domestic production, (in addition tothose which may be restricted for special reasons); and the former groupshould be opened up for import over time, in order to provide competition forand ensure efficiency of domestic production. Although efforts are being madeto improve the access of domestic producers of exported goods to suchrestricted imports through special arrangements, such arrangements (asdiscussed in para 75) are not working effectively.

Table 1.7: NUMBER OF FOUR-DIGIT CATEGORIES CONTAINING BANNEDOR RESTRICTED ITEMS a/ , FY85-89

FY85 FY86 FY87 FY88 May 88 b/ FY89

Banned 311 388 358 355 280 178(Target) - - (359) (287) - -Restricted 186 283 289 261 23 165

A/ There are 1012 4-digit headings in the CCCN classification system.b/ The May 1988 IPO was an interim IPO containing the necessary changes

to the FY87 IPO to meet the ISC I tranche release conditions.c/ The FY89 IPO is on the basis of the Harmonized system and is thus not

comparable with previous IPOs. The numbers in the columa (on a CCCNbasis) are estimates produced by GOB as part of the conversion and may besubject to classification errors.

Source: Ministry of Commerce; staff estimates.

52. This process has been sustained in the current year. The latest IPO forFY90 and FY91 has introduced two changes: (i) the IPO is to remain in effectfor two years rather than one, and (ii) it contains significantsimplifications, namely the consolidation of the Negative and Restricted listsinto one list, now named the "Control List". Table 1.8 (which is notcomparable with data in Table 1.7, since the current IPO is based on the newHarmonized Classification system), shows that the number of 4-digit itemssubject to controls has been reduced by about 25Z; but at the same time, somenew restrictions on public sector agencies' imports, requiring priorpermission from Ministry of Industries, have been introduced. Allowing forthese, there is still a significant reduction of about 18? in the ControlList, although the target of eliminating the import bans and restrictions byFY91 as specified in the adjustment program is unlikely to be achieved.

Table 1.8: CHANGES IN FOUR-DIGIT CATEGORIES OF PESTRICTED IMPORTS, FY89-91

Banned Restricted Banned & TotalRestricted

FY89 217 150 66 433FY90-FY91 156 121 43 320Additions a/ - 33 - 353Net Change -61 +4 -23 -80

a/ Added to the Restricted List in the FY90-FY91 IPO.

Source: Ministry of Commerce.

53. The second important aspect of trade yolicy reform has been therationalization and reduction of tariffs.16 In this regard, the Governmentundertook to: (i) reduce the maximum tariff rate to 1002 (with the exception ofspec4ified luxury goods; (ii) limit customs duties to a maximum of 20Z on rawrjaterials, 752 on intermediate products and materials and 100Z on final products;and (iii) restructure import tariffs in the textile and steel and engineeringsectors so that nominal tariffs in these sectors fell within the range of 0X to852. Concurrently, with the reductions in banned and restricted lists, effortswere made over the program period to implement tariff reforms. Steps were takento rationalize the tariff structure by lowering tariff rates and by reducing thenumber of sales tax rate from 4 to 3. In this context, the maximum tariff ratesfor final goods in the textiles, steel and engineering, chemicals and electronicssectors were reduced, with adjustments for inputs and intermediate goods.

16/ Taxation of imports in Bangladesh includes a combination of customsduties (tariffs), sales taxes, development surcharges and license fees,cascading in that order on the c.i.f. value of imports. Of these, tariffs arethe most important. In regard to tariffs, the Government publishes a seriesof statutory tariff rates which are the highest rates that can be legallylevied. Various exemptions or concessions (for example, to stimulateinvestment in priority sectors and to induce businesses to locate in lessdeveloped areas) may effectively lower tariff rates for some goods. However,it is difficult to link these statutory rates, exemptions and the concessionsclosely in order to clearly identify effective duty rates that will apply togoods described in the Harmonized Code. The "operative" tariff rates quotedin para 54 take the effects of exemptions on statutory rates into account, butnot concessions.

CHART 1 CHART 3(July 1989 'Oporatlve Rates) Textile Sector Tariftf

No ent Nob of estrie2eo 860

2000 30

260-1600

1000 160-

100.olooo9I '10 0:

0 2.6 6 10 1 JO 30 60 100 10200260300400 0 6 10 20 30 60 100 S0 300Duty Rate (per cent) Duty Rate (per cent)

_ ~~~~~~~~~~~~~~~~~~~1089J90 *Operalv Rate

... ~~~~~~~~~~~~~~~~~~~-

CHART 2 CHART 4(Tariff Rates by evel ot tabrication) Steel and Eneerh Sector Tarifs

M2 *dban fam IS) 1^ of enu

Median ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~Dt Rate (pe?.)t

120 No.30 1 entie

100-260-

60~~~~~~~~~~~~~~~~~~10

(July 1989 'operative rabs') Duty Rate (perdcent40R

54. A recent analysis of the tariff structure following new revisions announcedin the FY90 budget indicates that these objectives have been partially achieved.Chart 1 (which tabulates importable items according to operative duty rates)shows that the first objective has been nearly achieved; thus 852 of items nowbear operative tariff rates of 1002 or.less. In order to determine the extent towhich the Government has achieved its second objective, Chart 2 classifiesirportable items into 10 categories ranging from unprocessed raw materials (A) tohighly fabricated consumer goods (J) and according to tariff rates levied onthem; the chart also indicates the median of the operative rates in eachcategory. It shows that there is now a general progression of operative tariffrates from low rates on raw materials to high rates on final goods. However, anumber of less fabricated (intermediate) goods are also taxed at 100Z, (wellabove the 75? target rate); while at the lower end of the scale, the operativetariff rate seems to be well above 202 target for raw materials. Similarly,progress towards the third objective can be judged from charts 3 and 4 which showfrequency distributions of the operative rates in the textile (excludinggarments) and the steel and engineering sectors. These show that in the textilessector, raw materials (principally cotton) are taxed at 0? and 5?, yarn at 202,industrial textiles at 50?, cloth at 10ox; and mainly knitted and crochetedfabrics and textiles (about 10? of the total) at over 100Z. Thus, while theGovernment is moving towards rationalization of the tariffs in the sector, about60? of the items are still taxed at rates of 100? or more. On the other hand, inthe steel and engineering sector, while basic inputs (pig iron and ingots) arenow taxed at low rates, the majority of outputs bear duty rates ranging from 202to 50Z, with fewer entries (as compared to the textiles sector) taxed at 100? ormore. However, the last category still accounts for 23Z of the items in thesteel and engineering sector.

55. Thus, on balance substantial progress has been made in implementing programtargets for tariff reform, but clearly less than the stated targets. In allthese areas, there is still much progress to be made in reducing cariffs. Boththe average and maximum tariff rates are still far too high and need to besubstantially reduced over time, as they provide excessive levels of protectionfor many items distorting resource allocation and perpetuating inefficiencies.Prevailing tariff levels also entail a strong bias against exports, and this mustbe corrected in order to promote export growth and develop a competitive andefficient industrial structure. Moreover, the FY90 budget has actually raisedtariff rates on a number of finished products which can be domestically producedto 1002 or more for protective reasons. This policy is aimed at promotingdomestic industrial development and is not necessarily inconsistent with thetariff rationalization process, provided that it is properly managed as a shortto medium term device for fostering new industries with potential to becompetitive. However, care should be taken to ensure that such a policy does notprovide an umbrella of protection on a permanent basis. Such protection shouldbe relaxed over a predetermined time period, to ensure that infant industriesactually grow up and operate efficiently.

Financial Sector Reforms

56. The adjustment program envisaged far-reaching reforms in the financialsectot 171 designed to strengthen financial institutions, improve resourcemobilization and allocation and to more generally facilitate the expansion ofprivate investment, production and exports. Towards these ends, steps were to betaken to restore financial discipline and improve credit recovery in bothagriculture and industry; strengthen financial institutions throughreclassification of loan portfolios, adequate provisioning for bad and doubtfuldebt and recapitalization of such institutions; imp-ove monetary management byreducing government (Bangladesh Bank's) direct controls over lending and creditallocation, and greater resort to flexible monetary instruments; and toliberalize the interest rate structure progressively by moving towards greatermarket determination of interest rates.

57. To restore credit discipline, the Government adopted a loan recoveryprogram in FY87 in both agriculture and industry. This program included legalsanctions against willful defaulters, (such as seizure of assets, denial of newcredit and import licenses to such defaulters, and excluding them from membershipof enterprise boards and official positions in local bodies). The development ofa credit information system by Bangladesh Bank (BB), including a pass book systemfor agricultural loans, was initiated. Loan recovery targets were also set forboth agriculture and development financial institutions (DFIs) in the industrialsector in FY87. The Government further decided to restrict new lending for BSRS,one of the two major DFIs, and to strengthen and consolidate industrial termlenditLg in the other (BSB) which had a relatively better performance. Thesemeasures had positive results; and in FY87, the collection targets set foragricultural loans were surpassed, while industrial loan recovery efforts weresatisfactory. In the next two years, however, there was a slackening of theseefforts. The floods to some extent undermined these efforts, as repaymentrequirements were relaxed in agriculture in order to provide relief to affectedfarmers and to encourage crop production. However, there was also lesscommitment to pursue these recovery policies vigorously, particularly inindustry. As a result, there has been little progress in this regari over thepast two yeE - Loan recovery rates as a percentage of amounts due has againfallen from 5.az in FY87 to 19.6Z in FY89 in regard to agricultural loans; and inthe case of BSB remained at the low level of 15Z. A significant improvement in

17/ The reform program in the financial sector was formulated against thebackground of rapid growth of the financial system and an overly expansionarycredit policy pursued by the Government in the mid-eighties (following the1984 floods) without due regard to enforcement of loan recoveries.Consequently, by FY86 serious problems (such as poor loan quality of banks,low credit recovery, and erosion of the capital base of the nationalizedcommercial banks and development financial institutions) had emerged,endangering the long-term viability of these institutions and their capacityto sustain agricultural and industrial credit delivery. Handated lending forperceived priority areas, at subsidized rates, restrictions on the freedom ofbanks to lend and to adjust interest rates, and extensive credit subsidiescontributed to these problems.

the loan recovery rate is an essential requirement for establishing a viableinstitutional credit system for the agricultural sector (including smallfarmers); and this should receive the Government's urgent attention.

58. A comprehensive reform program for the financial sector, based on therecommendations of the National Banking commission and a World Bank study on thefinancial sector, has been under preparation over the past two years. However,the implementation of this program, (which is being supported by a FinancialSector Adjustment Credit from the Bank), has begun only recently followingconsiderable delay largely due to difficulties in establishing an appropriateinterest rate policy. The proposed reform seeks to enhance financial sectorefficiency through greater reliance on market competition, reduction -n directgovernment intervention, interest rate liberalization, strengthening of the NCBsand an improved legal framework for debt recovery.

59. A key objective of financial reform has been the elimination of existingcontrols on interest rates with a view to developing a lending and deposit ratestructure which fully reflects the costs and risks of lending for both lendersand borrowers, in order to improve resource allocation and private financialsavings mobilization. (Under the then prevailing system, deposit rates had beenchanged only once d-aring the past decade, while lending rates for most borrowerswere subsidized). The transition to greater market orientation was initiated inNovember 1989, by establishing a system of new interest rate determination, underwhich banks are free to adjust their lending and deposit rates within certainbands; while interest rate subsidies have been made transparent and reimbursable.Bangladesh Bank, with technical assistance from USAID, has developed amethodology to calculate shadow market rates for lending to major sectors, takinginto account the cost of funds, operating costs and risks. The new structure isa significant improvement over the previous fixed interest rate regime, thoughthe imposition of bands may limit the effect of changing market conditions oninterest rates 181 and credit decisions. To sustain the move towardsliberalization, GOB needs to ensure regular adjustments in the interest ratestructure over time.

60. The reform program also seeks to place greater reliance on more flexible,less discriminatory methods of monetary control. Credit ceilings, for example,have been abolished, and the existing refinancing programs have been replaced bya general rediscount facility at the bank rate for commercial banks. DMF-assisted training is under way to develop the institutional and skills base formonetary programming and analysis in Bangladesh Bank. Substantial work, however,remains to be done, for example, to improve the capacity of Bangladesh Bank toconduct open market operations effectively. Given structural limitations (such

18/ According to the new policy, floors for deposit rates will be set byBangladesh Bank every six months at 0.52 above the inflation rate for fixedterm deposits, and 12 below that level for savings deposits. (The currentbands for savings deposits will be 9.5-12.02 and for fixed deposits 10.5-14.252.) Banks, but not individual branch managers, are free to set theirrates within these bands. Bangladesh Bank has published twelve categories forlending rates based on shadow rate calculations.

as the shallow capital market) which hamper open market operations, timelyimplementation of measures already being considered is essential to strengthenBangladesh Bank's authority to conduct monetary policy (i) by enacting necessarylegal-reforms and enlistment of skilled personnel with analytical capabilities;(ii) issuance of debt instruments at market determined rates and (iii) developinga tendering mechanism for such instruments.

61. The Government's plans to strengthen the NCBs through financialrestructuring, improved debt recovery, and a larger technical assistance packagehave unfortunately been delayed. Steps have been taken to strengthen thecapability of Bangladesh Bank to supervise these institutions. A new system ofaccounting and provisioning for bad debts of NCBs was introduced in November1989. (Among other things, this requires suspending accrued interest on badloans, taking 1OZ provision on substandard loans, and 50Z and 1002 on doubtfulloans and losses, respectively). An important survey to reclassify NCBs loanportfolios - an essential basis for making adequate provisions andrecapitalization of these institutions - though considerably delayed, was begunin December 1989. Some other initiatives are also under way. For example, a newBanking Ordinance requiring NCBs to increase their minimum capital to 5? ofdeposits is under preparation. In addition, it is expected that banks will bereimbursed by the Government for costs of interest rate subsidies, estimated atTk 1.5 billion. Recapitalization of BSB has been implemented, but other proposedmeasures as well as efforts to improve loan recoveries need to be pursued withvigor. BSB has made little progress in implementing a number of reforms whichare essential if it is to be a viable institution.

62. Although much behind schedule, the reforms underway in the financial sectorcan make a significant contribution to improving viability of financialinstitutions, resource allocation and flow of credit for productive activities.However, it is important to recognize that the reform process which has beeninitiated is only the beginning toward an efficient market-determined financialsystem. In each of the areas mentioned in the reform program, continued strongcommitment is required to attain program objectives, particularly throughsustained credit recovery efforts and through a policy of permitting financialinstitutions to operate freely without interference in their lending decisionsand/or burdening them with the costs of carrying out other non-economicfunctions.

Fiscal Policies

63. The stabilization program carried out during the mid-eighties had reducedthe overall budget deficit from 11.2? of GDP in FY83 to 7.6? by FY86, largely bycompressing the development budget (ADP), which fell from 10.3? of GDP to 7.9Xover the same period. At the same time, current expenditures increased from 6.6?of GDP to 7.9Z, while revenues increased modestly from 8.8? of GDP to 9.22 duringthe same period. Accordingly, the structural adjustment program for the FY87-89period sought to significantly improve revenue mobilization, restrain the growthof current expenditures and substantially expand the development budget, whilefurther reducing the overall budget deficit to 7.OZ and related bank financing.Specific targets and measures envisaged in the program included, on the revenue

side, raising government revenues from 9? of GDP to 10.5? over the three yearperiod through improved revenue collections, structural reform of the tax systemand better public pricing and cost recovery policies. On the expenditure side,improving the quality and efficiency of public expenditures by carrying out acomprehensive review of the public expenditure program, providing adequateallocations for O&M in key sectors, (such as flood control, drainage andirrigation, highways and education), and improving project implementation andpublic administration were envisaged.

64. Little progress was made during the program period towards the attainmentof these objectives, in part due to major floods in FY88 and FY89 which createdconsiderable budgetary pressures, but also due to inappropriate fiscalmanagement. Thus, although the overall budget deficit was maintained withinacceptable bounds during the FY87-89 period, (the budget deficit in FY89 was7.4Z of GDP, following a brief rise to 8.42 in FY87), the revenue/GDP ratiostagnated at around 92; the internal composition of the expenditure programcontinued to evolve along the lines established earlier, with currentexpenditures rising steadily, and the development budget, after an initial risein FY87 was compressed further in the next two years (Table 1.9). These issuesare discussed in greater detail in Chapter II.

65. Resource Mobilization. Revenue performance during the program period wasdisappointing; the revenue/GDP ratio essentially stagnated around 9? and in FY89was still below the FY86 level. This disappointing revenue performance was dueto several factors. The floods in FY88 and FY89 depressed economic activity andimports and reduced tax collections. A more fundamental reason, however, is thein-built inelasticity of the tax system. This made it necessary to introduce newshort-term revenue measures amounting to Tk 5-6 billion per year just to maintainrelative yields at the prevailing level (paras. 141-145). Third, the Governmenthas taken its time to consider long-term tax reform which is necessary to improverevenue yield, as well as equity and allocative eff{ciency of the tax system.Although technical studies for this purpose were carried out by the IMF and theBank as envisaged under the program, and these studies were reviewed within theGovernment, no action was taken during the program period to prepare forstructural tax reform. The absence of exchange rate adjustments also contributedto low revenue growth, as the tax system is currently very dependent on importtaxation.19/ Finally, non-tax revenues - mainly profits and dividends frompublic enterprises and other financial institutions, as well as interest paymentson loans outstanding to these agencies- have fallen as a proportion of GDP,because of the deteriorating financial coidition of most public enterprises andfinancial institutions.

19/ Recent increases in the development surcharge on imports and theintroduction of export subsidies in the FY90 budget are another indicationthat the nominal exchange rate is becoming increasingly out of line, and thatdepreciation of the exchange rate should be considered both to improveincentives for exports and increase government revenues.

Tble 1.9: 8 iANMA8: C AM Di e(POdTI OF TM CE4TRAL 00VOMT, FY3I-FY90

(In b IIl lone of Take)

FY81 FY-5 FY84 FY865 F86 FYS7 FY68 FY89 FYo0

Fbrueary Revised

Budget Estimate d/ Budget Estimate e/ Target /f

Total revenue 21.88 25.40 28.60 35.93 42.28 48.00 83.28 88.42 59.02 60.82 66.20 68.20_____._______ ---- _ ----- ----- ----- -- - -- - - - - - - - - -- ----- -----

Tao 17.99 21.08 23.70 28.87 32.98 88.77 43.63 52.15 47.87 62.66 SS.90 57.40

Non-ten 8.99 4.32 4.90 7.06 9.80 9.23 9.68 11.27 11.15 18.16 10.70 10.60

Total expenditure 43.01 57.60 60.68 65.89 77.42 93.03 99.06 112.30 107.26 135.02 124.30 125.17_- - - - - - -___ __ __ __ __ ----- ----- ----- ----- ---- - -- - -- ___ -- -- ------ -- -- ......_ __

Current expenditure /a 13.00 19.20 23.08 26.61 34.97 41.69 49.19 83.30 57.65 65.64 70.30 66.30Food account deficsit 4.67 6.58 8.80 4.28 1.66 0.18 5.64 1.27 0.85 7.11 11.10 10.8S

of which: foodatock change (2.76) (-0.03) (0.27) (1.96) (0.27) (0.12) (6.00) (0.37) (-5.60) (1.49) (..) (4.35)Annual 1Ovelomant Program (ADP) 23.69 29.60 30.11 80.40 86.80 48.80 40.78 3.1S 42.46 58.03 38.60 43.62Other capital expanditure *nd

not lending /b 1.65 2.24 3.71 4.62 4.32 5.01 8.27 4.18 6.10 4.34 4.40 4.40

Ovarall budget deficit 21.165 2.40 32.03 29.96 35.19 45.08 45.80 48.68 48.24 S4.20 58.20 56.31___._________________ ----- --- __ _ _ __ - --- -- - -- - -- - ---- _ ---- --- - ----- ----- _ __

Excluding foodgrain stocking 23.90 82.43 31.78 28.00 34.92 44.91 39.80 48.51 81.82 52.71 ... 51.96

Net foreign financing /c 15.28 28.25 27.87 28.67 31.51 40.35 44.22 44.02 47.73 50.18 42.10 44.97_______________________ ----- ----- ___-__ __-- ----- -- ___ -_-__ ----- ---- ---- -----

Project aid 8.00 13.44 13.31 14.40 20.17 29.68 25.98 20.85 28.09 32.50 26.60 28.85CowAodity aid 6.64 9.00 9.63 9.62 11.64 11.18 15.12 14.24 16.08 1S.00 14.70 14.96Food aid 2.80 6.40 6.97 4.92 4.99 6.94 7.89 6.79 8.88 10.43 8.60 8.57Coemrcial food borroaing n.e. 1.28 -0.41 2.86 -2.27 -2.94 0.10 __ 1.15 -0.85 -0.90 -0.21Oabt amortization n.e. -1.82 -1.68 -2.63 -3.02 -4.40 -4.87 -6.66 -6.17 -6.90 -6.00 -6.90

Net domestic financing 5.90 4.18 4.18 1.60 8.68 4.68 1.58 4.86 0.51 4.02 16.10 12.00______________________ ----- ----- ----- ----- ----- ----- --- _-_ ----- ----- ----- ----- ____._

Banking syatem 5.00 0.65 4.27 1.90 0.95 3.37 -0.71 0.65 -4.47 0.18 12.70 8.45Other doseetic 0.90 3.50 -0.09 3.20 4.68 1.31 2.29 4.21 4.98 3.84 3.40 3.S5

(Annual percentage change)

Total revenue 25.7 9.5 12.6 25.6 17.7 13.5 11.0 19.1 10.8 36.9 12.2 15.6Total expenditure 11.8 25.3 4.9 8.6 17.6 20.7 6.7 13.2 8.3 25.9 15.9 17.3

Current axpenditure /a 20.2 29.7 20.0 18.5 29.* 16.8 15.4 8.4 17.6 13.3 21.5 14.5ADP 13.8 11.2 1.0 1.0 20.1 26.8 -12.0 30.4 4.1 39.3 -9.1 2.7

(In percent of GOP)

Total revenue 9.8 8.8 8.2 8.6 9.2 8.9 9.0 9.7 9.1 10.8 8.9 9.1Tax revenue 7.7 7.3 6.8 6.9 7.1 7.2 7.4 8.0 7.4 8.3 7.5 7.6Non-ten revenue 1.7 1.8 1.4 1.7 2.0 1.7 1.6 1.7 1.7 2.4 1.4 1.5

Total expenditure 18.4 19.9 17.3 15.8 16.8 17.3 16.8 17.3 16.5 18.0 16.5 16.6Current expenditure /a 8.6 6.6 6.6 7.4 7.9 7.7 8.8 8.2 8.9 8.7 9.3 8.8AOP 10.2 10.8 8.6 7.3 7.9 8.6 6.9 8.2 6.5 7.7 5.2 5.8

Overall budget deficit -9.1 -11.2 -9.2 -7.2 -7.6 -8.4 -7.8 -7.5 -7.4 -7.2 -7.8 -7.5Excluding food *toc ing -10.2 -11.2 -9.1 -6.7 -7.5 -8.4 -6.7 -7.5 -8.0 -7.0 ... -6.9

/a Execlude. food subeidiee, which era included under the food account deficit./b Comprise non-ADP project expenditure, the Food for Work program. miscellaneous inveeteent (non-development)

and net loans and adaences. A ajor part of groe- lending by the Government is included within the AOP./c Including foreign grants.

/d Provisional steff tiaste. t./. Likely budget outcoxe in the absence of discretionary government actions./f Revised budget targets for FYOO on the baeia of anticipated governaent actions discussed in purae 113 and 114 below.

Sources: 8angladesh authorities, and staff estimates.

66. In public pricing, significant progress has been made in some areas inrecent years, particularly in the energy sector. The average price of naturalgas was raised by about 182 a year, on average, between FY86 and FY90, and powertariffs by 6.8Z p.a. over the same period. As a result, gas prices for mostconsumers (other than fertilizer plants) are now approximately in line with lnng-run marginal costs; and in power, cover about 701 of the estimated economic costsof supply. There has also been some improvement in the Power Board's (BPDB)accounts receivable and system losses. However, progress in other areas has beenmuch less, although some adjustments in domestic air fares, railway tariffs, andtelephone and postal charges have been made recently. These changes, however,are inadequate to cover the revenue needs of the various agencies, particularlysince many prices have changed very little in recent years. In some criticalareas, particularly food ration prices and fertilizer, the Governmant has notadjusted prices to reflect increases in international prices for thesecommodities during the past two years; although a 1-1/22 increase in rationprices has been just announced, this is highly inadequate, so that the currentfood prices include a large implied subsidy element. There is a need, therefore,to review the structure of public prices on a number of products and introducechanges to reflect economic pricing considerations.

67. Public Expenditure Management. There was little progress in controllingthe growth of current expenditures, which increased from 7.72 of GDP in FY87 to8.92 in FY89. In part, this was due to the impact of the floods, whichnecessitated increased allocations for relief and targeted programs, which werefinanced largely through food aid. The most important factors contributing tothe growth of current expenditures, however, were large increases in pay andallowances for civil servants, particularly for lower-grade staff, averaging 18Zper annum between FY86 and FY89; higher allocations for defense and lawenforcement services (equivalent to about 402 of the increase in non-reliefrelated current expenditures); education, including grants for private secondaryschools and colleges (25? of the overall increase) and subsidies for BangladeshRailways. As a result, the ratio of cu,1 rent expenditures to revenues increasedfrom 832 in FY86 to 98Z in FY89. Thus, government savings performance actuallydeteriorated during this period.

68. Given the rapid growth in current expenditures and unsatisfactory revenueperformance, local resources available for the development program have becomeincreasingly constrained over time. This has been exacerbated by inappropriatefiscal management. Following the 1987 floods, the Government recognized the needto revise its Ziscal priorities, and an emergency program of revenue increasesand revision in expenditure allocations was introduced in November 1987. Giventhe depressed state of the economy and the urgent need for rehabilitation, it wasrecognized that a more accommodating fiscal stance (including additional bankborrowing) would be appropriate to help finance the development program. In theevent, however, net bank credit to the Government fell by approximately Tk 1.2billion in FY88, further reducing taka funds available for the ADP and hamperingproject implementation. In FY89, severe flooding created an even greater needfor prompt action to revise the Government's fiscal stance in order to facilitatethe rehabilitation effort and protect the ADP. However, no action was taken toincrease revenues, while expenditure allocations were not revised until late inthe fiscal year (March 1989). Moreover, even though additional bank borrowing of

Tk 2.0 billion was provided under the credit ceilings to augment local resourcesfor the ADP, Government operations with the banking system actually recorded asurplus of Tk 4.5 billion, i.e., credit use by the Government fell short of thetarget envisaged under the credit ceilings by Tk 6.5 billion. (In the currentyear, however, the Government has resorted to substantial bank borrowing: butthis is expected to finance current expenditures and food operations rather thanthe development budget--para. 109).

69. Consequently, the development program declined by about 12? in nominalterms in FY88 and showed little improvement in FY89 (implying a sharp cutback inreal terms) in both FY88 and FY89, contrary to the expectations of the adjustmentprogram. Tangible actions to review priorities in the expenditure program and toimprove its quality and efficiency of resource use have not been taken so far.The Government has continued to allocate a large share of the available localfunds to locally funded projects (accounting for approximately half of the totalellocation of local funds in the FY89 ADP), thereby spreading remaining fundsthinly over too many aided projects. This problem has been exacerbated by theinclusion of various "crash" projects in the ADP in recent years, such as theDhaka flood psotection scheme, which, independent of its technical and economicjustification, has diverted a disproportionate share of local resources away fromother projects. As a result, preject implementation and aid utilization havesuffered. A study on public administration has been recently completed afterconsiderable delay. But, it was not able to reach a consensus on many of themajor structural constraints affecting the quality of public administration; andno actions have been taken so far.

External Policies

70. On the external side, the primary objective of the adjustment program hasbeer; to strengthen the balance of payments position and limit the externaldeficit to about 7Z of GDP. A flexible exchange rate policy was expected to playa fundamental role in this regard by improving the international competitivenessof exports, promoting export diversification and encouraging efficient importsubstitution. In view of the urgent need for promoting non-traditional exports,special measures to improve the efficiency and competitiveness of such exportswere also envisaged. A secondary objective was the unification of the exchangerate to eliminate multiple currency practices and increase access of importersand exporters to foreign exchange. In this context, the scope of the secondaryforeign exchange market was to be progressively enlarged and the differentialbetween the official and secondary market rates was to be progressively reducedwith a view to its eventual elimination. Certain service transactions and someimports under commodity aid were to be transferred to the secondary market inFY89 with the balance of commodity aid to be shifted in FY90, both to achieve theabove objective and to improve aid utilization. Finally, appropriate debtmanagement policies were to be implemented to contain debt sr-rvice obligations,particularly by limiting non-concessional borrowing.

71. Significant progress was made in FY87 and FY88 in addressing thesegoals, with policy improvements in many of the areas outlined in theadjustment program. Non-traditional exports grew rapidly and the currentaccount deficit was reduced well below program targets. However, the pace ofpolicy reform slackened noticeably in FY89 and FY90, with the teal exchangerate appreciating significantly. Simultaneously, the growth of non-traditional exports decelerated and the current account deficit widened. InFY90, the balance of payments situation has deteriorated further; the growthof exports and private transfers from abread slowed down and has not beensufficient to finance additional imports which have continued to growsteadily. At the same time, aid disbursements have declined due to the slowpace of project implementation and delays in finalizing reform programs (towhich quick-disbursing assistance has been linked). Thus, the current accountdeficit is expected to remain around 6.7X of GDP, while foreign exchangereserves have declined rapidly to the equivalent of only 1.7 months' importsby February 1990, eroding the gains achieved over the past three years (Table1.10).

72. Following a significant appreciation of the exchange rate in the earlyeighties, corrective action in FY85 and FY86 through a 202 cumulativedepreciation of the official exchange rate had helped to depreciate the realeffective exchange rate by 12? in that period. In accordance with theobjectives of the adjustment program, this policy was continued in FY87 andFY88. In these two years, the official exchange rate was depreciated by afurther 4S in nominal terms; and although Bangladesh's domestic inflation ratecontinued to be higher than those of her trading partners, a weakening of theU.S. dollar (to which the Taka has been effectively linked), helped todepreciate the real effective exchange rate by 5? in FY88. During this periodthe Government had made small but frequent adjustments in the nominal officialexchange rate, so that progress was relatively quick and more or lessautomatic. However, in FY89, after some minor adjustments in the early parcof the year resulting in a further 2? depreciation of the nominal exchangerate by November 1988, this process of flexible management of the exchangerate was effectively suspended, with no change in the nominal exchange rateuntil early March 1990 (see para 113). This, combined with a pick up indomestic inflation and a recovery of the U.S. dollar led to a sharpappreciation of the real effective exchange rate by nearly 11? in FY89.Moreover, this trend has continued into FY90. As a result effective exchangerate has appreciated even above the levels prevailing in the early eighties(FY83) by about 8-10Z; erasing the gains from flexible exchange ratemanagement achieved over the past four fiscal years, and eroding thecompetitiveness of Bangladesh's exports.

Tabl- 1.10: BALANCE OF PAYMENTS, FY8I-FYO9

(US* mililon)

FY81 FY83 FY84 FY35 FY36 FY37 FY88 FY89 FY90/a…----------------- -…--- --- -- …----------------------

Merchandise Exports, f.o.b. 711 066 811 9J4 819 1,074 1,231 1,286 1,476Merchandise Iporta, c.I.f. -2,683 -2,246 -2,85 -2,647 -2,384 -2,420 -2,986 -3,387 3,662Trade Balance -1,622 -1,660 -1,542 -1,71J -1,564 -1,546 -1,755 -2,089 -2,177

Service., Net 15 -its -33 -73 -126 -161 -144 -149 -i95Receipts 274 280 279 236 260 262 310 891 407Payments -269 -U84 -J12 -864 -886 -418 -454 -640 -602

Private Transfers (net) 379 e65 627 477 86M 781 788 836 830

Current Account Balance -1,428 -1,020 -94S -1,314 -1,084 -966 -1,111 -1,402 -1,642

Aid Disbursements 1,147 1,345 1,263 1,267 1,306 1,695 1,640 1,669 1,641

Food Aid 194 256 277 244 203 225 300 227 281Commodity/Program Aid 398 452 489 482 893 408 509 538 480Project Aid 690 688 652 691 710 967 8a1 904 900

MALT Amortization -50 -74 -72 -110 -117 -164 -135 -169 -204Trust Fund, Net -- -1 -8 -18 -25 -30 -81 -23 -13Aircraft Loans, Net -- -- 65 18 -1 -7 -11 44 -20Food Credits, Net /b -- 47 -9 91 -69 -96 6 43 -6Borrowing (67) (51) (190) (13) (0) (39) (65) (20)Repaymant (-10) (-60) (-99) (-82) (-96) (-33) (-12) (-26)

Short-term and OtherBorrowings, Net 28 -36 -45 -35 1 -140 -193 -87 -68

IMF, Net Purchases 193 48 27 -6 -3 164 -18 68 -161

Other Including Error*A Omissions 86 -74 -126 -a8 91 -109 -8 -86 -40

Changes In Gross Reserves(- = increse) 24 -236 -182 144 -99 -267 -144 -57 403

Memorandum It e:

Cross Roservoe (end FY) 251 358 640 396 495 762 8SS 913 510(as months of Import.) 1.2 1.9 2.7 1.3 2.5 8.4 3.4 3.2 1.7

Current Account Deficitas % of GOP -10.0 -8.4 -4.7 -8.2 -7.0 -5.5 -6.9 -6.b -6.7

Terms of Trade Index (FY81=100) 100.0 96.6 112.1 140.4 107.4 114.0 123.2 109.2 119.9Terms of Trade Annual Change (5) -22.4 13.4 16.2 26.2 -23.6 6.2 8.1 -11.3 9.8Debt Service Ratio/e 19.7 16.8 16.3 24.5 29.2 27.8 22.6 23.1 25.7

/a Preliminary estimtes on the basis of governmet actions discussed In ares. 113 and 114 below./b Commercial borrowings on account of food Import, Incurred by 0DB./c Debt Service s a percentage of export of goode and servic" and private transfers.

Sources: Bangladesh Bank, Bangladesh Bur eu of Statistic, and staff estimates.

73. In parallel, progress was made in unifying the real exchange ratesystem. Towards this end, the official exchange rate, in nominal terms, wasdepreciated as noted, while U e secondary market rate was slightly appreciated(by 12) in FY87 and FY88. In effect, the premium in the secondary market overthe official exchange rate was reduced from about 92 in FY86 to 6.52 in FY87and 4.5Z in FY88 to 2.02 in November 1988. Simultaneously, the list ofimports and exports transacted through the seconlary market was expanded bytransferring all exports other than raw jute and wet blue leather and the bulkof non-aided imports into this market. Thus, the share of the secondarymarket in total imports increased progressively from 262 in FY86 to 34Z inFY87, and 42Z in FY89. However, since aid-financed imports account for about502 of total imports, the share of the secondary market in non-aided importshas increased from 462 in FY86 to about 702 in FY89.20L Some commodityprograms--notably IDA assistance under the Industrial Sector Credit in FY88and commodity aid from Britain in FY89--were also transferred to the secondarymarket. However, the transfer of other commodity aid programs to thesecondary market has been significantly delayed. Although detailed proposalsfor effecting such transfers have been made by IDA and under a study completednearly two years ago to improve commodity aid utilization, and these proposalshave been reviewed by Government committees quite some time ago, they have notbeen implemented so far. With the differential between the official exchangerate and the secondary market rate now down to only 2Z, the rationale for dualforeign exchange markets is now weak; and consideration should be given to thefull unification of these rates in the near future.

74. A number of measures designed to improve and expand the scope ofexisting programs to assist exporters were implemented in recent years asplanned. These included the removal of restrictions on exporters to importbanned or restricted items for use in export production; setting up a DutyExemption/Drawback Office (DEDO) to simplify the duty drawback system onimported inputs for exporters; and expandizg the Export Guarantee scheme, theExport Performance Benefit (XPB) Scheme,21L and access of exporters to export -financing at concessionary rates. Most of these measures were implemented inFY87 and FY88, with some fine-tuning last year.

20L The remaining imports are financed through foreign exchange provided byBangladesh Bank for public sector imports (e.g., foodgrain) and barter andspecial trade arrangements.

21/ Under the Export Performance Benefit (XPB) scheme, the list ofcommodities entitled to the exchange rate premium in the secondary market andthe rates of entitlement have been progressively raised, so that in FY88earnings from all eligible exports could be converted at or close to thesecondary market rate. There are now only three rates of entitlement -- 402.702 and 10OZ -- with a larger number of non-traditional exports receiving themaximum rate.

75. However, the usefulness of existing special measures (including recentimprovements) on promoting non-traditional exporters has been limited, exceptin the case of ready-made garments and finished leather products. Forexample, a recent study 22L by local consultants commissioned by the WorldBank suggests that stringent bureaucratic requirements preclude access of mostexporters in a timely manner to imported inputs which are on the restricted orbanned lists. Similarly, even though the XPB Scheme has been expanded andentitlement rates increased, the differential between the official exchangerate and the secondary market as noted earlier, has been sharply reduced,eroding the benefit of the XPB scheme to exporters;23 / (thus an exporterreceiving XPB at the 1002 rate now receives a maximum additional premium ofonly 1.92, whereas in FY86, at a 702 entitlement rate he would have receivedan additional 6.3Z). Nor do all exporters succeed in receiving full refundsof taxes and duties paid on imported inputs. The same study suggests thatwhile the benefits of special measures are positive for most exports, thegeneral level of effective assistance is quite modest -- only a few pointsabove zero. Moreover, with the sharp erosion of the value of XPB Scheme,effective rates of assistance for most exporters have probably fallen over thepast few years. In contrast, effective rates of assistance for importsubstituting activities is much higher (on average about one-third higher),due to relatively high levels of tariffs and import restrictions (despitesignificant progress in trade policy reform in recent years discussedearlier), resulting in a substantial bias against exports. Against thisbackground the recent significant appreciation of the exchange rate and itsimpact on the competitiveness of exports is a matter for concern.

76. Balance of payment trends over the program period reflect the impact ofthe changing pace of policy implementation, as well as other domestic andexternal developments. In FY87 and FY88, the external position strengthenedconsiderably, even though floods and domestic political disturbances hamperedeconomic activity in the latter year. Exports rose strongly by 502, innominal terms, cumulatively in the two years, aided by a 43Z increase in non-traditional exports 241, in real terms, in FY87 and by a further 311 in FY88(mainly in ready made garments and, to a lesser extent, shrimp and leatherexports - Table 1.11). Private transfers from abroad (primarily workers'remittances), also increased sharply by 252 in nominal terms, in FY87 and byanother 8S in FY88, to nearly $800 million, (equivalent to 262 of imports) inthe latter year. The continued depreciation of the exchange rate in these two

22L "Value of Bangladesh's Policies to Promote Exports", Dhaka, June 10,1989.

231 This should not imply that unification is not desirable; to thecontrary, what is now needed is full unification of thw two markets andexchange rate adjustments to provide generalized benefits to all exports.

24/ Consequently, the share of non-traditional exports in total exports rosefrom 372 in FY86 to 472 in FY87 and 542 in FY88.

years, (consolidating the gains made in the mid-eighties), no doubtcontributed to this rapid growth of non-traditional exports and remittances.

77. Imports rose by 112 ($256 million), in nominal terms, in FY87 and byanother 142 ($366 million) in FY88. These increases were mainly due to higherfood imports reflecting continuing stagnation of domestic grain productionnoted earlier. (Non-food imports increased by only 32 in real terms in FY87and stagnated in FY88 as the stabilization effort was sustained in FY87 and asincomes and activity levels remained depressed in FY88). However, the highercosts of imports in FY87 were fully matched by increased export earnings andremittances, (which together rose in nominal terms by $400 million, or 29Z inthat year); and in FY88, export earnings and remittances provided anadditional $214 million towards financing the increase in imports. (Thus,export earnings and remittances financed 692 of the import bill in FY87, and682 in FY88 -- a considerable improvement from 592 in FY86 and onLy 432 inFY81). This helped to reduce the current account deficit even more thanenvisaged under the adjustment program to 5.52 of GDP in FY87 and 5.92 in FY89(Table 1.10). Rising aid disbursements and balance of payments assistancefrom the IMF in support of the adjustment program fully financed these currentaccount deficits and helped to build up foreign exchange reserves to theequivalent of 3.4 months' imports in both years, exceeding program targets.

78. A number of factors have contributed to the weakening of the externalpayments position in FY89 and its further deterioration in the current year:the impact of the FYI9 floods; adverse movements in terms of trade; thedeterioration in the policy environment, including the appreciation of theexchange rate; and most recently an over-expansionary fiscal policy which hascoincided with a recovery in the real economy this year. While it isdifficult to establish precise causal relationships, all these factors haveclearly played some part. The next section evaluates the impact of thesefactors on the balance of payments.

79. Exports grew by only 42 (or $55 million) in nominal terms in FY89. Thisreflected both a slowdown in volume growth (non-traditional exports rose byonly 122 and traditional exports by 12, in real terms), and a decline in theaverage unit value by 22. Most Bangladeshi export items - both traditionaland non-traditional - experienced competitive pressures and a softening ofexternal prices. In the event, the entire increase (of $55 million) in exportearnings stemmed from ready-made garments (additional $37 million) and ureafertilizer (additional $29 million).

Table 1.11: PATTERN OF EXPORTS, FY81-FY9O__________

-------------------------------------------------------- __-------------___---__--_----_-_------------___-------_---_-____

Share of Exports

FY81 FY83 FY84 FY86 FY88 FY87 FY88 FY89 FY90/a FY81 FY89

In Current Prices - Value (US$ million)

Traditional Exports 583 633 828 672 611 671 s58 564 856 82.0 43.1

Raw Jute 119 110 117 161 124 104 81 97 124 18.7 7.6Jute Goods 386 318 367 390 293 302 301 280 326 51.5 21.8Tea 41 47 69 81 33 30 39 40 43 6.8 3.1Leather 57 58 85 70 61 135 147 137 183 8.0 10.8

Non-Troditional Exports 128 153 183 282 808 503 63 732 819 18.0 66.9

Fish and Shrimp 40 72 77 87 113 136 140 141 152 5.6 11.0Ready-Made Garments 3 11 32 118 131 299 484 471 660 0.4 88.6Other 86 70 74 59 60 s8 91 120 117 12.0 9.3

Total Exports 711 888 811 934 819 1074 1231 1286 1476 100.0 100.0

FY81-89 AverageIn Constant Prices - Annual Growth (X) --------------

Total Exports 11.4 4.8 4.7 -3.4 11.0 22.4 7.3 6.6 1.8 7.7Traditional Exports 4.5 1.8 -1.6 -17.6 11.6 11.2 -9.3 1.0 7.7 0.7Non-Traditional Exports 59.1 20.0 80.7 39.9 10.6 43.2 30.7 12.0 -3.7 27.3

Memo Item:

Export Price Index (FY81=100) 100.0 88.8 101.8 119.3 94.1 100.8 107.6 105.6 119.1

to Staff estimte.

.ource: Planning Comission, Bangladesh Bank and staff estimates.

80. The floods did have some adverse effects on exports, although the impactwas not as bad as originally feared. Initially, Government estimated flood-related losses of potential export earnings at about $160 million, relative toan export target of $1405 million for FY89. However, the volume and priceexpectations envisaged in these export targets for some important products(such as jute and jute goods, ready-made garments) were optimistic; and tothat extent, actual shortfalls were not all due to the floods. In some cases,for example (leather), export volume targets were in fact achieved, and insome others (such as raw jute and jute goods) export volume growthsubstantially exceeded FY88 levels; nevertheless, earnings declined because offalling export prices. In these cases it is difficult to argue that floods,rather than weak external demand and prices, constrained export earnings. Inthe case of ready-made garments, some disruption in production and exportshipments and some cancellations of export orders did take place; but by thethird quarter of the fiscal year these exports were generally well ahead oftheir previous year's pace and revised expectations. Nevertheless, stiffcompetition in overseas markets and quota restrictions which limited access ofpopular export items to major markets (such as USA) also contributed to aslowdown in the growth of earnings from ready made garments to only 92 innominal terms. Floods, as well as a subsequent drought in early spring hadsome adverse effects on minor agricultural exports, such as fruits andvegetables; but, these are a very small proportion of Bangladesh's exports.

81. A number of exports where Bangladesh is a price-taker were, however,constrained by weak external demand and prices and lack of competitiveness atthese prices. In frozen shrimp, for example, export prices declinedsubstantially in the second half of the year; and exports to Japan - theprincipal market - were curtailed; and domestic stocks increased. In tea,although export prices improved somewhat, weak demand in the principal marketfor Bangladeshi tea - Pakistan - led to a decline in export volume. Exportvolume also declined by about 52 in jute goods, where Bangladesh is the majorsupplier in international markets; this may have been in part due topostponement of shipments in the last quarter of the fiscal year in order toqualify for export subsidies which became effective in FY90, and also due toweak external demand for jute goods. Although the floods affected raw juteproduction, this did not hamper exports in FY89, since domestic stocks werestill high; the main constraints on jute exports continue to be weak externaldemand, coupled with over capacity and lack of competitiveness of the domesticprocessing industry (para. 48).

82. Bangladesh has not been able to develop new exports other than ready-made garments and shrimp on a consistent basis. Although some industrial andagricultural products (such as naphtha, paper, newsprint and vegetables) havebeen exported from time to time, these depend primarily on the fortuitousavailability of domestic surpluses; and have fluctuated erratically, as theydid in FY89. For example, urea fertilizer exports increased substantially to$53 million in FY89 (from $25 million in PY88) as temporary domestic surplusesemerged with recent expansion of domestic production capacity. However, witha significant pick-up in domestic fertilizer use so far in FY90, these exportshave been suspended.

83. External factors - softening prices and demand - appear to have affectedexport performance significantly more than the floods did in FY89. This trendis expected to continue in FY90, although export prices for some products(such as jute) have improved somewhat (para 110). The general slowdown ofexport growth in the last two years can be clearly seen from Chart 5, whichplots the growth of major exports on a logarithmic scale. In this context,the increasing lack of competitiveness of Bangladeshi exports (in the absenceof any exchange rate adjustments over the past 16 months and rising domesticcosts and inflation) have clearly contributed to the deterioration in exportperformance in FY89 and FY90. This in turn has led to the announcement oflarge-scale cash subsidies for jute goods at the beginning of FY90 and for awide range of export products, including leather, shrimp and ready-madegarments more recently, reflecting the increasing uncompetitiveness of theexport sector.

84. Imports increased relatively rapidly in FY89 by 13Z, or $389 million, innominal terms. This increase was entirely due to non-food imports which roseby $510 million or 22Z in nominal terms, following a long period ofstagnation. The unusually large growth in non-food imports was fuelled bycapital goods (additional $234 million), intermediate goods (additional $92million, mainly TSP and ammonia fertilizer for crop recovery programs) andresidual imports which rose by $184 million. In the case of capital goods,however, the bulk of the increase represented some unusual and possibly non-recurring elements - the purchase of an aircraft by the national airlines ($66million) and unexpectedly large equipment imports under project aid for a newfertilizer factory somewhat ahead of schedule ($77 million). Private sectorimports of capital goods also increased modestly due to increased demand forminor irrigation equipment, imports of which were recently liberalized topromote agricultural production. There was also strong demand for 'other'imports which totalled about $1.1 billion or 33Z of total imports in FY89, forstock building in the expectation of a recovery in the economy fuelled by agood boro crop, to meet reconstruction needs, and a general increase in demandreflecting liberalization of import policies earlier. According to roughestimates provided by Bangladesh Bank, some items within this categoryrecorded significant increases : milk food and daixf products (by $44million), fruit and vegetables and food preparation (by $11 million), sugar(by $10 million) reflecting shortfalls in domestic production, andintermediate goods such as iron and steel (by $78 million), metal and metalscrap (by $24 million) and textile fibers (by $13 million).

85. Bangladesh's terms of trade 251 deteriorated by about 11Z in FY89(Table 1.13). While this was an important factor, it was not a root cause of

25/ Terms of trade had improved steadily since FY81, with export pricesmostly above, and import prices consistently below FY81 prices, except in FY86when jute prices fell steeply following an equally sharp rise in the precedingyear. Accordingly. some setback to these positive trends had to berealistically expected in the normal course of events.

CHART 5

Export Performance

US$ Million

81 82 83 84 85 86 87 88 89 90Fiscal Year

Jute 4Fish & Shrlmp__-- Garments -- Others

Table 1.12: TRENDS IN IMPORTS, FYS1-FY90

…-------------_.------------------------------------------ __----------------- __---------------------------_________-…-

% of Imports

FY81 FY83 FY84 FY8S FY86 FY87 FY88 FY89 FY9O/ FY81 FY89______________________________________________________________________________________________________________________________

In Current Prices - USS million

Food 342 489 486 601 566 388 685 544 586 13.6 16.2

Foodgrains 250 386 898 498 220 278 489 874 405 9.9 11.1Edible Oil 92 83 87 108 135 115 176 170 181 3.6 6.0

Major Intermediate Goods 781 656 641 682 e09 416 522 614 711 30.8 18.2

Petroleum 603 456 56 3569 342 230 270 281 3a3 19.9 8.3Fertilizer 104 66 76 137 108 26 46 108 125 4.1 3.2Raw Cotton, Yarn 141 90 173 140 102 97 139 142 163 6.6 4.2Cemnt 33 44 37 28 67 64 67 83 90 1.3 2.6

Capital Goode 689 e65 599 616 691 1003 856 1090 1070 27.2 32.3

Other /b 721 486 628 788 709 818 943 1127 1285 28.5 B3.4

Total Imports 2633 2246 2263 2647 2364 2620 2986 3376 3652 100.0 100.0

(Non-Food Imports) 2191 1779 l868 2046 1756 2282 2321 2831 3046 86.6 88.9

In Constant Price - Indices (FY81=100) Growth Rate FYS8-89

Food 100.0 169.6 162.4 244.9 130.3 186.7 330.5 218.7 228.0 10.6Intermedate Goods 100.0 91.6 97.3 106.1 116.3 98.0 104.7 131.0 142.0 3.7

(Petroloum) 100.0 88.8 80.6 86.1 101.6 986.7 99.6 113.4 124.8 2.3Capital Goods 100.0 97.4 91.0 93.9 98.4 123.6 97.3 120.6 116.2 2.9Other 100.0 66.5 91.5 112.3 94.6 99.5 110.8 124.6 136.8 3.2Total Imports 100.0 98.6 102.7 123.0 106.6 117.2 136.0 188.0 145.2 4.3(Excluding Food) 100.0 86.1 98.4 103.9 102.9 106.6 104.4 126.6 133.1 3.3

Umo Item:

Import Price Index 100.0 91.8 90.4 86.0 87.6 88.2 87.3 96.6 99.8

…-…-- - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - --------- …- -…-- - - - - -

Estimate.ZE Consumer and other Intermeadate goods not separately shown.

Source: Planning Commission, Bangladesh Bank and staff estimate.

the weakening of the external situation. The terms of trade decline whichoccurred last year was mainly due to a rise in import prices by over 1O, (asexport prices fell slightly by 2X). This in turn reflected a sharp increasein food import prices by about 24Z, while the prices of non-food imports(which accounted for roughly 84Z of total imports in value terms) rose by only12 -- i.e., somewhat slower than the rate of increase in the Bank's importunit value (MUV) index for developing countries which rose by 2.8Z over thefiscal year. Had the prices of these food imports (valued at $544 million)risen at the same rate as non-food imports prices, the import bill would haivebeen lower by about $100 million. However, about 462 of the food imports lastyear generated its own financing through food and commodity aid onconcessional terms. Therefore, only the balance of approximately $290 millionimported from Bangladesh's own resources entailed an additional financingburden due to higher food import prices. Thus, the true impact of higher foodprices on the balance of payments was only about $54 million. 26/

Table 1.18: CHANCES IN TERMS OF TRADE, FY81-90(Indices, FY81=100)

FY82 FY83 FY84 FY8S FY86 FY87 FY88 FY89 FY90 a/

Export Price, 84.8 88.8 101.8 119.8 94.1 100.6 107.6 106.6 119.1

Import Prices 99.7 91.8 90.4 86.0 87.5 88.2 87.8 98.6 99.3

Food 93.6 80.7 87.2 71.7 79.7 60.9 68.9 73.8 76.9Non-Food 100.8 95.8 91.8 89.9 89.1 96.7 101.6 102.9 106.2

Terms of Trade 86.1 96.6 112.1 140.4 107.4 114.1 128.2 109.2 119.9Change -1T6 18. 10.7 26. -28.6 TI -T 8.0-. I 9.8

*/ EstImate.

Source : Bangladesh Bank and staff estimates.

86. The acceleration of imports, together with the sluggish growth ofexports and remittances (which provided only an additional $103 million,compared to a $389 million increase in imports) caused a widening of thecurrent account deficit by $291 million to $1.4 billion or 6.32 of GDP inFY89. However, gross aid disbursements (including additional food andcommodity aid for flood relief and an unexpectedly early disbursement of $77million in project aid for a FY90 fertilizer project), increased by only 1.72to $1,669 million in FY89. But, additional resources from the IMF to supportthe adjustment program ($68 million net) and commercial borrowing for food($43 million net) and aircraft k$44 million net) were sufficient to financethe current account deficit and debt repayment obligations, and build upreserves by a modest $57 million to $913 million - the equivalent of 3.2months' imports - by end of FY89, somewhat less than envisaged under theadjustment program. Bangladesh's debt service, as a ratio of exports of goodsand remittances, increased slightly from 22.6Z in FY88 to 23.12 in FY89. Inview of projected increases in repayments to the DMF, commercial food and

26L If all import prices rose at the same rate as non-food import prices,a &- of of . ,

aircraft loan repayments, and the stagnation of exports and remittances, thedebt service ratio is expected to rise further to about 26Z in FY90. However,the debt service ratio is expected to decline significantly over the mediumterm (para 177); nevertheless, the present relatively high level of the debtservice ratio underscores the need to pursue prudent debt management policiesby avoiding excessive commercial borrowing, as well as for taking imaginativesteps to revive export growth.

Poverty Alleviation

87. One of the principal development objectives of the Government, asoutlined in its Plan documents and PFPs, is the alleviacion of poverty throughthe expansion of employment opportunities, improvement and expansion oftargeted relief (or income transfer) programs and accelerated efforts in humanresource development. Towards this end, the Government undertook to implementprograms which aimed at (i) expanding employment opportunities through specialprograms such as Food-for-Work (FFW), crop diversification, and the promotionof small and cottage 'ndustries and the non-traditional export sector; (ii)targeting income transfer programs to the lowest income groups, while reducinggeneral foodgrain subsidies, thereby safeguarding the rural poor andvulnerable groups; and (iii) increasing funding for programs in basiceducation, health, nutrition, and family planning in an effort to reach thevery poor who still do not have access to these services. It also undertookto improve the institutional framework for poverty alleviation by facilitatingthe role of NGOs and reforming the cooperative system.

88. Employment and Income Generation. Available evidence suggests that theobjective of expanding employment sufficiently to absorb increases in theworkforce has not been achieved; and that the incidence of poverty may haveincreased, reversing an improving trend in the poverty situation observed inthe early to mid-eighties.-71 In recent years (FY87-89), the slowdown in

27/ A GDP growth rate of 42 p.a. during FY81-86 probably had a positiveimpact on the poor through improved employment generation and higher ruralincomes. The Planning Commission estimated that during FY81-85, 3.2 millionperson-years of employment were created, averaging about 800,000 persons perannum. Several factors helped in this development: (a) in agriculture, dueto higher cropping intensity, adoption of more labor intensive rice and wheatvarieties, and increased crop acreage and output; (b) outside agriculture, dueto the growth in cottage and service activities, fueled by increases inagricultural incomes and especially workers' remittances; and (c) fromexpanding infrastructure projects, for example, those funded under the ruralworks programs. Rising real incomes since FY81 probably reduced the incidenceof poverty, although the absolute numbers below thenpoverty line (defined as2122 calories a day per person) remained overwhelming. Recent estimates basedon the FY86 household expenditure survey (HES) indicate that 44.2 millionrural and 7 million urban people, representing 51X of the rural and 56Z of theurban population respectively, are below the poverty line. (See Report of theBangladesh Household Expenditure Survey, 1985186, Bangladesh Bureau ofStatistics, Dhaka; October 1988.) A more detailed analysis of povertydevelopments in this period is given in World Bank Report No.7105-BD,at . -- in '- ' in

economic growth and the decline in investment appear to have affectedemployment generation. The Planning Commission estimated that during FY85-88.employment generation amounted to 2.2 million person years, or slightly below750,000 per year. The impact of sluggish economic growth on employmentgeneration in recent years is also evident from trends in real wagedevelopments for unskilled labor. These show that real wages in agriculture,which constitute a significant portion of the income of the poor, peaked inFY86 and have been declining since. Furthermore, since the bulk of the poorare also employed as unskilled labor in sectors such as jute and small scalerural industries, where real wages declined in recent years, the data suggestthat, on average, incomes and purchasing power of the poor have fallen sinceFY86. This conclusion is supported by an analysis conducted by the World FoodProgram (WFP). According to this analysis, between FY82-86, there was a 562increase in the quantity of wheat purchasable with prevailing daily wage ratesfor rural unskilled labor; this trend, however, has been reversed in the lastfew years, since real wages in terms of wheat, after peaking in FY86, declinedby about 4Z p.a. during FY87-88. A similar conclusion is derived with regardto rice.281

89. Less favorable employment and wage developments in recent years have putincreasing pressure on special programs 297 to provide support for the poor.Accordingly, these programs were substantially expanded, especially during theflood years, both FY88 and FY89. It is estimated that employment generated byFFW increased from 53 million person-days in FY81 to 105 million person daysin FY88 and 115 million person days in FY89; and now account for about 10? ofthe potentially rural wnemployed. These special programs have served a usefulpurpose; but their effectiveness has been limited because of their primarilyrelief orientation, and by policy and institutional constraints, includingweak managerial and implementation capacity and poorly trained and motivatedmanpower. These concerns are shared by both Government and donors; and haveled to the establishment, over the past three fiscal years, of two taskforces, one on BRDB and the other on food-assisted development programs suchas FFW. These task forces have completed their reports; but, the findings ofthese studies are yet to be translated into a coherent set of policies andprograms.

90. The combined effects of declining growth in the dominant agriculturesector, the weakening of real wages and stagnating employment point to apossible increase in poverty in recent years. It is likely that given thisworsening of the overall poverty situation, the conditions of poorer women andchildren deteriorated even more. (A detailed discussion of the role of women

28/ WFP, 'Analysis of Rural Wage Rate Movements Over Time in Bangladesh."Dhaka; February 1988 (mimeo)

291 Since the early eighties, special targeted programs have been implementedby a number of agencies including the Bangladesh Rural Development Board(BRDB), the Bangladesh Small and Cottage Industries Corporation (BSCIC), RuralWorks Program (funded by the Upazila Development Fund) and the FFW. In someirstances, good progress has been made. For example, FFW remains the mainoutlet for rural employment in the off-season.

in development is provided in Chapter IV). These adverse trends have beenprobably compounded by the unfavorable effects of recent floods. Although thegovermment's response to the relief efforts has been remarkable (see below),recent efforts seem more directed at short-term relief rather than addressingthe long-term poverty problem through expansion of productive employmentgeneration and supporting investment and facilities. An employment monitoringcell was established in the Planning Commission in FY88, but its role inevaluating the performance of ongoing programs and in the dissemination of newemployment initiatives has been insignificant. Lack of progress in thiscritical area provides a basis for questioning the general direction andmanagement of government programs to increase employment.

91. Relief (income transfer) programs. Recognizing the limitation ofdepending solely on growth of per capita income as an instrument for povertyalleviation, the Government has provided relief to the vulnerable throughprograms such as the VGD, Test Relief and subsidized foodgrain by the publicfoodgrain distribution system (PFDS). During FY87-89, steps were taken toconsolidate efforts begun in the mid-eighties to rationalize PFDS so as totarget a larger part of food aid toward the rural poor and vulnerable groups.Thus, foodgrain distribution through non-monetized channels increased from 28Zof total PFDS distribution in FY81 to 44Z in FY86 and to 482 in FY89. Inaddition to the above policy which reduced PFDS' original bias in favor of therelatively well-off-urban populationl2.1 a number of other improvements havebeen made over the years. Currently, the government is reviewingrecommendations aimed at enhancing the development impact of programssupported by PFDS.

92. These changes have helped to enhance the impact of PFDS on the poor byexpanding coverage and improving the efficiency of delivery. The swift andefficient response of the the Government's relief efforts following the floodsof 1987 and 1988 (which are estimated to have displaced 3C million and 45million people, respectively) reflects the effectiveness of the reforms inthis area. Nevertheless, further improvements are required to strengthen theeffectiveness of PFDS in reaching the poor and in attaining its developmentalobjectives. Policy recommendations for streamlining the effectiveness of PFDSare provided in the report of the special task force on strengtheninginstitutions for food-assisted development (SIFAD). These need to be actedupon by the Government. Also, as noted elsewhere, the financial costs ofrunning these programs, in terms of food subsidies, after declining throughFY88, have increased sharply in FY89 and FY90. The Government therefore needs

30/ First, the ration quota for key monetized channels has been progressivelyreduced from 3 seers (about 3 kg) per week per adult in FY81 to 1.5 seers byFY87; second, the composition of the ration has changed substantially to takeadvantage of lower import prices for wheat vis-a-vis rice; third, the isstueprice has frequently been adjusted in line with changes in procurement prices(however, in view of the rapid growth of domestic rice production and domesticprocurement of rice by the PFDS, the balance between rice and wheat in PFDS'distribution programs now need to be reconsidered); and fourth, the Governmentintroduced a modified ration scheme to provide subsidized food for the ruralpoor in April 1989.

to focus on utilizing its limited resources in a cost-effective manner tomaximize their employment and income generation impact rather than for reliefpurposes.

93. Human Resource Development. Because human resource development inBangladesh is very low, the Government has emphasized the expansion of suchprograms and the improved distribution of their benefits on both equity andeconomic grounds.!U Available indicators however, show that progress inhuman resource development has been slow, although substantial efforts havebeen directed at infrastructure development. Up until recently, publicprograms have primarily provided physical infrastr.ucture (e.g., schoolbuildings and basic health facilities). However, the commitment of publicresources to operate the programs effectively has been insuff±L4ent. Thelevel of public expenditures (especially current) on human resourcedevelopment has been very low. Expenditures on education, health and familyplanning, as a proportion of GDP, declined from ar. annual average of 2.4Zduring FY76-80 to 2.1Z during FY81-86. Although this ratio improved slightlyto 2.42 during FY87-88, there has not been any significant change in thisarea. In education, for example, while real expenditures increased by anaverage of 14.4? per annum during FY83-86, the growth rate dropped to about 7Zduring the last three years. Expenditures on health and family planning as apercentage of total government expenditures also declined from an average of4.6? during FY82-86 to 4? in recent years. The available data also suggestthat the extremely poor have benefited less than the average from existinghuman resource development programs (para 208).

94. The Government is cognizant of the need to channel increasing resourcesfor human resource development. In education, it has stressed the importanceof increasing enrollments and improving quality, especially at the primarylevel. But, although the share of current expenditures on primary educationaveraged 432 of the total education budget during FY87-89, the Government'slong-term priority to improve quality of and increase access to primaryeducation is being undermined by pressures to increase funding for thesecondary and college levels. The share of current expenditures spent onsecondary schools and college education increased from 29Z in FY82 to 41? inFY88 (while that for primary education declined from a high of 492 in FY86 to40? in FY88), partly as a result of increased government support for wages ofteachers in private secondary schools and colleges. The need to put a cap on

31/ The quality of education is poor and school enrollments are low. Theadult literacy rate was only 29? in 1981, and has not improved much since.There is severe malnutrition; and health care and sanitation services,particularly potable water, are limited. As a result life expectancy at birthis only 55 years, and child mortality rates (22 per thousand, or over twicethe average in low income countries) and maternal mortality rate (6 perthousand live births compared to 4.5 for developing countries) are among thehighest in the world. Although the acceptance of family planning services hasincreased from 10? in FY75 to close to 30? in FY88, the population growth rateis still high, estimated at 2.6? per year in FY89, compared to 2.7? per yearin the early seventies.

subventions to private secondary schools has not yet been recognized. Inhealth, although efforts have been made recently to redirect its focus fromthe mainly curative services towards preventive and maternal-child health(HCH) care, failure to allocate adequate budgetary resources to facilitate theavailability of drugs and other supplies hinders the effective utilization ofexisting physical facilities. Similarly, in family planning, recent effortswhich are directed at improving demand through better education suffer fromthe failure to effectively integrate family planning with health services.

95. Role of NGOs. NGOs supplement the Government's efforts at povertyalleviation as a number of them provide a valuable role in reaching targetgroups by providing income generating opportunities and services such ascredit, training, health care and nutrition education. Some of them(especially the Grameen Bank) have successfully reached women who compriseover 502 of the membership in fairly effective programs of group formation,train..ng and the provision of credit. In a few instances (e.g., BRAC andCARE), NGOs have also provided direct services to the Government on acontractual basis, for example, to undertake immu-nizPtion programs, or totrain women in immunizing poultry. Another important contribution of NGOs hasbeen their success zn implementing social service programs on a wide scale(e.g., NGOs provide sbout 40Z of modern contraceptives and the majority of MCHcare in urban areas) and the implementation, though on a relatively smallscale, of several relevant literacy and training programs for adults and non-formal primary schooling, which have very low drop-out and high enrollmentrates of girls.

96. Concerned about the lack of progress in maximizing the full potential ofNGO participation in poverty alleviation, the working level meeting of the AidGroup held in Bonn in 1987 encouraged the Government "to develop a policyframework to facilitate and stimulate the participation of the private sector,both non-profit and profit-making organizations, as development agents inpursuing poverty alleviation and employment generation .... U.321 But despitethe Government's commitment to supplement its poverL7 alleviation efforts byencouraging NGO participation, its overall policy environment and regulationsstill do not sufficiently facilitate NGO activities. Altviough the Governmenthas undertaken to reform its policies towards NGOs, e4peciall; by furthersimplifying the institutional arrangements for the approval of NGO projects soas to speed up their implementation, little actual progress has been made inrecent years. NGOs continue to face substantial delays in project approval;and new guidelines published in FY88 have, in certain cases, exacerbated thedelays. Beside improving the policy environment for facilitating NGOparticipation, the Government should also explore the scope for channelingresources to the poor through increased use of NGOs, thereby reducing thedemands on its limited technical personnel. (In this context, theestablishment of a "fous.dation" to provide funding for NGO credit activitiesis in the right direction). It could also expand cooperation between itsinstitutions and NGOs, for exrAmple, in the provision family planning services.In addition, the Government should consider making available managementtraining facilities to some NGOs in order to enhance their capabilities.

321 Closing statement of the Chairman, Nov. 18, 1986.

B. SHORT-TERM ECONOMIC PROSPECTS

97. In the current year - FY90 - two major developments are taking place:on the positive side, a long-awaited rebound in agriculture, which will helpincrease the overall economic growth rate to around 5.52; and on the negativeside, a continuing deterioration in the macroeconomic situation noted earlier.However, both these trends cannot coexist, since continued deterioration inthe macroeconomic situation, unless quickly reversed, will inevitablyundermine the incipient economic recovery. If this happens, Bangladesh wouldagain miss an opportunity to accelerate economic growth and development on asustained basis. In the light of these concerns, the next section discusseseconomic prospects for FY90, while the necessary elements of a strategy toaddress the present crisis and to restore the momentum of development arediscussed in Chapter III.

Prospects for Economic Growth

98. After several years of stagnation, agricultural production is expectedto increase sharply in FY90. The main rice crop - aman - is expected to reach9.5 million tons, about 382 higher than last year's harvest, and 11 higherthan the previous peak attained in FY86. Favorable weather (absence of majorfloods) as well as substantially increased fertilizer use (by 18z) andsupplementary irrigation (facilitated by recent improvements in minorirrigation policies), have contributed to this increase in the aman crop. Theprospects for the winter crops - boro and wheat - are also promising from atechnical viewpoint, given the improved availability of minor irrigationequipment, fertilizer and other inputs. Present indications are that boroarea will be about the same as last year; but with some improvement in yields,total boro production is expected to reach 6.0-6.3 million tons, and wheatabout 1.2 million tons. Thus total foodgrain production could rise to 19.2 to19.5 million tons - about 15? above last year's level.

99. However, it is unlikely that farmers' iacomes will increasecommensurately with foodgrain production. Effective market demand may notincrease fast enough over a short period to absorb such a large increase inmarketed foodgrain supplies; also, the already high level of PFDS' food stockswill constrain the scope for domestic procurement to the extent needed, in theface bumper crops. Despite a significantly expanded procurement effort duringthe recently concluded aman season, average market prices in the past sixmonths have been below last year's levels; and given the bright prospects forwinter crops, this trend is likely to continue during the remaining months ofthe fiscal year. As a result, despite the rapid growth in production,farmers' incomes and value added in the agriculture sector as a whole may riseby only about 7?, underlining the importance of supporting domestic grainprices.

100. An increase in rural incomes of this order will still have a positiveimpact on the demand for domestic manufacturing goods. Most manufacturingsubgroups are likely to benefit from this development, especially those which

provide inputs for agriculture (such as chemicals and agricultural equipment)and to a lesser extent, consumer goods. However, a number of other domesticindustries (such as jute, sugar, shrimp, cigarettes and basic metals), arelikely to experience sluggish growth due to supply constraints and weakexternal and domestic demand. Thus, value added in the manufacturing sect^'rmay increase by only about 4Z in FY90. With continuing expansion of theutilities and construction sectors, overall GDP growth is likely to reach 5.52this year - a significant improvement over the rate of 2Z p.a. achieved overthe past two years. The large increase in foodgrain production and decline infood prices will also help increase per capita consumption. However, thesustainability of this recovery over the next year will depend on the adoptionby the Government of necessary measures to stablize the macroeconomicsituztion and maintain incentives for agricultural development througheffective domestic procurement policies (see below).

Food Management

101. The Government's plans as outlined in t;be FY90 Budget were to import1.92 million tons of foodgrain (including 1.6 m llion tons through food aidand 320,000 tons commercially) and to procure ,010,000 tons domestically toprovide for an anticipated PFDS distribution of 2.3 million tons.331 However,before the beginning of FY90, in late June 1989, the Food Ministry contractedfor large commercial purchases of 259,000 tons of rice (mainly from Thailand)and 267,000 tons of wheat for delivery in early FY90, even thoughl a recordboro crop (23Z larger than the previous boro crop of 4.7 million tons in FY88)was being harvested. However, given good weather and record domestic crops,these imports created a major problem. While domestic offtake slowed down,these imports led to a large build-up of foodstocks to over 1.4 million tonsby end-November preempting storage capacity and budgetary resources, preciselyat the time a major domestic procurement drive was needed to support a recordaman crop.34

102. The Government responded to this difficult situation by (i) cancelingthe remaining commercial imports planned for FY90 (about 200,000 tons);(ii) increasing the target for domestic procurement to about 900,000 tons,including doubling of the target for aman to 500,000 tons, and (iii) arrangingadditional storage by utilizing 40,000 tons of BADC's fertilizer capacity andconstruction of temporary facilities of about 15,000-18,000 tons. TheGovernment has also asked the major food donors to permit food aid to be usedfor procuring grain domestically within Bangladesh this year rather than for

33/ The PFDS distribution target represented a substantial reduction from the2.94 million tons distributed last year, mainly because the allocations forrelief, VGD and FFW were expected to decline sharply from 1.42 million tons inFY89 to 796,000 tons in FY90 in the expectation that a major flood would notoccur. However, market sales were still estimated at 1.5 million tons,virtually the same level as in FY89 (1.52 million tons).

34/ Gross storage capacity in the country (excluding private storage forwhich no estimates are available) is about 1.8 million tons; but effectivestorage capacity is about 1.4 million tons.

importing from abroad. But this may not prove feasible for most donors.About 400,000 tons of aman rice is now expected to be actualiy purchased; andthis has helped to avert a significant decline in rice prices so far.However, in view of expected bumper winter crops, there is still aconsiderable risk that domestic prices to farmers could decline substantiallyduring the harvesting period (May-June), if the food situation is not managedcarefully. If domestic offtake continues to be slow, PFDS' stocks could riseabove 1.4 million tons by June, hampering domestic procurement. TheGovernment therefore should monitor the food situation carefully and, inparticular, refrain from commercial imports at this stage.

103. The Government's decision last June to purchase commercially largequantities of foodgrain abroad was prompted by a desire to build up foodstocksfrom slightly under 1.0 million tons in early FY90 as a precautionary measurein the event of another major flood. While this desire for a high level ofstocks is understandable, the timing of procurement in June was not. First,the domestic stock situation, at nearly 1.0 million tons, was alreadyreasonably good; and additions to stocks had to be in place only by September,the beginning of the lean season when PFDS distribution usually picks up.Second, and most important, the niarvesting of a record boro crop of 5.8million tons had already begun; and the unusually large size of the crop hadalready prompted concerns about a possible decline in boro prices and Lhe needfor a major domestic procurement effort.35L Third, these concerns in turn hadled to some rescheduling of aid-financed imports to make room for domesticprocurement. There was, therefore little need for hasty commercial purchasesabroad. The Government could have observed the progress of boro procurement(or a possible flood) and would still have had time to arrange commercialimports if needed.361 This should be a valuable learning experience inmanaging the food situation in the coming ronths.

Budgetary Prospects

104. As noted, the fiscal situation has deteriorated for FY90. Large revenueshortfalls coupled with unsustainable levels of current expenditures and theadverse impact of food operations on the budget have substantially reducedlocal curreucy resources for financing the annual development program (ADP),which is likely to be cut back sharply in real terms for the third consecutiveyear. The overall fiscal deficit is expected to widen and domestic borrowingfrom the banking system has increased sharply this year, exacerbating balanceof payments and inflationary pressures.

105. The FY90 Budget, announced in June, anticipated that total revenueswould rise by 37Z (Tk 22 billion) in nominal terms, over the estimated actualsfor FY89, with tax revenues rising by 312 (Tk 15 billion) and non-tax revenues

35L These concerns were being expressed as early as March 1989; see World BankReport NO. 7596-BD, 'Bangladesh - Recent Economic Developments and Prospects",March 13, 1989.

361 Commercial purchases from Thailand would require 5-6 weeks for delivery,compared with 8-10 weeks from European and American sources.

by 632 (Tk 7 billion). Accordingly, current expenditures (excluding foodsubsidies) were projected to increase by 142 (Tk 8 billion) in nominal terms.After accommodating these and a deficit of Tk 7 billion on food operations(including food subsidies of Tk 5.6 billion), a revenue surplus of Tk 8billion, equivalent to 1.1Z of GDP, was anticipated; this, together with amodest increase of about 52 in aid disbursements in nominal terms, wasexpected to finance a development program of Tk 58 billion, roughly 402 abevethe estimated level of the ADP in FY89.

106. However, these expectations will not be realized. On the basis ofactual tax collections in the first seven months of FY90, tax revenues arelikely to fall short of the budget target by about Tk 7 billion, and non-taxrevenues by another Tk 7 billion (see "February estimate" in Table 1.9).Thus, a shortfall in total revenues of about Tk 14-15 billion, or 65X of theanticipated increase in revenues is envisaged. This shortfall in revenuesreflects the fundamental inelasticity371 of the tax system, as well as thelack of realism of budget estimates this year (para. 150). Unlike last year,revenue growth has not been constrained by any unusual factors this year,since the GDP and import growth targets underlying the FY90 budget estimatesare likely to be realized. In the case of non-tax revenues, the shortfallmainly reflects the difficulties of collecting additional debt servicepayments due from public enterprises. which were projected to rise from Tk 2.2billion in FY89 to Tk 7.5 billion in FY90.

.,-. On the other hand, current expenditures, which were programmed on thebasis of unrealistic revenue estimates, are likely to exceed the budgetestimates. The FY90 budget provided for a 142 increase in currentexpenditures in nominal terms; but since allocations for VGD and reliefpurposes were substantially reduced from last year's unusually high levels ofTk 5.1 billion to Tk 2.1 billion in the budget, these estimates permitted a202 nominal increase (about Tk 10.6 billion) for other current expenditures.The bulk of this increase has been earmarked (Oider a contingency allocationof Tk 7.7 billion) for large increases in pay and allowances to governmentemployees (estimated to cost about Tk 4.8 billion) and non-food subsidies(estimated at another Tk 3.2 billion in the budget). Non-food subsidies willclearly exceed budget allocations. For example, subsidies to jute alone arenow estimated at Tk 2.5 billion, compared to Tk 1.5 billion in the budget;while interest remission on agricultural loans will preempt the balanceremaining under non-food subsidies. S;iilarly, the contingency allocation islikely to be fully utilized for accommodating wage increases and a number ofpost-budget expenditure decisions. After the budget was finalized, theGovernment increased subventions to private secondary schools from 702 to 802

37/ Although the Government introduced new tax measures of Tk 7 billion thisyear, comparable efforts were made in each of the past four years; Tk 4billion a year in nominal terms in both FY85 and FY86, Tk 5 billion in FY88and Tk 6 billion in FY89. Notwithstanding these initiatives, total revenuesincreased by only about Tk 6 billion a year in nominal terms in both FY86 andFY87, and by about Tk 5.0-5.5 billion a year in FY88 and FY89, or at anaverage of 152 per annum in the first two years and 112 per annum in the lasttwo years, indicating the extreme inelasticity of the tax system.

of the civil service wage scale for teachers' salaries, which will add anotherTk 360 million or so to current expenditures. Completed development projectstransferred to the revenue budget (Tk 400 milion) and cash subsidies for awide range of exports (other than jute) such as leather, shrimp and ready-madegarments (possibly upto Tk 1.0 billion, though all of it may not beaccommodated this year) represent other claims. There are also strongpressures for additional expenditure allocations from many quarters, includingdefense and law enforcement agencies and local government.

108. The impact of food operations on the budget will be significantly largerthan envisaged earlier. Food subsidies are likely to exceed the budgetedlevel of Tk 5.6 billion because of substantially higher food import prices.In addition, expanded domestic procurement, substantial commercial imports andthe slowdown in offtake from the PFDS may lead to a large build-up offoodgrain stocks. Thus, an additional financing burden of about Tk 4 billionover the levels assumed in the original FY90 budget for financing foodoperations is envisaged.

109. These developments will drastically reduce the availability of localcurrency resources for financing development expenditures. Faced with theseresource shortfalls, the Government has resorted to substantial borrowing fromthe banking system. As of end-February, government borrowing from the bankingsystem had increased by Tk 12.7 billion, compared to Tk 0.2 billion assumed inthe budget. This has been an important factor contributing to balance ofpayments and inflationary pressures. Much of this borrowing, however,financed the increased operating deficit in the food account (in part due tonecessary domestic procurement) and higher current expenditures. Thus, in theabsence of offsetting actions, the resources available for the ADP are likelyto be sharply reduced in nominal terms (Table 1.9)--clearly an undesirablesituation. Recognizing this, the Government has just recently formulated ashort-term stabilization program designed to increase revenues, restraincurrent expenditures and mobilize more resources for the ADP, as well as tocontain balance of payments pressures over the coming months; this program(the expected impact of which is summarized in the "revised target" column inTable 1.9) is discussed in paras 113 and 114 below.

Balance of Payments Prospects

110. Increasing demand pressures associated with the recovery of the economy,an exceptionally expansionary fiscal policy this year and weak incentives forexports and remittances have contributed to a swift deterioration in theexternal payments situation. Although exports are expected to increase byabout 14Z (about $189 million) in nominal terms to $1475 million in FY90,export growth, in real terms, is expected to decelerate further to less than22 this year. Non-traditional exports, (excluding fertilizer--see below),which grew at the rate of 30-402 p.a., in constant (FY81) prices, in FY87 andFY88 and over 20? p.a. in the FY81-86 period, are expected to deceleratesharply to only 12? this year. As in FY89, earnings from some export products(such as fish and shrimp) are expected to suffer from weak external prices.In addition, urea fertilizer exports are expected to fall sharply (from $53million last year to $8 million this year) due tc a recent export ban toensure adequate domestic availability. However, export prices of other

exports (such as jute, leather, tea, etc.) are expected to increase, leadingto an overall improvement in the export unit value index and some recovery inthe terms of trade this year (Table 1.13). The anticipated increase inoverall export earnings is expected mainly from ready-made garments(additional $79 million), raw jute and jute goods (additional $73 million) andleather ($26 million).

111. The rapid growth of imports which began in the last quarter of FY89 hascontinued unabated so far in FY90. In the absence of actions to slow downimport growth and control the fiscal deficit, imports could continue toincrease leading to a continued decline in foreign exchange reserves.Recognizing this situation, the Government has recently taken some steps tocontain government spending and import growth (para 113). Accordingly, totalimports are now expected to increase by only about 8Z ($277 million) innominal terms (or 52 in real terms). Major intermediate goods (petroleum,fertilizer, raw cotton and yarn, and cement) account for about $97 million ofthis increase, and food imports another $42 million. The bulk of importgrowth, however, reflects intermediate and consumer goods (additional $158million) imported mainly by the private sector. Data on openings and paymentsof letters of credit suggest that imports of a broad range of commodities haveincreased, presumably due to increased incomes and consumer demand, restockingby traders and the effects of trade liberalization. Despite record harvestsand an emerging glut of foodgrain domestically, payments on foodgrain importsalso will be larger this year (by $31 million, or 82 in nominal terms) thanlast year, mainly due to higher import prices for both rice and wheat andcommercial imports noted earlier. Imports of capital goods, however, arelikely to decline somewhat in nominal terms, given the slow pace ofimplementation of the development program.

112. Private transfers, largely workers' remittances from abroad, areexpected to decline slightly by about 12 in nominal terms this year.Accordingly, and given the larger increase in the value of imports relative toexports, the current account deficit, in nominal terms, is projected toincrease from $1,402 million in FY89 to about $1,542 million in FY90; however,as a proportion of GDP, this would represent a marginal decline from 6.92 lastyear to about 6.72 this year. This reduction is based on the assumption thatthe Government would take appropriate actions outlined below to contain importdemand and stabilize the economic situation. Nevertheless, disbursementr ofexternal assistance towards financing this deficit are expected to decline byabout 22 (or $28 million) in nominal terms from last year's levels. Projectaid disbursements are likely to stagnate reflecting the setback to thedevelopment program, while delays in the implementation of sector adjustmentprograms are expected to lead to some reduction in associated fast-disbursingprogram/commodity assistance. Also, net repayments to the IMF will amount toabout $151 million in the absence of an ESAF arrangement this year. Takinginto account increased repayments of medium and long term debt, food creditsand other short term borrowings (Table 1.10), a financing shortfall of about$400 million for the year as a whole is likely to persist, necessitating acorresponding drawdown of foreign exchange reserves. Accordingly, grossforeign exchange reser-cs are currently projected to remain around the presentlevel of $510 million, equivalent to 1.7 months' imports--a significantdecline over the year.

The Government's Short-Term Stabilization Program

113. Recognizing the deterioration of the macroeconomic situation, theGovernment has recently initiated a short-term program in order to stabilizethe budget and the balance of payments over the remaining months of FY90.(The expected impact of this program is taken into account in the budget andbalance of payments projections for FY90 summarized in Tables 1.9 and 1.10).To contain the rapid growth of imports in order to maintain foreign exchangereserves at the target level of $510 million, the Government in late Februaryimposed a 50? deposit requirement for opening letters of credit on allimports; and tightened the availability of bank credit for financing ofimports by reducing the duration of post-shipment credits for imports andlimiting the access of banks to refinancing facilities at the central bank.On March 5, a 5Z nominal depreciation of the Taka, signalling a resumption ofthe flexible exchange rate management policy, was also announced. Thisadjustment is welcome, but still falls significantly short of even restoringthe real effective exchange rate to its early FY89 level, as discussed in para72. To improve the budgetary situation, the Government is expected toannounce shortly new measures designed to mobilize additional revenues of Tk 2billion during the next few months and to limit current expenditures to thelevels assumed in the original FY90 budget. The anticipated new revenuemeasures include: increases in tariff values for customs duty purposes to morerealistic levels, adjustments in prices of petroleum products and exciseduties on cigarettes, reductions in prevailing exemptions from customs dutiesand sales taxes for certain imports, increased efforts to improve collectionsfrom existing income taxes and increases in public enterprise prices. Inorder to restrain current expenditures, all new demands for additional fundallocations are expected to be rejected, while effort; are to be made torestrain the growth of the wages and salary bill and subsidies. The exchangerate adjustment noted earlier should help in this regard to reduce exportsubsidies. The Government also has just raised ration prices for wheat andrice distributed through the PFDS by 1-1/2Z; (this measure, however, althoughin the right direction, will have only a marginal impact on reducing foodsubsidies). These measures are expected to limit the budget deficit to about7.4Z of GDP in FY90 and help reduce net government borrowing from the bankingsystem from Tk 12.7 billion at the end of February to about Tk 8.5 billion byend June. However, given the difficulties of making these measures effectiveon a timely basis, there is considerable uncertainty whether these targetswill be achieved. Based on its estimates of resource availabilities andexpectations of increased project aid disbursements on a few large projects,the Government hopes to finance a development program (ADP) of roughly Tk 47billion; this is considerably short of the original budget target of Tk 58billion, but an improvement over the approximately Tk 39 billion anticipatedin the absence of additional budgetary efforts, and about Tk 43 billionindicated by staff estimates (on the basis of additional efforts and somewhatlower expectations of project aid disbursements). However, the realization ofthis target will depend on whether the Government will take the necessarysteps to improve resource availability for the ADP in a timely manner. TheGovernment is also expected to take steps to revise the priorities in the ADPso that the limited local currency resources now available (Tk 15 billioncompared with Tk 25 billion anticipated in the original FY90 budget) would be

allocated to high priority projects to maximize their development and aidutilization impact. Finally, in order to reduce domestic demand andinflationary pressures, the growth of credit to the private sector and public

enterprises is expected to be reduced to a level consistent with a broad money

growth target of 162 for the year; this will require considerable restraint onboth private and public borrowing over the next four months. These steps inturn are expected to prepare the ground for discussions on a possible ESAFarrangement with the IMF for FY91.

114. These measures represent a much needed beginning to stabilize themacroeconomic situation. As noted, the Government has already made a start in

implementing the program in some areas, while other measures are expected to

be announced in March. The timely implementation of this program is crucialin order to prevent a further deterioration in the financial situation.Nevertheless, the attainment of the revised budget targets for FY90 is likely

to be difficult. To regain a greater measure of financial stability, muchmore needs to be done over the coming months. The essential steps in this

regard include: the reestablishment of fiscal discipline through vigorousefforts in the FY91 budget to drastically reduce the growth of current

expenditures, substantially increase revenue mobilization, and reprioritizethe development budget and provide additional local resources for highpriority projects to improve project implementation and aid utilization.Concurrently, to help achieve external payments viability, continued flexibleexchange rate management iR needed in order to ensure competitiveness ofexports on a sustained basis and restrain import growth without resorting torestrictive trade and foreign exchange practices. These and other essentialmeasures to restore financial stability and the momentum of the developmenteffort are discussed in greater detail in Chapters II and III. While theGovernment has indicated its commitment to the formulation of a strong refc.m

program over the coming months, its implementation poses a special challenge.

CHAPTER II

Fiscal Policy in the Current Economic Situation

115. As described in Chapter I, following a stabilization program which wassuccessfully implemented by FY87, economic performance slowed down markedly inFY88 and FY89 and in FY90 to date. To a large extent, some slippages wereinevitable, given the extraordinary impact of natural disasters during thisperiod. However, inappropriate economic policies and a lack of progress onkey reforms were important factors which contributed to the weakening economicsituation. This situation laid the basis for the recent deterioration ineconomic performance, particularly the weakening of the budgetary and externalpayments situation, which has become more apparent over the past year.

116. The extent of the deterioration in the current economic situation andits implications for economic management and the medium-term prospects for theeconomy were only recently recognized by the Government. In part, this is dueto the rapidity of the financial deterioration. It is also due to the factthat, after two years of floods and depressed economic activity, the long-awaited recovery in the agriculture sector is now taking place, holding outthe promise for a more broad-based economic revival. This spawned a genuinebelief in many circles that everything is going well with the economy, leadingto a divergence of views about short-term economic prospects and policies. Inaddition, part of the responsibility for the deteriorating situation can betraced to weak coordination between key economic agencies within theGovernment. The ability of the Government to take corrective actions on asustained basis over the coming months, as noted earlier, is thereforecritical in determining whether the current deterioration will be stabilizedquickly, without significantly impairing medium term development prospects.

117. It is important to recognize '.hat the recovery of the real economy dueto more favorable weather and improved agricultural sector policies will notnecessarily lead to sustainable economic growth unless sound fiscal, financialand external policies are pursued at the same time. Indeed, the pursuit ofsound economic policies and an acceleration of policy reform are essential totranslate the short-term recovery in the economy into sustained economicgrowth oveL the medium term. For example, unless remunerative prices tofarmers continue to be maintained in the face of record crops, farmers'incomes and incentives could be substantially eroded. This in turn couldundermine the potential recovery in the industrial sector by reducingeffective demand for domestic manufactured products. Moreover, if the currenteconomic deterioretion is not brought under control quickly, it wouldinevitably require another prolonged period of stabilization and tight demandreitraints to restore macroeconomic equilibrium before efforts to speed up thepace of economic growth and development can resume. Therefore, in addition toactions currently being taken to stabilize the situation, further efforts mustbe made in the coming months to re-orient economic policies, protect priorityinvestment projects and facilitate structural change in order to minimize the

disruptive effects of current developments on investment and growth.Nevertheless, some reduction in growth, incomes, investment and consumptionlevels, with attendant hardships on the population, will be inevitable. Inthe absence of such action, however, the early years of the Government'sFourth Five Year Plan currently under preparation are likely to be spentprimarily on restoring macroeconomic equilibrium, rather than wrestling withthe challenges of accelerating economic growth and alleviating poverty; andthe Plan is likely to be derailed and deprived of any real chance of achievingits objectives, even before its implementation begins. It is thereforeimportant that corrective actions, identified in Chapter III, are takenwithout delay.

118. The rest of this report will focus on the policy changes that arenecessary to restore macroeconomic equilibrium in the short term and make thenecessary transition to economic growth and poverty alleviation over themedium term. Much of the analysis will focus on public resource managementissues, which are at the heart of recent macroeconomic problems and which arecentral to any development strategy to accelerate economic development overthe next few years. Accordingly, Chapter II analyzes the causes of recentmacroeconomic instability, payirng particular attention to the role of fiscalpolicies as well as the slowdown in policy reforms over the past two to threeyears. The chapter focusses on a range of issues, such as the inelasticity ofrevenue growth, inappropriate expenditure priorities, weak controls on thegrowth of current expenditures, and lax expenditure monitoring mechanisms. Inthis context, recommendations are made for ,.mproving the balance, quality anddevelopment impact of the public expenditure program, increasing aidutilization, enhancing revenue mobilization, and improving food and exchangerate management. Chapter III spells out additional policy changes which areneeded to sustain economic growth in the medium term. The implications ofthis analysis for growth and development are presented in the form ofalternative development scenarios for the economy over the medium term, whichPlso provide the parameters for an indicative resource envelope for the nextfew years, which is an essential requirement not only for improving theeffectiveness of public resource management but also for the formulation of ameaningful macroeconomic framework for the Fourth Five-Year Plan. Chapter IVrounds up the discussion with an analysis of the government's poverty programsand recommendations to increase the developmental impact of such programs.The chapter pays particular attention to the importance of enhancing theeconomic status of women by increasing their productivity and access togainful employment as an integral part of achieving growth, employment,poverty alleviation and resource mobilization objectives.

A. Macroeconomic Linkages in the PresentEconomic Situation

119. While the recent deterioration of the macroeconomic situation has beensurprising in terms of its speed, a deeper analysis indicates that the rootsof the current situation lie in inappropriate economic policies over the pasttwo to three years. In this sense, therefore, the current danger signs wouldhave appeared earlier and been more apparent except for the effects of theflood damage of the past two years. Ti4as year, overly ambitious fiscalbudgeting, inadequate planning of expenditure priorities. and a weakening ofinstitutional arrangements for expenditure control and monitoring haveexacerbated budgetary pressures. These have spilled over into the balance ofpayments, either directly through higher public sector imports (suchI asfoodgrains) or indirectly through increased banK borrowing, which hasaggravated domestic demand and inflationary pressures. Higher demandpressures have coincided with a recovery in private sector demand for importsbased on the expectation that the long-awaited economic recovery is underway,particularly in the agricultural sector. However, due to a marked change inthe pattern of public expenditures in favor of higher consumption and transferpayments and away from donor-financed investments, combined with decliningcompetitiveness of Bangladesh's exports due to exchange rate appreciation andrising wage costs, external financing and export earnings have not beenforthcoming in sufficient volume to sustain the budget and the balance ofpayments at present levels.

120. Table 2.1 helps to show the close linkages between the government'sfiscal operations and the balance of payments, as well as the central rolethat fiscal management played in the successful macroeconomic stabilizationefforts of the mid-eighties and in the present economic deterioration. Inparticular, two closely linked structural relationships should be noted:

(a) On the fiscal side, government revenues have been quite low andstable at around 9Z of GDP throughout the past decade. Given thelimited scope for domestic non-bank borrowing, the level of totalgovernment expenditures and the overall fiscal deficit are thereforehighly dependent on external aid inflows. In recent years, theoverall fiscal deficit and net aid inflows have been both around 7Zof GDP.

(b) On the balance of payments side, there is a similar structuralrelationship, with export earnings (equivalent to about 6Z of GDP)and workers' remittances from abroad (another 3-4Z of GDP) financingonly about 60Z of imports. The external current account deficit isof the same order as the fiscal deficit, about 7Z of GDP. Theexternal current account deficit thus closely mirrors the fiscaldeficit, and external aid (which is provided primarily to theGovernment) helps to bridge both the fiscal deficit and the externaldeficit. Thus, government policies which affect the fiscal deficithave an important direct impact on the external current accountdeficit as well, although the latter is also influenced by changesin the level and structure of private sector expenditures. Changes

in the composition of government expenditures have an impact on theexternal deficit as well, both by influencing the level of publicand private consumption and import demand and by affecting aidutilization and aid inflows. Finally, the government's expenditurepolicies have a significant impact on the overall savings rate inthe economy. Since the national savings rate is quite low, thelarger part of investment in the economy is financed by foreignsavings, mainly foreign aid inflows.

121. In the early eighties, both fiscal and external deficits were large, onthe order of 10-11 of GDP annually, but the Government was able to fill themwith aid inflows, and development expenditures (supported by external aid)represented the largest share of the government's expenditure program.Reduced aid availability in the early eighties and the correspondingunsustainability of these structural deficits necessitated the stabilizationprogram of the mid-eighties and led to a compression of both the fiscaldeficit and the external deficit by FY87. This adjustment was achievedlargely by compressing development expenditures. As a result, the fiscaldeficit stabilized at around 8? of GDP, while external aid amounted to about7.52 of GDP in the FY84-87 period. Restraints on private demand helped toreduce the import/GDP ratio, and efforts to promote exports, particularlythrough a flexible exchange rate policy, contributed to an improvement in theexports/GDP ratio, which also helped to reduce the external deficit.Consequently, the external deficit, though broadly in line with the trend inoverall fiscal deficit, was compressed even more than the fiscal deficit.

122. In the last three years, the overall fiscal deficit has not changedmuch. However, significant changes have taken place in the composition ofpublic expenditures. Development expenditures as a ratio of GDP fell from8.6Z in FY87 to 6.3? of GDP in FY89 and are expected to fall further to 3.6?in FY90. At the same time, current expenditures (excluding food subsidies)rose sharply from 7.7? of GDP in FY87 to 8.9Z in FY89. Some of the increasein current expenditures in FY88 and FY89 can be attributed to the impact ofthe floods, wb.ch required increased allocations for relief and targetedprograms for the poor. However, as these were financed largely throughincreased external assistance, they did not constitute a major drain onbudgetary resources available for other purposes. Because of the additionalaid financing for relief programs, total aid inflows remained at about 7.3? ofGDP in both FY88 and FY89, even though project aid as a proportion of GDPdeclined noticeably in response to the reduction in development spending. Atthe same time, the increase in current expenditures did not generate balanceof payments and inflationary pressures during FY88 and most of FY89 becausethe floods depressed real incomes and private consumption. Import demandgenerally remained subdued until the latter part of FY89, and Bangladesh'sforeign exchange reserves continued to rise in both years.

Table 2.1: TRENDS IN KEY MACROECONOMIC VARIABLES, FYS8-^0(As percent of GDP at market prices)

FY81 FY82 FY83 FY84 FY86 FY8B FY87 FY88 FY89 FY90 as

Government Fiscal OperationsTotal Rovenue 9.3 8.8 8.8 8.2 8.6 9.2 8.9 9.0 9.1 9.1Total Expenditure 18.4 17.4 19.9 17.3 16.8 18.8 17.3 18.8 18.5 18.6Overall Fiscal deficit -9.1 -8.7 -11.2 -9.2 -7.2 -7.6 -8.4 -7.8 -7.4 -7.4

Not Foretgn Financing 8.5 7.9 9.8 8.0 8.9 6.8 7.5 7.5 7.3 6.2(Project Aid) (8.4) (3.9) (4.7) (3.8) (3.5) (4.4) (656) (4.4) (4.3) (3.9)

!xt.r'nal Accountota Export- 6.0 4.7 5.7 6.8 5.8 6.3 6.1 8.5 8.4 6.3 2

Private Transfers 2.7 3.2 4.9 3.9 2.5 3.8 4.2 4.2 4.4 3.8 00Total Imports 17.8 18.9 18.5 16.8 18.5 16.4 14.8 15.8 16.6 16.9 lCurrent Account deficit -10.0 -12.0 -8.4 -8.8 -8.2 .7.0 -6.. -5.9 -8.9 -8.7

MPo Item:oFt lnvsstment 15.9 15.0 13.8 12.3 13.0 11.8 12.4 11.9 11.7 11.0National Savings 5.8 3.0 5.2 5.8 4.8 4.7 8.9 8.0 4.8 4.3Change 1n resrves(- a Increase) 0.2 1.0 -1,9 -1.3 0.9 -0.6 -1.4 -o.e -0.3 1.8

/ Estimte, on the assumption that the Government will take steps to stabilize theiriacro.conomic situation In the remaining months of FY90.

Source: Bangladesh Bureou of Statistics, Bangladesh Bank, staff estimates.

123. It could thus be argued that the floods In FY88 and FY89 masked theimpact of growing problems with regard to public resource management.Reasonably high levels of non-project aid inflows, a depressed domesticeconomy, and a strengthening foreign exchange reserve position created a senseof stability and comfort which was not warranted by the underlying fiscaltrends. This in turn gave rise to expectations that with continued externalsupport and a recovery of the economy, existing expenditure priorities couldbe sustained. In fact, the FY90 budget is even more hesvily oriented towardsconsumption, with large wage increases for public sector employees and foodand export subsidies. The floods also contributed to sli?pages in policyreforms, as the Government was understandably reluctant ta implement neededreforms and pricing adjustments against a background of economic hardship.Adjustment fatigue, as well as a sense of security associated with theseemingly comfortable balance of payments position, helped to crystallize thisposture over time, so that policy reforms were delayed in a number ofimportant areas - for example, the energy and financial sectors, price changesfor a number of public enterprises, and the management of the exchange rate.

124. These developments have had a number of adverse consequences. The lackof movement of the exchange rate together with increased wage costs (a directconsequence of budgetary policies, since wage adjustments in the public sectorhave immediate repercussions on private sector wages) and higher domesticinflation have led to a sub .antial appreciation in Bangladesh's realeffective exchange rate during the last quarter of FY89 and FY90 andundermined the competitiveness of exports and the inflow of remittances.Similarly, delays in reaching agreement * nticipated reform programs withthe multilateral institutions have redu; .he inflow of fast-disbursingprogram aid, which would have normally st ported the balance of payments andto a lesser extent the budget. With the return of more favorable weatherconditions, external assistance for relief purposes tapered off in FY90. Atthe same time, the low priority given to the development program andassociated shortfalls in project implementation have adversely affecteddisbursements of project aid. Thus, net foreign financing, including bothproject and non-project aid, has fallen significantly as a proportion of GDPin FY90. while exports and remittances also declined as proportion of GDP.Apart from the government's own increased consumption and policies which favorhigher private consumption (such as wage increases and higher food and othersubsidies), the government's management of the food situation through largecommercial imports added about $150 million to the import bill in the firsthalf of FY90. Concurrentls,, the strong recovery of the agriculture sector hascontributed to an improvement in rural incomes and expectations of a broad-based recovery in the economy, triggering private demand for imports toreplenish depleted stocks and provide for anticipated needs for inputs andconsumption.

125. Occurrences of macroeconomic imbalances are not unusual in any country,and this cannot explain why the macroeconomic situation deteriorated sorapidly in Bangladesh. A recovery in the domestic economy should not be areason for such a deterioration; rather, such a situation, if reasonably well-managed, should have provided the springboard for increasing economic growth

and development on a sustainable basis over the medium term. The ultimatereasons for the present financial problems should therefore be sought in thequality of economic management, especially overly-ambitious budgetaryplanning, problems in maintaining effective expenditure controls, lapses inmonitoring key economic indicators, and a situation in which the presentinstitutional arrangements for dealing with such exigencies have notfunctioned quickly and effectively enough to recognize the deterioratingsituation and take remedial actions. The next section examines issues ofpublic resource management in greater detail.

B. Priorities for Reform in Public Resource Management

126. Reform of public resource management policies is an essential conditionfor the restoration of financial stability and the achievement of sustainableeconomic growth. This section sets out the major issues that will need to beaddressed as part of a reform program in this area. Many of therecommendations have already been discussed in previous Bank economicmemoranda and special reports (especially the recent public expenditure review 371and tax reform reports 38/), but the recent deterioration in the macroeconomicsituation and delays in beginning the prt:ess of fiscal reform give addedurgency to the recommendations at this time. The major topics which arediscussed in this section include:

(i) Controlling the growth of current expenditures;

(ii) Prioritizing the public investment program;

(iii) Public revenue mobilization;

(iv) Improving foreign aid utilization;

(v) Budget management and expenditure control;

(vi) Management of the food budget; and

(vii) The role of exchange rate management.

371 World Bank Report No. 7545-BD. "Bangladesh: Public Expenditure Rev2ew- Public Resource Management During the Fourth Five-Year Plan" March 13,1989.

38/ World Bank Report No. 7196-BD, "Bangladesh : An Agenda for Tax Reform",December 15, 1989.

Controlling Current Expenditure

127. The rapid growth of current expenditures, which increased from 302 ofthe overall public expenditure program in FY81 to 542 in FY89, has been one ofthe most important factors contributing to the bias in favor of consumptioninstead of investment in the economy, the poor implementation performance ofthe annual development program, and continuing problems in the utilization ofcoreign assistance. These divergent trends in current expenditures and thedevelopment budget can be clearly seen from Chart 6. Unlike the ADP wheremost investment projects receive some form of screening and review, much ofgrowth of current expenditures has taken place in response to ad hoc short-term decisions, generally with little consideration of their ultimatedevelopment impact or affordability in a macroeconomic context. Many of thesedecisions are extremely difficult to reverse once they are taken. Thus, it isclear that sustainable long-term growth will continue to be an elusive targetuntil the Government improves its ability to manage and control the recurrentbudget more effectively.

128. Table 2.2 provides a breakdown of the major categories of cash currentexpenditures between FY85-89. 39/ During this period, cash currentexpenditures increased at an average annual rate of 19Z in nominal terms,equivalent to a 50? real increase over the four-year period. The largestcategories of cash currtnt expenditures in absolute terms are defense (22X ofcash current expenditures in FY89) and education (182 of cash currentexpenditures), while the fastest growing categories include subsidies (averageannual growth of 69Z between FY85-89), interest payments on foreign debt (312annual growth), and the operating deficit of Bangladesh Railways (242 averageannual growth). Many of the issues regarding current expenditures have beenanalyzed in the recent public expenditure review; in this section, attentionis focussed on factors that have contributed most significantly to the rapidincrease in the level of current expenditures during the past five years.

391 The concept of cash current expenditures differs from the government'sconventional definition of current expenditures in that it includes theoperational deficits of Bangladesh Railway and the Post Office, while itexr'udes food subsidies and in-kind transfer payments (Vulnerable GroupDevelopment/Test Relief) which represent implicit rather than direct cashtransfer payments.

CHART 6

Public Expenditures

Percent of GDP12

10 -z .

0 l l l l81 82 83 84 85 86 87 88 89 90

Fiscal Year

Expenditure Type

- Curr Expenditures I Annual Dev Plan

Fiscal Years ending In June

129. The most important factor contributing to the growth of currentexpenditures has been increases in public sector pay and allowances,especially for lower skilled employees. Direct expenditures on pay andallowances for civil servants accounted for approximately 402 of cash currentexpenditures in the FY89 budget. This underestimates the fiscal impact ofgovernment wage pol'cies, however, as many other categories of currentexpenditures are linked to government pay scales, including transfers to localauthorities for upazila staff compensation, grants to private secondaryschools and colleges to cover teachers' salaries (which are based on thegovernment scale), the operating deficits of Bangladesh Railways and the PostOffice, and pension and retirement benefits. Including these elements, cashcompensation accounts for approximately 55-602 of total current expenditures,while other non-wage expenditures (excluding interest) represent about 25-302of cash current expenditures. Public sector compensation policies also affectwage costs in the public sector enterprises through direct linkages in wagescales, and the private sector through an implicit wage leadership effect,which has implications for the budget through such factors as the financialviability of the public enterprises and the overall macroeconomic performanceof the economy.

130. The number of public sector employees is estimated to be on the order of1.4-1.5 million (excluding autonomous public enterprises), of whichapproximately 700,000 are paid directly under the recurrent budget, 500,000are employed in public statutory corporations (such as BADC and BWDB) and200,000 or more are employed in temporary positions established under thedevelopment budget. The skill composition of public sector employees isheavily biased toward lower-level manual and clerical workers, with higherskilled Class I and II officers representlna only 7-82 of total employees.Overstaffing is common in many ageizcies and departments, particularly inlower-level positions; rough estimates indicate that such overstaffing amountsto perhaps one-third to one-half of employees in Bangladesh Railways,Bangladesh Telephone and Telegraph Board, and LADC. At the same time, thereare large numbers of vacancies in higher-level positions (approximately 252 ofClass I and II level positions are vacant), and nany government officialsattribute pervasive implementation problems at lea3t partly to staffingproblems in the civil service marnagement positions.

131. In this situation, structural iesues in the civil service pay system areas much a concern as the overall fiscal turden. D'iring the late 1970's andearly 1980's, the Government followed an implicit p)licy of allowing civilservice salaries to decline in real terms in order to maintain fiscal balance.Between FY78 and FY83, the level of ca3h compensation declined by _approximately 30-35Z in real terms for Class I and II officers and by 20-252for Class III and IV staff. This led to serious problems of morale within thecivil service, and the Government established a National Pay Commission inFY85 to review compensation policies. In accordance with the recommendations jof the Pay Commission, salaries for Class I and II officers was restored toFY78 levels in real terms at the beginning of FY86; for Class III and IVstaff, however, pay and allowances were increased by approximately 30-402 in

Table 2.2: FUNCTIONAL CLASSIFICATION OF CURRENT CASH EXPENDITURES a/ FY85-90(Tk million)

FY85 FY86 FY87 FY88 FY89 FY90 Percentage Annual

Prov. Prov. Prov. Prov. Revised Budget Share Growth

Accts Accts Accts Accts Estimate FY85 FY89 FY85-89

Defense bl 5672 6688 8205 9185 11393 11317 22.02 21.72 19.12

Law Enforcement 1831 2356 2697 3237 3478 3691 7.1 6.6 17.42

Agriculture c/ 1180 1389 1880 2052 2490 2386 4.5 4.7 20.52

Education 4463 6005 7430 8814 9485 9702 17.3 18.1 20.72

Health and Population 1820 1920 2483 2985 3211 3356 7.1 6.1 15.32

Roads. Bridges & Ferries 526 365 781 988 848 878 2.0 1.6 12.72

Operational Deficits 803 1305 1595 1771 1819 1988 3.1 3.5 22.7Z

(Railroads) (627) (1160) (1322) (1531) (1503) (1698) (2.4) (2.9) (24.42)

(Post Office) (176) (145) (273) (240) (316) (290) (0.7) (0.6) (15.8Z)

Relief 1548 1167 1486 3231 5071 2147 6.0 9.7 34.5?

(VGD/TR) (1310) (1065) (1340) (3034) (4750) (1954) (5.1) (9.1) (38.02)

(Other) (238) (102) (146) (197) (321) (193) (0.9) (0.6) ( 7.8Z)

Subsidies 2596 1590 697 8L4 7057 8689 10.1 13.4 28.4Z

(Food) (2500) (1410) (500) - (6270) (5451) (9.7) (11.9) (25.82)

(Other) (96) (180) (197) (824) (787) (3238) (0.4) (1.5) (62.22)

Interest Payments 3115 4150 4450 6201 73281 7668 12.1 14.0 23.9?

(Domestic) (1465) (2132) (2054) (2700) (2498) (2588) (5.7) (4.8) (14.3?)

(Foreign) (1650) (2018) (2396) (3501) (4830) (5080) (6.4) (9.2) (30.8?)

Other di 6061 9443 9314 10,812 11,339 19,166 23.5 21.6 17.0?

Total Cash Current Expend. a/ 25,805 33,903 39,178 47,066 52,499 63,583 100.02 100.Cz 19.42

a/ Excludes food subsidies and VGD/TR, but includes deficits of railroads and post office.

b/ Includes BDR.c/ Includes Forestry, Fisheries, Livestock, Cooperatives and Irrigation, Drainage and Flood Control.

d/ Includes Tk 7,681 million in FY90 Budget for increases in pay and allowances and other costs

not included elsewhere.

real terms above the level prevailing in FY78. The fiscal impact of thisunbalanced increase in compensation levels was particularly severe because ofthe much larger number of Class III ands IV staff relative to Class I and IIofficers. Moreover, this change had l:ttle justification in terms ofaddressing the long-term staffing requirements of the civil service, and thecompression raLio of the civil service pay scale (i.e., the differential inpay between the highest and lowest grade employees) deteriorated to a levelthat would be considered undesirable in most countries in terms of maint.diningadequate incentives for good performance.

132. During the past two to three years, the Government has shown itself tobe sensitive to the demands of the public sector labor unions which representClass III and IV employees. Wage adjustments have been announced largely inan ad hoc manner and with little apparent consideration of their impact on theoverall budget. Moreover, the pattern of increases has tender to exacerbatethe structural problems in the civil pay structure (see Table 2.3). In FY88,the Government granted a 102 increase in pay and, subsequent to the floods,granted an additional increase in the festival allowance equivalent to twoweeks' pay. In FY90, increases in pay and allowances were announced thatresulted in an increase of approximately 18Z in pay, adding an estimated Tk4.8 billion in direct compensation costs to the recurrent budget. These payincreases have been passed on to the public enterprises, even though most ofthem have not been able to make offsetting price adjustu.ents to cover thecosts. As a result, the Government has not been able to realize the level ofnon-tax revenues which was included in the FY90 budget as increased interestpayments and dividends and profits. While part of the pay increases duringthe past three years can be justified because of increases in the cost ofliving, the recent increases have generally been inflationary in their impactand contributed to the overall deterioration in macroeconomic trends. TheGovernment has recently established a National Pay Commission to review civilservice compensation policies. A critical issue that should be addressed bythe Commission is the feasibility of substantial pay awards in the presentcircumstances. Indeed, it may be desirable to delay implementation of suchawards until the country's financial situation improves. In this context, theCommission should also consider the adoption of a more realistic procedure fordetermining interim pay adjustments in order to reduce political pressuresfrom the public sector labor unions for large annual increases. In addition,consideration should be given to granting higher differential pay awards forClass I and II officers in order to reverse the compression of the existingpay structure and improve incentives for attracting highly qualifiedemployees, to the extent that this could be done without triggering largeincreases in wages for lower level staff. Finally, the Commission needs torecognize the adverse macroeconomic implications of large increases in wagesto lower level staff at this jun-ture. Besides the fiscal pressures on thebudget, such increases in public sector wages contribute to the imbalancebetween consumption and investment in the economy and the lack ofcompetitiveness of Bangladesh's exports in sectors such as jute. TheGovernment may therefore need to consider macroeconomic adjustments such asdevaluation and wage restraints which hold wage adjustments below the increasein domestic prices in order to reduce real wage rates in the economy andpromote greater investment and export competitiveness.

Table 2.3: TRENDS IN NOMINAL AND REAL CASH COMPENSATION al(Taka per month)

Salary Scale FY83 FY85 FY86 FY88 FY90

MNS1 (Secretary)Nominal compensation 4143 5510 9000 10070 11102Real compensation 1258 1381 2027 1865 1771Index of real compensation b/ 100 110 161 148 141

MNS5 (Deputy Secretary)Nominal compensation 2701 3927 6145 7096 8333Real compensation 821 984 1384 1314 1329Index of real compensation bl 100 120 169 150 162

MNS9 (Assistant Secretary)Nominal compensation 1205 1938 3090 3702 4588Real compensation 368 486 696 686 732Index of real compensatior. of 100 132 190 186 199

MNS15Nominal compensation 635 902 1542 1850 2243Real compensation 211 244 384 376 393Index of real compensation b/ 100 116 182 178 186

MN20Nominal compensation 472 623 1055 1237 1432Real compensation 157 169 262 251 251Index of real compensation b/ 100 108 167 160 160

Compression Ratio: MNSl/MNS9Nominal compensation 3.4 2.8 2.9 2.7 2.4Real compensation 3.4 2.8 2.9 2.7 2.4

Compression Ratio: MNS1/MNS20Nominal compensation 8.8 8.8 8.5 8.1 7.8leal compensation 8.0 8.2 8.0 7.4 6.8

a/ These estimates include all normal cash allowances; however, they excludespecialized allowances such as traveling allowance and allowances available only tothe defense and law enforcement services. The estimates assume normal progressionthrough the ranks and are therefore adjusted annually for normal step increments andadditional increments which are granted from time to time. The cost of livingindices used for deflating nominal compensation are the consumer price index formiddle income families in Dhaka, Chittagong and Khulna for MNS1, 5 and 9; thedeflator used for MNS15 and 20 is the consumer price index for non-gazettedgovernment employees in Dhaka. For FY90, the average price increase for July-October 1989 is used for MNS1,5, and 9; and the same rate of increase is used toupdate the deflators for MNS 15 and 20 as well.

b/ FY83 = 100.

Source: Ministry of Finance.

133. Turning to the major categories of current expenditures, defenseexpenditures represent the largest single share of the recurrent budget. Asin most countries, little detailed information is available on the compositionof the defense budget or the basis on which it is prepared. Nevertheless,some overall trends can be discerned. During the period FY85-89. defenseexpenditures in the recurrent budget increased by 47Z in real terms;moreover, it is doubtful whether the budget includes major equipmentpurchases. This figure does not include defense expenditures that appearelsewhere in the budget; for example, a major share of food subsidies goen; tothe defense establishment through the Essential Priorities channel whichsupplies commodities at a subsidy of up to 85Z below the ration price.During the past several years, the Government has announced a number ofspecial cash allowances for the defense and law enforcement services; while itis impossible to estimate their cost precisely, the gross size of "other"allowances increased from Tk 0.9 billion in FY85 to Tk 3.3 billion in FY89, anaverage rise of 38Z per year. Experience during the past five years indicatesthat the defense budget is prone to cost overruns, amounting to an averageincrease of 102 over the budgeted figure or approximately Tk 1.0 billion inFY89. For FY90, there are indications that this cost overrun may be evengreater, despite th. absence of any major relief efforts. Since this overrunwill be financed entirely from local resources, it has a particularly adverseimpact on the rest of the budget, wdhich faces very tight funding conetraints.Given the relative size of the defense budget, it will be difficult o controlthe growth rate of current expenditures unless greater efforts are made toreduce the growth of defense expenditures to affordable levels.

134. The education budget represents the second largest share of currentexpenditures. Education is clearly a priority area in the government'sdevelopment strategy, and the level of education expenditures is significantlybelow the level in comparable countries (about 1.8Z of GNP in FY88,approximately half of the level in other Asian countries). Nevertheless,there are serious questions as to whether the pattern of education expenditurein the recurrent budget represents an efficient way of expanding services inthis sector. The two largest components of the education budget are pay andallowances for primary school teachers and grants to private secondary schoolsand colleges to cover the cost of teachers' salaries. During the recentpreparation of a General Education project to finance the expansion of theprimary education system over the next five years, the Government citedrudgetary pressures in order to request donor financing for the incrementalcost of teachers' salaries, in addition to the large amount of recurrent costs(e.g. textbooks, teacher supplies, etc.) that have already been picked up bythe donors under the development budget. At the same time, the Governmentprovided very generous grants to private secondary schools in response topressures from the teachers' unions, increasing from 502 of the cost ofteachers' salaries in the FY8O-85 period to 601 in FY86, 70Z in FY87-89, and801 in the FY90 budget. Despite this large 0hare of public funding going toprivate secondary schools, little effort has been made to improve curriculumstandards or the quality of education. Similarly, in other areas of theeducation budget such as technical and vocational education and universityeducation, there are serious questions about the cost-effectiveness of

existing funding levels, although the labor unions strongly oppose introducingany efficiency improvements. These problems show up in very highdiscrepancies in the unit cost of education at all levels, including a 6-to-1differential in unit costs between secondary and primary education and a 54-to-i differential in unit costs between university and primary education.These differences are approximately twice as large as the cost differentialsfound in other developing countries and three times the average differentialfor other South Asian countries. Therefore, despite the government's recentannouncement that primary schooling will henceforth be compulsory, thesestatements are not reflected in the general pattern. of expenditure increasesthat has taken place in the sector during the last five years.

135. Turning to other important sectors, the agriculture sector received asignificant increase in current funding in FY89, primarily to cover floodrepair costs incurred by BWDB. As this allocation was cut in the FY90 budget,however, it does not appear that the Government intends to provide a sustainedincrease in operational expenditures for the agricultural sector, which on anoverall basis (including the ADP) have been cut substantially during the pastten years. Similarly, the amount of increase in current expenditures forhealth and population activities and for roads, ferries and bridges has beenbelow the general rate of increase in the recurrent budget and has gonelargely to cover increased compensation costs, providing very little room forimprovements in operations and maintenance. Many areas where shortfalls inrecurrent funding have been particularly binding on the efficient expansion ofpublic services are described in the public expenditure review, includingagricultural extension, agricultural research, fisheries and livestockservices, O&M for flood control and irrigation structures, maintenance ofroads and bridges at both the national and upazila level, primary health andfamily planning facilities, primary education, technical and vocationaltraining facilities, and maintenance of inland waterways. On the other hand,the Government has funded large increases in the operational deficits ofBangladesh Railways and the Post Office. The growing deficit of BangladeshRailways is an area of particular concern, as BR was generally able to break-even on its operating costs through FY83. The rapid increase in the operatingdeficit since then has taken place despite large inflows of donor financingfor rehabilitation activities, and reflects very weak control of operatingcosts (especially staff recruitment) and insufficient fare increases. Thedismal financial performance of BR was a major factor in the recent findingthat additional investment to include a rail line on the proposed JamunaMulti-purpose Bridge could not be economically justified at the present time.Concern must also be expressed about the rapid expansion of non-foodsubsidies, whicn are expected to amount to at least 7? of all cash currentexpenditures in the FY90 budget. The Government has justified some of thesubsidies as the first phase in a program to address underlying structuralproblems (e.g., jute export subsidies), but experience demonstrates thatsubsidies will be very difficult to eliminate over time unless the Governmentis prepared to take strong actions to encourage economic reforms. Finally,cash subsidies on food are also expected to be substantial -- another 7-8Z ofestimated cash current expenditures this year.

136. In summary, the rapid inrrease in current expenditures in recent yearslargely reflects the outcome of short-term decisions, rather than a carefulconsideration of alternative priorities for the use of scarce publicresources. There are many areas of the recurrent budget that aresubstantially underfunded and deserve higher allocations (particularlyoperations and maintenance and the social sectors); however, these are notthe areas where the Government has provided additional funding in recentyears. Instead, the additional current expenditures have been used to satisfythe demands of particularly lower level civil servants, labor unions, publicenterprises and the defense establishment. This means that constraining thegrowth of current expenditures will be difficalt to achieve and is likely torely on relatively blunt macroeconomic instruments (e.g., devaluation, wagerestraints, austerity budgets, etc.). It will also depend critically on thewillingness of the Government to impose implicit redu.ctions in real incomes onthese influential groups. Such actions will be essential if the Government isto have any realistic expectation of stabilizing the current fiscal situationand reorienting the pattern of public expenditures toward higher levels ofinvestment and economic growth.

Prioritizing the Public Investment Program

137. The major factor leading to the decline in development expenditures as aproportion of GDP can be seen in Table 2.4. In FY84, local funding resourcesprovided 63? of the financing available for the ADP, while project aidaccounted for 372. From FYe4-89, however, local funding stayed virtuallyconstant in nominal terms, which was equivalent to a 37Z reduction in realterms, wkile disbursements of project aid increased by 52? in real terms. Thenet result was that the ADP remained virtually constant in reel terms duringthis period, with project aid substituting for the reduction in local funding.Even within the declining share of local resources, there was a continuedsubstitution of donor funds for locally generated revenues, with counterpartfunds obtained through commodity aid increasing from 50? of local funding -availability in FY84 to 812 in FY89. These trends are clearly evident fromChart 7 which shows the relative share of project and commodity aid and thegovernment's taka contribution to financing the ADP in real terms over theFY84-89 period. Thus, it is apparent that the large increase in donorresources over this period had no impact on increasing the level of publicinvestment and only served to permit the Government to channel its own fundingresources from the development budget to relatively low priority currentexpenditures. This situation has weakened the justification for the donors toprovide additional funding to the Government, unless there is a significantimprovement in fiscal discipline.

138. Even within these overall trends, there are serious problems withrespect to the way the Government allocates local funding. Table 2.5 showsthe distribution of funding within the FY90 ADP for donor-aided projects,

Table 2.4: FINANCING OF ADP EXPENDITURES, FY84-89(Tk cro.e) aL

FY84 FY85 FY86 FY87 FY88 FY89

Taka 1905 1875 1882 1998 2015 1985(of which,Commodity aid) (963) (962) (1164) (1113) (1312) (1608)

Project Aid 1101 1292 1746 2441 2135 2630

Total 3006 3167 3628 4439 4150 4615 b/

a/ One crore = 10 million Taka.b/ Government estimate.Source: Staff estimates based on IMED data on ADP expenditures.

locally-financed projects and block grants. Donor-aided projects constitute782 of the FY90 ADP, with donors financing an average proportion of 71? ofcosts for these projects (compared to 53? of average project costs financed bydonors in FY81). It is generally acknowledged by the Planning Commission thatthe availability of local resources is the most critical macroeconomic factorin determining the rate of project implementation. Despite evidence that manydonor-aided projects are significantly underbudgeted in terms of local fundingallocations (for example, over half of IDA projects report that local fundingavailability is a significant problem in implementation), only SOX of theavailable local funds are allocated to support donor-financed projects. Theremaining local funds are allocated in roughly equal shares between ten blockgrant programs and 385 locally financed projects. These block grants andprojects, unlike .ose which are aid-financed, do not leverage projectassistance to help finance the necessary capital goods imports and support thebudget and the balance of payments. Giver the acute taka shortage and theimplicit high value of local resources, projects which are fully locallyfinanced should have substantially higher rates of return than aided projectsto justify the local currency support they now receive. If not, the burden ofproof of their economic viability and ability to generate higher returnsshould be placed on these projects and programs before they receive preferredaccess to limited local currency resources. In many instances, however, thisis not the case. On the other hand, if such projects are indeed viable andproperly designed, they should be financed by external donors, subject tonormal economic rate of return criteria. If this is done, the Governmentcould, even within the current allocation of funding to the ADP, significantlyimprove project implementation and the absorption of foreign resources byreallocating funding from locally-funded projects and block grants to donor-aided projects. In this context, it should be noted that all donor-aidedprojects and project components are not high priority. However, as noted,this is also true of a number of fully locally funded projects. TheGovernment will therefore need to critically review the development programand establish clear priorities within the ADP in order to improve itsdevelopment impact.

CHART 7

Financing of ADP Expenditures

Crores of Takas2000 -- __-

0 84 86 86 87 88 89

Fiscal Year

Source of Funds

IM GOB a Com. Aid E1 Proj. Aid

Constant 1984 Prices (GDP Deflator)

Table 2.5: DISTRIBUTION OF I1UNDING IN THE FY90 ADP a/(Tk crore) b/

Project No. ofTe.ka z Aid ? Total X Projects

Donor-aided Projects 1205 50? 2924 100? 4129 78? 332Locally-financed Projects 1186 5O? - - 1186 22? 395

Projects (650) (27?) - - (650) (12Z) (385)Block Grants (536) (23Z) - - (536) (102) (10)

Total 2391 1002 2924 10O? 5315 100; 727

al Does not include technical assistarnce and self financed projects.b/ One crore = 10 million taka.

Source: Annual Development Program. 1989/90.

139. Table 2.6 lists the twenty proje_ts (including block grants) in the FY90ADP that received the largest allocations of local funds, equal to at least Tk20 crore ($6.1 millirn) or more. Although those projects represent only 3? ofthe total number of projects in the ADP, they account for 38? of the localfunding and 15? of the project aid allocations. In general, the Governmenthas not been very successful in mobilizing foreign assistance for theseprojects; only 8 out of the 20 projects attracted project aid in excess of Tk1.0 crore. While some of the projects clearly have very high priority in thegovernment's development strategy (e.g., #4 - Family Planning Programme; and17 - Universal Primary Education), the priority of other programs has not beenclearly established (e.g. #2 - Zila and Upazila Infrastructure, whichrepresents a continuation of a very large block grant program to constructgovernment buildings in upazila headquarters; #5 - Teesta Barrage Project,which has already cost Tk 3 billion since it was started in 1978 and isexpectel to require at least another Tk 2.6 billion before it yieldssignificant benefits; #6 - Barind Integrated Area Development Project, with anestimated cost on the order of Tk 4 billion; #11 - Crash Program for WaterSupply in Dhaka, which was undertaken by DWASA in response to a governmentdirective despite ongoing studies aimed at identifying the most cost-effectivesolution to Dhaka's water supply requirements; and #13 - Procurement,Processing and Distribution of Improved Seeds, which provides subsidies onimported seeds to cover operating inefficiencies of BADC and maintain itsprotected position in the seed market). In general, Table 2.6 reflects a veryhigh de facto priority for investments in Dhaka (11 - Greater Dhaka FloodProtection Project; #11 - Crash Program for Water Supply in Dhaka; 116 -Telecommunications Expansion for Greater Dhaka; as well as Greater Dhaka PowerDistribution, Phase II, which would be 122 on an extended project list) andupazila infrastructure (projects #2, 3, 9, 18, and 20, as well as parts of 14

Table 2.6: SLOCK GRANTS AND PROJECTS IN FY90 ADP WITH LOCAL FUNDINGALLOCATIONS OF TK 20 CRORE (S 6.1 MILLION) OR MORE

Local Project TotalAid

1. Greater Dhaka FloodProtection Project 150.0 - '50.0

2. Zila and Upazila Infrastructure 130.0 - 130.0

3. Development Assistance to Upazilas 100.0 - 100.0

4. Family Planning Programme, 4th Phase 68.5 53.6 122.1

5. Teesta Barrage Project 50.0 .:..O 30.0

6. Barind Integrated Area Dev. Project 47.7 - 47.7

7. Universal Primary Education 41.0 111.8 152.8

8. Block Provision for Rural 40.0 - 40.0Employment Oprortunities Creation

9. Block Provision for Zila Parishad 26.0 - 2O.0Infrastructure

10. Deep Tubevell Irrigation Project 25.9 24.0 0S+9Phase III

11. Crash Program for Water Supply 25.0 - 25.0in Dhaka

12. Chittagong Export Processing Zone 24.0 1.0 25.0Phase II

13. Procurement, Processing and Dist-ribution of Improved Seeds 22.8 - 22.8(Seed Subsidies)

14. Diesel Locomotive Workshop, 22.0 17.6 39.6Bangladesh Railways

15. Jamuna Fertilizer Factory 21.9 '35.2 157.1

16. Telecommunications Expansion 21.6 50.0 71.6for Greater Dhaka

17. River Research Institute 20.0 1.0 21.0

18. Chittagong Hill Tracts Dev. Program 20.0 - 20.0

19. Development Assistance to Pourasharas 20.0 - 20.0

20. Thana Health Complexes 20.0 13.9 33.9896.4 438.1 1334.5

Source: Annual Development Program 1989/90.

Source: Annual Development Program 1989190.

and 7). While very few of the projects on this list are necessarily unviablein economic terms, they do raise questions as to whether the PlanningCommission is able to maintair. a consistent set of priorities over theallocation of scarce local resources in the face of many other competingdemands in the ADP.

140. While it is possible to raise a variety of questions about detailedfunding allocations in the ADP, it is important to recognize that on anoverall basis, the ADP generally reflects a reasonably coherent and consistentset of priorities for the public investment program. There are very fewobvious "white elephants" in thle ADP, and the "cure' investment programdesignated in the ADP generally reflects a realistic choice of high priorityprojects, although the procedures previously established for ensuring that the"core" projects received preferential access to funding have not functionedeffectively in recent years. Indeed, the first priority of the Governmentshould be to achieve a significantly larger ADP in order to address many ofthe high priority development objectives facing the country. The recentpublic expenditure review concluded that there are a large number of highpriority public investment projects potentially available and that the majorconstraining factor was the government's 'plementation capacity, includingboth physical and financial considerations. As shown in this section,however, the Government will not be able to achieve a higher ADP until it iswilling to address the major macroeconomic constraints on the budget.Necessary actions include conti'lling the diversion of local funding resourcesfrom the development budget to relatively low priority current expenditures,and secondly, establishing a clearer sense of priorities in the allocation oflocal funding within the ADP itself, with tighter constraints on the share ofresources going to locally financed projects and block grants. Until actionsare taken to address these issues, other efforts to prioritize the ADP 'e.g.,by designating a "core' investment program or speeding-up the closure ofindividual projects) will be largely cosmetic in their impact and will havelittle effect on restoring public investment levels.

Public Revenue Mobilization

141. Despite the fact that the public revenue mobilization effort inBangladesh is one of the weakest in the world and is a significant constrainton the level of national savings and the implementation of the publicexpenditure program, the Government has been unable to increase revenuecollections as a percentage of GDP throughout the 1980s. In large part, thisis due to the inbuilt inelasticity of the current tax system, such that theGovernment has to introduce new revenue measures of Tk 5-6 billion each yearjust to maintain current revenue yields. The scope for obtaining additionalrevenues has also become increasingly constrained by the severe disincentiveeffects of existing tax instruments, which have increased pressures forspecial tax exemptions and tax evasion. Fundamental reform of the tax systemis therefore essential to sustain the long-term growth of revenues. Thissection briefly reviews the revenue measures that the Government hasintroduced in the past few years.

142. Table 2.7 shows the growth of central government rever.ues from FY84-90.The most important sources of revenue growth in absolute terms have beenexcise duties, customs duties, and income and profit taxes. Additionalrevenues from excise taxes have come largely from natural gas and tobaccoproducts. The weighted average price of natural gas to consumers has morethan doubled between FY89-90, with most of the increase going to theGovernment in the form of higher excise taxes. At the present time, the priceof gas is approximately equal to the long-run marginal cost (LRMC) ofproduction, including a depletion premium. Given the need to mobilizeadditional revenues, there is justification for the Government to continueincreasing the price of gas above the LRMC level. At the same time, the gascompanies continue to be hee. ily dependent on the government budget forfinancing their investment program, and a division of future revenues whichprovides a larger share to the gas companies should be considered as a meansof improving their self-financing capacity.

143. The structure of customs duties has changed significantly in recentyears, with tariffs being rationalized, while quantitative restrictions (QRs)on imports have been withdrawn on a lumber of products as part of the importliberalization program. The net effect of these offsetting measures ongovernment revenues has not been adequately quantified. In order to improverevenue yields from customs duties, the Government has generally relied on twotypes of actions in recent years. First, tariffs have been raised or imposedon commodities whose price has fallen in international markets in order tocapture windfall gains for the Government; the major products affected in thismanner have been petroleum and crude soybean oil. The second measurp has beenthe development surcharge, which is applicable to all dutiable impo.-ts. Thesurcharge was increased from 2Z to 5? in the FY88 budget, 6Z in the FY89budget and 82 in the FY90 budget. At the same time, a number of specialconcessions on duties have been introduced following the budget, particularlyin FY90, which have partially offset the increase in average yields. Thereliance on increases in the development surcharge raises questions as towhether the Government should consider offsetting movements in the exchangerate instead, particularly given the recent introduction of subsidies on awide range of exports. More generally, the widespread use of specialexemptions and concessions, frequent changes in duties for protectivepurposes, and extensive reliance on QRs does not provide an efficientincentive system for the promotion of industrial development. Introduction ofa more uniform and transparent system of customs duties (coupled with aneffective system for duty drawback, etc.) would contribute significantly toindustrial and revenue growth in the medium-term.

Table 2.7: CENTRAL GOVERNMENT REVENUES, FY84-90(Tk billion)

Percentage GrowthFY84 FY85 FY86 FY87 FY88 FY89 FY90 Share Rate

Budget FY84 FY89 FY84-89

Tax Revenue 2A.69 28.87 82.98 88.77 43.68 47.87 82.66 838 81e 15.11

Custom duties 9.34 11.83 18.89 15.42 16.64 18.45 28.42 38 31 14.61Sales taxes 3.50 4.46 4.61 6.39 6.43 5.02 6.67 12 9 7.5%Income and profits taxes 3.39 3.86 4.62 6.68 0.84 6.98 9.86 12 12 16.5XExcise duties 5.97 6.92 7.72 9.41 11.72 13.87 18.17 21 23 18.41 °°Other 1.49 1.80 2.64 3.29 a.a0 3.66 4.84 6 6 19.01

Non-tax Revenue 4.91 7.06 9.30 9.23 9.68 11.15 16.16 17X 19X 17.81

Profits of non-financial enterprises 0.28 0.68 0.78 0.83 0.80 0.68 0.76 1 1 16.71Profits of financial Institutions 0.94 2.13 2.70 2.18 1.70 1.37 1.90 8 2 7.86Interest receipt. 1.18 1.24 2.81 1.92 2.27 1.68 7.60 4 3 7.81Other 2.61 3.01 3.51 4.30 4.86 7.52 8.01 9 13 24.6X

Total Reveuses 28.60 86.93 42.28 48.00 65.26 59.02 80.82 1001 lOO1 16.61X

Source: National Board of Revenue; Ministry of Finance.

144. The Government's approach to income and pro.it taxes also shows ageneral reliance on ad hoc revenue measures, rather than a coherent approachto strengthening the revenue base. A 62 income tax surcharge was introducedas an emergency measure following the FY88 floods and increased to 10% in FY89and 152 in FY90. This approach tends to increase the burden on people alreadypaying taxes, while doing little to spread the burden more equitably. TheGovernment also introduced a tax amnesty in FY86 to capture unreported incomeand fabsequently extended it; given the increasing tax burden on reportedincome, this device may strengthen the incentives to disguise income sources.Finally, the Government has recently extended a number of tax holidays to theyear 2000 despite evidence that the incentive effect of these measures doesnot justify their loss of revenue.

145. It is clear that the Government is trying to pursue too many objectiveswith the revenue system, which has intensified political pressures for specialtax treatment and undermined revenue growth. Given the strong need foradditional revenues and the limited administrative capacity of the government,the tax structure should be revised to focus primarily on facilitating revenuegrowth and providing a simple and transparent set of revenue instruments.While this approach is ifkely to be opposed by special interest groups, itwould go a long way toward reestablishing equity and efficiency in the revenuesystem.

Foreign Aid Utilization

146. While the utilization of foreign aid has been increasingly affected byproblems in the management of local resources discussed earlier, proceduralbottlenecks of various types are an additional problem in almost all sectors.As shown in Chapter III, except for turn-key type investments and a limitednumber of high visibility projects to which the Government and/or the donorsgive special attention, the large majority of donor-aided projects suffer fromsimilar problems of low disbursement rates and lagging implementation.Indeed, differeaces among donors in project disbursement rates can be largelyexplained by the extent to which donors concentrate their funding inrelatively 'easy" areas (especially highly capital-intensive type investments)as compared to funding projects in a variety of sectors. While it is arealistic strategy for many donors to concentrate their assistance in areas ofspecial interest, the Government has an obligation to balance the interests ofdonors across a spectrum of projects to ensure that the public investmentprogram adequately covers the requirements of the sectors. The commonexperience of various donors in terms of poor project implementation in themajority of sectors indicates that the Government may face difficulties inincreasing project aid utilization, even if it is able to resolve problemsregarding the allocation of local funding.

147. In recognition of the problems of slow project implementation, theGovernment announced at the 1986 Aid Group meeting that it intended toundertake studies on the utilization of project and commodity aid in order toidentify specific actions to improve foreign aid utilization. After a numberof delays in initiating the studies (many of which are indicative of more

general problezas in aid utilization), the reports were finally completed bythe middle of 1988 and presented at meetings of the Local Consultative Groupin Dhaka. Following these meetings, the Government asked interested donors toparticipate in working groups to study the reports and prepare specificrecommendations for improvements in existing procedures. Again following anumber of delays, the reports of the working groups were completed bySeptember 1989 and forwarded to the External Resources Division forimplementation. Since that time, the Government has taken no further actionsto implement the reports, despite the fact that almost four years have elapsedsince the Government announced its intention to carry-out improvements ir, aidutilization procedures.

148. The continuing delays in making changes in aid utilization proceduresare surprising, as many of the recommendations of the working groups arefairly non-controversial in nature. For example, the commodity aid workinggroup recognized that the rationale for maintaining separate administrativeprocedures for allocating commodity aid through the External ResourcesDivision had largely disappeared with the liberalization of access to foreignexchange through the secondary market and the narrowing of the differentialbetween the secondary and official exchange rates. Hence, the working grouprecommended that the administration of commodity aid programs should belargely transferred to Bangladesh Bank and integrated with the existingprocedures for allocating foreign exchange through the secondary market. Thisstep is consistent with the government's announced intention to unify foreignexchange management procedures, but no actions have been taken to completethis process. With regard to the project aid utilization study, many of therecommendations of the working group focus on removing redundant steps invarious approval procedures. For example, ministries should be given theright to reallocate funding between core investment projects (or from non-coreprojects to the core pro-ram) witbnut having to seek specific approval fromthe Planning Commission. Staff recruitment should not have to be cleared asecond time with the Ministry of Establishment and the Finance Division afterit had already been approvdd as part of the Project Proforma clearanceprocess. The coverage of customs duties and sales taxes for project-aidedimports should be automatic from the block grant established for that purposein the ADP, rather than requiring a separate line item authorization. Theseand other examples can be cited to show that the majority of therecommendations of the working groups reflect a commonsense approach toresolving implementation difficulties on a case-by-case basis, and theimplementation of these recommendations would be beneficial to both theGovernment and the donors in terms of improving foreign aid inflows.

Budget Management and Expenditure Control

149. Past economic reports have identified and analyzed a number ofdeficiencies in the government's procedures for budget preparation andexpenditure control. For example, the accounting system is antiquated andheavily overburdened and provides little information to monitor the a tualoutcome of the budget during the fiscal year. As a result, the FinanceDivision is forced to rely mainly on changes in the government's cash balancewith Bangladesh Bank to monitor the level of expenditures, rather than more

detailed accounting information. To take another example, the currentseparation of budget functions between the Ministry of Finance and theMinistry of Planning is becoming increasingly undesirable, as the budget isbeing driven by the rapid growth of current expenditures which receive almostno scrutiny or justification in terms of their development impact, unlike thesituation with the ADP. These and other similar problems are well-known tothe Government and exist in many developing countries, so the analysis ofsituation will not be repeated here. Instead, several problems in budgetmanagement which have emerged relatively recently are identified below, aswell as the steps that will be required to address these problems.

150. The first problem is the increasingly unrealistic nature of budgetprojections over the past two-to-three years. As shown in Table 2.8, in FY85and FY86, the estimates for total revenues were relatively conservative, andactual revenue collections exceeded the budget targets in both years. SinceFY87, however, the budget targets for revenue collections have becomeincreasingly optimistic, and revenue collections for FY90 are now expected toshow a shortfall of about 15Z below the budget target, even with new measuresto raise additional revenues (para 113). At the same time, the budgetestimates for current expenditures, which were fairly accurate in FY85, turnedout to underestimate the actual level of expenditures by almost 18Z in FY89.In FY90, stringent measures are required as noted earlier, to limit currentexpenditure growth closb to budgeted levels. Projections of foreign aidutilization in the budget are notoriously hard to make in any country, and thebudget has shown both over and underestimation of net foreign financing duringthe FY85-90 period. Nevertheless, because of the growing tendency in thebudget to overestimate revenues and underestimate current expenditures, thebudget estimates have tended to be overly optimistic about the availability oflocal resources to support the ADP, with the shortfall in development spendingbelow the budget target becoming steadily larger since FY87.

151. The comparison between budgetary targets and actual outcomes in Table2.8 could reflect lax financial discipline as well as unrealistic budgetestimation. However, to the extent that the Ministry of Finance has tended toerr on the side of higher revenues, there is a strong tendency to overrun thebudget on the expenditure side, especially for current expenditures, becauseof the implicit overprograming of commitments. This problem has becomeparticularly evident in FY89 and FY90. As shown in Table 2.9, the expectedgrowth rate for revenues was relatively modest from FY86 to FY88 (FY85represented an exceptional revenue effort), and the correspondence betweengrowth rates for actual and budgeted revenue collections was well within thebounds cf expected errors. For FY89, however, the budget projected a growthrate for revenues of 19.1Z, despite the fact that new revenue measures in thebudget were relatively modest, and the actual growth of revenues was only10.8Z. While this shortfall in revenues may have been affected by the floods

Table 2.8: BUDGET TARGETS AND ACHIEVEMENT, FYSS-90(In billion Take)

FY86 FY86 FY87 FY88 FY89 FY90Budget Actual Budget Actual IBudg t ActIu Budget Actual Budget Actual Budget Esti-mte

Total Revenue 36.69 86.93 89.80 42.28 49.16 48.00 54.44 63.26 63.42 59.02 80.02 68.20Current Expenditure p/ 28.87 28.91 83.43 36.38 38.18 41.60 46.93 49.03 64.20 63.86 71.16 72.80Revenue Surplus 7.66 7.02 6.38 6.90 11.00 8.40 8.61 4.23 9.22 -4.83 9.66 -4.60Net foroign Financing 36.42 28.87 34.66 31.61 87.81 40.36 46.16 44.22 44.02 47.73 60.18 44.97Annual Development Program 38.96 30.40 38.28 36.60 47.64 46.30 60.46 40.76 53.16 42.46 58.03 43.62

In Percent of Budoet Targets

Total Revenue 100.70 108.20 97.60 97.80 93. 6 5S.23Current Expenditures 100.10 108.80 109.00 106.70 117.80 102.30Net Foreign Financing 78.70 90.90 106.70 97.90 108.40 89.62Annual Developent Program 78.00 96.40 97.20 80.80 79.89 76.17

j/ In accordance with the GovernmentV budget classification practice, current expenditures In this table Includecash expenditures as *ell as food subsidies and VCD and relief progroas. (In Table 1.9, food subsidles areshown separately under the food account deficit).

Source: Ministry of Finance; BudgeB documents.

_|_*_ME in _

in FY89, this factor cannot explain the apparently excessive projection ofrevenue growth in the FY90 budget. The FY90 budget has projected a revenuegrowth of 36.9Z, which is well beyond the growth rate achieved in any previousyear, in spite of the fact that the new revenue measures introduced in theDY90 budget were generally comparable to actions taken in previous years whichyielded much less buoyant revenue growth. These comparisons indicate thatwhile the budget estimates were prepared on a relatively conservative basis upto FY88, since then the budget estimates have become increasinglyoptimistic: this has been an important contributing factor to thedeterioration in the fiscal situation.

152. A second problem in budget management which has appeared in recent yearsis an increasing divergence between the expected outcome of the ADP as_ndicated by Ministry of Finance budgetary release data and the actual outcomeof the investment program as indicated by Bangladesh Bank cash expendituredata. This situation reflects a growing problem in cash management in thecontext of an increasingly decentralized budgetary system. In practice, themajor issues appear to be : (a) the build-up of cash balances with governmentdepartments and autonomous bodies; and (b) the growing reliance on implicitrather than explicit cash transfers in the budget to deal with issues such asdebt-service liabilities and accounts receivable.

153. The Ministry of Finance has generally relied on monitoring the releaseof funds from its general account with Bangladesh Bank as its main instrumentfor tracking the overall level of public expenditures. As shown byTable 2.10, however, this approach has become increasing difficult to controlin recent years because of delegated authority to government departments andautonomous and semi-autonomous bodies to hold and manage their own cashdeposits. For example, in FY88 the Ministry of Finance adopted a mildlyexpansionary expenditure policy to offset the impact of the floods in 1987,which was reflected in an increase in the level of net borrowing fromBangladesh Bank of approximately Tk 1.6 billion. This was offset, however, bya build-up in cash deposits by autonomous and semi-autonomous agencies of Tk4.7 billion (as well as offsetting movements in cash deposits of governmentdepartments and government borrowings from scheduled banks), which resulted ina net decrease in credit outstanding to the public sector (and an implicitreduction in actual expenditures) of Tk 1.2 billion. Thus, the government'smildly expansionary policy was more than offset by counter-cyclical cashmovements by other public sector agencies. In FY89, although the Governmentannounced a policy to maintain expenditures or. critical development projects,actual net borrowing from Bangladesh Bank declined by Tk 2.5 billion,indicating a strongly contradictionary fiscal stance. In addition, net publicsector borrowing from the scheduled banks declined, largely because of abuild-up in cash deposits by government departments. These movementsillustrate the need for the Ministry of Finance to upgrade its ability tomonitor and control the public expenditure program. Given the growingcomplexity of the public expenditure program, it would be counterproductive toreimpose a high degree of centralized control on the budget; in addition, such P

a strategy is likely to slow down project implementation. A moresophisticated system for monitoring public expenditures will be necessary forthe Government to maintain effective direction over the outcome of theexpenditure program in the future.

Table 2.9: REVENUE ESTIMATES VERSUS ACTUAL COLLECTIONS, FY85-90

(Annual Growth rates in percent /a)

FY85 PY86 PY87 FY88 PY89 FY90

Budget Actual Budget Actual Budget Actual Budget Actual Budget Actual Budget Estim.

Tax Revenue 21.3 22.6 12.6 14.2 22.7 17.6 15.9 12.5 19.5 9.7 30.9 19.9

Customs Duty 24.4 26.7 1.4 13.2 19.3 15.2 15.4 7.3 12.1 11.5 30.0

Sales Tax 11.4 27.4 -0.2 3.4 43.0 16.9 -7.6 0.7 19.9 -7.6 39.4

Income Tax 12.1 13.9 25.6 19.7 18.8 19.7 26.6 20.0 32.7 5.1 31.0

Excise Duty 18.6 15.7 31.1 11.6 28.4 18.4 24.1 28.2 23.5 18.3 26.7

Non-Tax Revenue 41.1 39.8 3.3 31.7 -6.3 -0.8 2.9 4.3 17.0 15.8 62.9 -3.2

Total Revenue 24.8 25.6 10.8 17.7 16.3 13.5 13.4 10.0 19.1 10.8 36.9 15.5

Ia Growth gates for both budget estimates and actual collections are in percent of actual collections during preceeding

fiscal year.

Source: Budget documents and staff estimates.

Table 2.10: NET CREDIT OUTSTANDING TO THE PUBLIC SECTOR, FY87-89 a/(Tk million)

FY87 FY88 FY89 Net ChangeFY87-88 FY88-89

Claims ofBangladesh Bank (Net) 14269 15885 13385 +1616 -2500

Claims of ScheduledBanks (Net) 8657 5840 3869 -2817 -1971

of which:(i) Gross Claims on

the Public Sector 185+,3 17349 17844 -l16 +495(ii) Less: Deposits of

(a) Government Depts. 5277 2428 5043 -2849 +2615(b) Autonomous and 4611 9081 8932 +4470 - 149

Semi-AutonomousAgencies b/

Net Public Sector 22,926 21,725 17,254 -1201 -4471Credit Outstanding,

a/ As of June 30 of each fiscal year.b/ Includes autonomous and semi-autonomous government agencies such as BADC and Dhaka

Improvement Trust, but does not include autonomous public enterprises.

Source: Bangladesh Bank.

154. Another important issue to be addressed is the collection of debt-service liability (DSL) payments from public enterprises. For the pastseveral years, the Ministry of Finance has enforced the collection of DSLpayments by offsetting liabilities against the release of local funds for theADP. In FY89, for example, this offsetting adjustment amounted to Tk 3.3billion or 26Z of the local funds suppoJedly provided to public sectorautonomous bodies to support project implementation. Although thisbookkeeping transfer is recorded as both an expenditure and revenue item bythe Ministry of Finance, in practice the affected agency does not receive thefunds and therefore is unlikely to carry-out the expected expenditures. Thissituation aggravates the overall shortage of local funds available to supportproject implementation and thereby worsens the situation with respect toforeign aid utilization. While the Ministry of FinLnce has a legitimateconcern to enforce DSL payments, this should be done by directly addressingthe financial capacity of the autonomous bodies to make the required payments,rather than resorting to bookkeeping transactions that disguise the actualimpact on the fiscal situation. It is essential that future efforts toenforce DSL payments are based on a case-by-case examination of the entitiesconcerned, taking into account their capacity to repay, their deposits withthe banking system, as well as measures needed to improve their profitabilitythrough price adjustments and efficiency improvements.

Management of the Food Budget

155. As noted earlier, the Government's food operations have become a majorsource of instability for the budget. Contrary to the generally-held viewswithin government circles, there are now large cash subsidies on foodoperations. Cash subsidies on food distribution through monetized channelsexceeded Tk 6 billion in FY89 and are expected to be about Tk 4.8 billion thisyear (see Annex B). In FY89, however, a substantial decline in foodstocks(which fell below 1.0 million tons by end FY89) generated additional revenuesfrom food sales which limited the negative cash impact of food operations onthe budget to about Tk 3.1 billion. In contrast, this year a 3ubstantialbuild up of foodstocks (to about 1.4 million tons by end FY90) will preemptbudgetary resources to the extent of over Tk 4 billion, so that the negativecash impact of food operations (for financing food stocks and subsidies) onthe budget will exceed Tk 9 billion. Thus, food operations have a similarimpact as current expenditure growth on the development budget (ADP); theyboth deprive the ADP of much needed local currency resources and are among themajor reasons for the recent stagnation of development spending.

156. The emergence of large food subsidies since FY88 has been mainly due tosubstantial increases in import prices of commercially purchased foodgrain -ofabout 55Z for wheat and about 67Z for rice - over the past two years.However, ration prices were not adjusted in FY89, while they were increasedmarginally by 82 for both rice and wheat in FY90 and -- a further 1.5Z morerecently - quite inadequate to cover increased import costs. As a result, allthe monetized channels are now subsidized in varying degrees (Table 2.11). InSome channels current ration prices are far below average costs; for example,the Essential Priorities channel which provides food largely to the armedforces is now subsidized to the extent of 85Z of average cost. In effect.altholugh actual quantities distributed through this channel are relativelysmall (126,000 tons this year), the subsidy is still about Tk 1.08 billion, or22Z of the estimated total cash subsidy this year. Similarly, sales to ruralconsumers under the new rural rationing scheme are subsidized to the extent of39? of cost for rice and 45Z for wheat, and sales of wheat to raralcrusherslmillers under the same scheme are subsidized to the extent of 262 ofaverage cost. These rural rationing schemes together account for 432 of theestimated total cash subsidy.

Table 2.11: RATES OF CASH FOOD SUBSIDY UNDER MONETIZED CHANNELS, FY90

Channel /a Quantity Subsidy Rate Total Subsidy Share of(1000 tons) Rice Wheat Tk million Total subsidy-t

SR,OP 559 18.1 26.4 1,188 24.7RR 395 39.2 45.1 1,704 35.5RC 152 - 26.3 324 6.7EP 126 86.3 84.1 1,079 22.4FM,LE,OMS 270 16.3 23.6 514 10.7Total 1,502 40.7 30.2 4,809 100.0

Ia RR: Rural rationing; and RC: Rural crushers/millers.For a description of other monetized channels, see footnote 12 onpage 22.

Source: Staff Estimates.

157. Given the extent of this negative cash impact of food operations on thebudget, the Government needs to seriously consider ways and means of reducingthis drain in order to provide local currency resources for the ADP by rhasingout food subsidies over time and improving food management. As discussedbelow, these aspects are closely inter-related. In regard to food management,while the Government must assure itself that certain minimum stock levels aremaintained in the country at all times for food security reasons, it is alsoimportant to ensure that procurement decisions (especially commercialpurchases abroad) are managed in such a way that they do not lead tounnecessarily high stock levels and tie up budgetary funds which could beotherwise available for the ADP. For example, the Government will need toprocure substantial quantities of foodgrain domestically whenever there aregood crops in order to support floor prices to farmers. Such domesticprocurement would inevitably lead to seasonal peaks in PFDS' food stocks,tying up budgetary funds for short periods; (this should be viewed asnecessary short-term costs of supporting domestic agricultural development).However, these food stocks should be smoothed out over a short period, byselling off accumulated stocks during the lean months between crops so thatover the year as a whole, the budgetary costs of domestic procurementoperations would be minimized. This would not be possible, however, iffoodgrain imports (both commercially purchased and aid-financed imports) addto domestic foodstocks and depress market prices maKing it difficult for PFDSto sell off its stocks through monetized channels (see below). Therefore, ifdomestic crops are expected to be as good as currently forecast, imports,especially commercial imports, should be managed very carefully. If at anytime imports of foodgrain are needed to supplement domestic production,priority should be given to aid-financed imports rather than to commercialimports, since the former generates cash resources for the budget and supportsthe balance of payments, while the latter constitutes a substantial drain onlimited budgetary resources and foreign exchange reserves. Given theplentiful availability of rice domestically, the Government should also

consider substituting more rice for wheat in PFDS distribution, rather thanimporting wheat commercially to meet perceived shortfalls in wheatavailability.

158. In contrast, there is considerable scope for reducing cash foodsubsidies by adiusting ration prices of monetized channels. As noted, rationprices have beeu adjusted very little in the last two years and are far belowinternational prices (especially for rice) and actual costs incurred by theFood Department. Moreover, to the extent that exchange rate adjustments areneeded, the magnitude of necessary adjustments in ration prices will be evenlarger. The Government therefore should consider initiating a phased programfor reducing these subsidies as soon as possible. In this context, reducingthe large subsidies under the Essential Priorities channel and/or transferringthem to the defense budget should be considered. Paradoxically, however,domestic market prices for foodgrains are currently below rati .i prices ofother channels (excluding the rural rationing channel), given the bumperharvests. Thus the extent to which these ration prices can be raised will belimited, (and large food subsidies will continue to be incurred). In thisregard, the Government should review whether the newly introduced ruralrationing scheme is achieving its intended objectives. To the extent thatthis channel is heavily subsidized and food distributed through it is resoldin the market (as currently happens), it will have a depressing effect ondomestic market prices. This also raisee questions about commercial purchasesof foodgrain abroad at prices which are much higher than those which prevaildomestically. While such purchases were economically justified in FY87 andFY88, with import prices now far above domestic procurement pric3s (especiallyfor rice), there is now little justification for such purchases (Table 2.12).Apart from their increased costs, such imports also have a depressing effecton domestic prices especially when domestic crops increase. (Aid imports, solong as they are distributed through monetized channels substantially belowworld prices, also will have similar depressing effects on domestic prices anddampen farmers' incentives. Until recently, the level and structure of foodaid clearly did not hurt producers' incentives, specially since donors havebeen willing to p3stpone aid shipments when needed. Although domestic marketprices and ration prices this year have slipped significantly below worldprices, it is, however, still premature to determine whether this is apermanent phenomenon.) Since lar;e budgetary cash subsidies arise mainly fromcash imports, replacing such imports with domestic procurement to meet PFDS'needs should help to substantially reduce food subsidies, as well as helpbring domestic prices more in line with world prices by adding to domesticdemand. As domestic market prices rise, ration prices can then be raised toreduce subsidies still further.

Table 2.12: TRENDS IN FOODGRAIN PRICES, FY87-90

FY8- FY88 FY89 FY90/-Rie Wh TtRice WhRc at Rc a R Weat

Taka per MTrGovtCWI-port 56,66 4,472 6,842 4,468 9,888 6,691 11,440 6,848D4ometic procuremnt price 7,440 5,140 6,190 5,88o 8,620 5,450 6,938 6,620Ration Price 7,760 6,160 8,230 6,890 6,700 6,650 9,390 6,100Market Prle 8,640 5,290 9,190 6,470 9,860 6,700 9,14/c S,884LeGUS Pricalb 8,6" 6,911 9,418 6,164 9,526 6,182 9,826 6,190

In Percont of Ixport PriceProcurement Price 181.8 114.9 119.7 120.0 90.7 95.8 78.1 88.6Ration Price 136.8 116.2 120.8 120.6 92.7 99.3 82.1 96.1Market Price 150.7 118.8 184.8 122-4 99.7 100.2 79.8 92.7OMS Price 151.0 182.2 187.6 188.0 101.6 108.6 86.9 97.6

g Estimate.a Open Market Sales channel of the PFDS.

Average for first 7 months of FY90.Source: Bangladesh Bank; Food Ministry; WFP; Staff estimates.

159. In view of continuing food subsidies, some bilateral donors have triedto encourage the Government to reduce and eventually eliminate food subsidiesover time. With this objective in view, the Government has been encouraged toequalize ration prices with open market sales (OMS) prices which weregenerally set at a premium of 152 above the domestic procurement price untilFY89 and at a 102 premium thereafter. This formula permitted the Governmentto fully cover procurement costs as well as overhead costs until about FY88,and since import prices for commercial purchases remained much below domesticration prices, to eliminate cash subsidies. However, given the sharpincreases in import prices of commercially purchased foudgrain over the pasttwo years, this approach alone will do little to reduce food subsidies now.The OMS price at present is 142 below the import price of commerciallypurchased rice and 32 below the price of wheat. Similarly, the OMS price is142 and 242 respectively below the average cost (including overheads) of riceand wheat distributed through monetized channels. Therefore, the OMS price asa reference price for eliminating subsidies now bears little relationship toeither the international price or the average unit costs of food operations.But, as notel earlier, if commercial imports are replaced by domesticprocurement in the case of rice and by aid imports in the case of wheat, thenthe equalization of ration prices with OMS prices can help to substantiallyreduce subsidies.

160. Recent trends indicate a number of issues which are relevant toimproving food management and its impact on the budget, as well as onagricultural development - the structure of ration prices, tha level of OMSprices and its relationship to world prices, the role of food aid andprocurement policies in a situation where the country is getting close toself-sufficiency etc. These issues will need to be carefully analyzed to helpformulate a coherent food management policy which is consistent withagricultural development goals and budgetary stability.

The Role of Exchange Rate Management

161. Effective management of the exchange rate is of critical importance forreversing the recent deterioration in the external payments position and forproviding appropriate signals to investors regarding resource allocation andinvestment decisions. It is also important for restraining the growth ofcurrent expenditures (especially export subsidies). However, as notedearlier, the nominal exchange rate was not adjusted from November 1988 untilearly March 1990; and the real effective exchange rate appreciated by about112 over that period. Although the nominal official exchange rate wasdepreciated by 4.992 in early march 1990, this will not be sufficient even toregain lost ground. This section reviews the need for a more active exchangerate policy in the b oader macroeconomic context, as well as its implicationsfor budget management.

162. The generally held view in Bangladesh is that exchange rate adjustmentsare likely to be of little benefit at present. The main arguments advancedagainst exchange rate depreciation are that: (a) the response of exports tosuch adjustments is likely to be limited in view of quotas on garments exports(particularly to the US market), the recent decline in external demand forshrimp, and the secular decline in world demand for Jute and ,ute products;(b) likelihood of increased domestic inflation as a result of exchange ratedepreciation, and (c) the narrow differential between the official exchangerate and the secondary rate (currently less than 22) implying that theexchange rate more or less is in equilibrium and that there are no pressureson the exchange rate to warrant a change. The Government also believes thatthe foreign exchange reserve position has now stabilized at around $500million (1.7 months' imports), and that the present level of reserves ismanageable, provided the country soon receives the fast-disbursing assistanceexpected from donors.

163. While these arguments are dominated by short term imperatives, the casefor exchange rate adjustment should also be viewed in the light of the loss ofreserves and the broader macro-economic context and particularly Bangladesh'slonger term development needs for sustained employment and industrial andexport growth. The recent appreciation of the real effective exchange rate(by 11Z since November 1988) is by itself not necessarily compelling, thoughimportant, evidence that the exchange rate is out of line. However, it shouldbe noted that the balance of payments situation has significantly weakened,export growth has decelerated over the past eighteen months or so, and that atthe same time imports have risen rapidly, with a recovery in domestic demand.An overvalued exchange rate makes imports cheaper than they should be (giventhe underlying scarcity of foreign exchange in the country) and encouragesimports. On the other hand, the weakening of exports in the face of weakforeign demand reflects the inability of Bangladeshi exporters to be price-competitive in overseas markets at the prevailing exchange rate. Thus, thissuggests that Bangladeshi exports are being priced out of overseas markets incompetition with exports from countries which pursue more aggressive exchangerate policies. The recent introduction of large scale cash subsidies for anumber of exports noted earlier (such as jute, leather, shrimp and evengarments) is a clear indication of this problem.

164. In this context, it should be noted that the appreciation ofBangladesh's real effective exchange rate, when compared to those of otherless developing Asian countries which directly compete with Bangladesh inovurseas markets, has been far larger than the 112 noted above. For example,over the 1986-1989 period, India depreciated her real effective exchange rateby roughly 332 and Pakistan by 302, while Bangladesh's appreciated by about 32(Table 2.13). Similarly, Thailand (which competes directly with Bangladesh inshrimp) depreciated her real effective exchange rate by 18Z over the sameperiod. Even more significant is the broad trends in real effective exchangerates in these countries over the past decade. For example, compared to anindex of 100 in 1980, Bangladesh's real effective exchange rate depreciatedmarginally to 97 by the end 1989, while India's depreciated to 63, Pakistan'sto 61, Thailand's to 79 and China's (an emerging jute exporter) to as low as54. These countries compete directly and successfully with Bangladesh notonly in the case of established exports, such as jute, leather, shrimp, ready-made garments and vegetables but also in areas which are relatively high onBangladesh's agenda for future export development (suck as leather goods,basic electronics, finished textiles etc). However, without a significantimprovement in competitiveness through effective exchange rate management andfurther improvements in tariff policies there is little chance that theseplans for export dev'lopment will be realized in the near future.

Table 2.133 MOVEMENTS IN REAL EFFECTIVE EXCHANGE RATES, 1980-1989

Country 1980 1986 1989

Bangladesh 100 94 97India 100 93 63Pakistan 100 87 61China 100 55 54Thailand 100 96 79

Sources Staff Estimates.

165. Although the differential between the nominal official exchange rate andthe secondary market rate is now less than 2Z, this by itself provides littleindication whether the exchange rate is currently in equilibrium or not. Asnoted earlier (in para 163) this differential has been achieved partly byappreciating the secondary market rate. More important, the secondary marketrate is not a good barometer of whether there is excess demand for foreignexchange or not. It is essentially a managed rate (in same way as theofficial exchange rate is) which the central Bank maintains withinpredetermined levels by providing foreign exchange as needed to meet actualdemand. Thus, in FY89, Bangladesh Bank provided nearly $880 million, in

addition to private transfers from abroad, to meet the demand for foreignexchange at the managed rate which remained relatively unchanged (at Tk 32.90to the US dollar from December 1987 until early March 1990). This year theCentral Bank is expected to provide around $1.0 billion including transfersfrom its foreign exchange reserves to meet anticipated demand in the secondarymarket at the managed rate. Indeed, this has been the primary reason for thelarge decline in foreign exchange reserves by nearly $650 million over thepast twelve months. But, so long as the Central Bank is able and continues toprovide foreign exchange to the secondary market by running down its reserves,there is no inherent reason why the managed rate will provide early warning ofthe need to depreciate the exchange rate. In other words, given the fact thatthe secondary market rate is a managed rate, the critical indicator is not themovement (or the apparent lack of it) of th}. secondary market rate (and itsdifferential from the official exchange rate); rather, it is the level offoreign exchange reserves which needs to be monitored carefully. As noted,these reserves came down sharply so far this year, clearly indicating the needfor adjustment of the exchange rate. The secondary market rate will notnecessarily rise until the Central Bank decides to float that rate in order toprotect its reserves.

166. Views about exchange rate management in Bangladesh are excessivelycolored by short-term perceptions, particularly the short-term elasticitypessimism noted earlier. However, it is necessary to be much more forwardlooking, given Bangladesh's structural problems and the long term developmentneeds for rapid employment generation, and the critical role labor-intensiveindustrial, especially export growth must play in this regard. As discussedearlier, Bangladesh's structural external payments problem has worsenedsignificantly over the past two years. Exports now finance only about 38Z ofimports and remittances another 23Z, compared to 41Z and 28Z respectively twoyears ago. So far, the external position has been maintained in reasonablebalance mainly because of large aid inflows of the order of 7-8Z of GDPannually, of which program/commodity aid has accounted for a large share.This has, however, helped to maintain the exchange rate at an artificiallyhigh level which is not warranted by the underlying structure of the balanceof payments and has discouraged export growth. In effect, Bangladesh hasfailed to develop opportunities for labor-intensive exports except in the caseof ready-made garments. However, given the improved prospects for fasteragricultural growth, Bangladesh now faces prospects of a substantial declinein food aid in the near future. While alternatives must be found to replacethis fast disbursing aid with other forms of assistance, total aid inflows areunlikely to rise rapidly unless the pace of economic development and projectimplementation improve significantly, as discussed in Chapter III. Also,little trust can be placed on workers' remittances from abroad to provide asteady source of foreign exchange earnings in the future. Theseconsiderations underline the need for Bangladesh to increase export earningsrapidly - twice as rapidly as import payments - in order to achieve a viableexternal position ovar the medium to long term. Given the limited purchasingpower of the domestic market (despite its large but mainly poor population)and the scarce natural resource base, Bangladesh musz increasingly look tolabor-intensive export processing activities to provide the necessary foreignexchange and employment opportunities to sustain future growth. Although the

Government has liberalized imports and rationalized tariffs to some extent,the expected shifts in the allocation of resources in favor of exports hasstill not happened, given tle still high levels of effective protectionprovided to import substituting activities and the very limited adjustments inthe exchange rate. For such shifts in resource allocation to happen, a muchmore aggressive posture to promote exports (while minimizing budgetary costs)through a very active exchange rate policy and continued improvements in tradepolicy are needed.

167. The need to improve the budgetary situation in the short to medium termprovides another powerful justification for exchange rate action. As noted,the Government has already provided large cash subsidies to jute exports and awide range of other exports. These subsidies should be eliminated in order tobalance the budget; and a significant adjustment of the exchange rate willhelp to achieve this goal and at the same time improve the profitability ofexports. Moreover, as discussed throughout in this report, the budget isunder severe pressure, and can ill-afford such extra impositions. (In thecase of jute, exchange rate adjustments alone, though essential, will not besufficient. As discussed in para 49, serious efforts must be made to solvethe structural problems in the jute industry). Substantial exchange rateadjustment will also facilitate the Government to continue the process oftariff reform without undermining revenue objectives. It is also helpful forrestraining import growth without reimposing quantitative restrictions toprotect the external payments situation and reserves. Indeed, a depreciationof the exchange rate, combined with selective increases in regulatory tariffsand export rebates can help to reduce the importation of items - such as milkfoods and electronic goods - for smuggling to neighboring countries, which hasbecome a concern of the Government.

168. An exchange rate adjustment will have some impact on domestic inflationas import prices rise. However, the effects of much-needed one timeadjustment should not be confused with the possibility of persistentinflationary pressures over time. Moreover, efforts to regulate importsthrough other mechanisms, (such as imposing higher margin requirements onletters of credits etc.), as demonstrated by recent experience, will lead tohigher import prices, creating large windfall profits to importers; however,in the case of exchange rate adjustments, such windfalls will mainly accrue tothe Government in the form of higher revenues. Also exchange rate actionshould not be viewed as an isolated economic policy decision, but mustnecessarily be accompanied by prudent fiscal management, and particularlyrestraints on wages. If this is done, the inflationary impact of a rise inimport prices can be contained reasonably well. However, if governmentexpenditures are not brought under control and if the Government resorts tobank borrowing to finance fiscal deficits, then domestic inflationarypressures can rise. In such situations, the underlying cause of inflationarypressures is the fiscal imbalance rather than exchange rate policy. As notedearlier, a rise in import prices at this stage is not undesirable. It shouldalso provide appropriate signals to investors to adopt less capital and morelabor-intensive production techniques which are more compatible withBangladesh's resource endowments, and restrain imports. For public sectorprojects which utilize imported capital goods financed through project aid,

the impact of a devaluation is likely to be neutral; although the taka valueof foreign costs of projects will increase, the taka value of aid financingwill also rise simultaneously. While domestic prices of imported goods willinevitably rise, this should be manageable provided that the Government takeseffective actions to restrain wage increases and contain current expenditures.Indeed, such restraint is essential if the benefits of exchange rate actionare not to be quickly eroded by inflation and rising domestic costs due toinappropriate fiscal policies. Thus, if sound fiscal policies are pursuedsimultaneously, an exchange rate adjustment should be no more inflationarythan, and is in fact preferable to, alternative policies of resorting to bankborrowing or starving the development budget of resources to provideassistance to exporters through cash subsidies.

Chapter III

Alternative Growth Scenarios and Aid Recommendations

A. Alternative Growth Scenarios 40/

169. The central development issue facing the Government is to bring about asignificant improvement in the widespread poverty situation. This willrequire, given the current rate of growth of the labor force, the creation ofabout 1.0 million jobs a year, compared to about 750,000 jobs created annuallyin the FY85-88 period. To achieve this goal, it is essential for Bangladeshto accelerate its rate of economic growth from the average of 3.7Z achievedduring this decade to at least 5.52 over the medium to long term. This inturn calls for a renewed commitment to structural reform, significantimprovements in economic leadership and management, and, given the limitedcapacity of public sector institutions, considerable emphasis on the privatesector for the creation of productive capacity and the provision of inputs andservices. In addition, Bangladesh must raise its rate of aggregate investment(including both public and private) to at least 14-152 of GDP over the nextfew years. Even this higher rate of investment will not be sufficient tomaintain growth at the desired level without a significant improvement in theefficiency of resource use. Increased foreign assistance will be needed toachieve a higher investment rate, but this inflow must be matched by effortsto mobilize greater internal resources and improve the efficiency of savingsformation in the domestic economy.

170. Priorities in the agenda for long-term social development and povertyalleviation (which must complement reform measures on the macroeconomic front)include population control, human resource development, expansion of targetedassistance to the poor, environmental issues (especially floods and frequentnatural disasters), and improvements in public administration. Even with morerapid economic growth, progress in improving living standards and alleviatingpoverty is bound to be exceedingly slow and difficult unless a significantreduction can be achieved in the currently high fertility and populationgrowth rates. To achieve this, much greater emphasis needs to be placed onprograms aimed at raising the very low literacy rate and improving the primaryhealth care delivery system and access to basic services. Although a higherrate of economic growth and improved social services are necessary conditionsfor addressing the pervasive poverty problem, these alone will not besufficient. Special targeted interventions will be required to provide aminimum safety net for the poorest sections of the population (including rurallandless households and destitute women) who might not otherwise benefit fromthe economic growth process.

401 Annex A provides a more detailed summary of the major development issuesin Bangladesh at the present time, drawing primarily on the more detailedanalysis provided in Chapters 1, 2, and 4.

171. Although the Government's stated development objectives are basicallysound. the primary constraint in almost all cases is implementation capacity.The ability of the Government to absorb and implement policy reforms islimited, and too ambitious an agenda inevitably results in important actionsbeing watered-down or deferred. Similarly, although productive investmentopportunities exist in almost all sectors, the Government's capacity toprepare priority projects and carry them through to completion needs to bestrengthened. These factors argue for introducing a much stronger set ofpriorities into the development policy agenda. Because so much needs to bedone in Bangladesh, there is a natural tendency to assign high priority to toomany activities. This problem can be aggravated by pressures from the donorcommunity, many of whom are highly vocal in areas of apecial interest to them.

172. This section describes two alternative growth scenarios for the nextfive years (FY91-95) based on the Government's policy performance andcommitment to structural reform. Besides illustrating the critical need forthe Government to stem the current drift in economic policy-making and make aclear commitment to a more aggressive growth policy, this section provides thetechnical background for the discussion of aid requirements presented inSection B.

173. The Base Case Scenario. The Base Case Scenario ("Modest Growth")represents the likely outcome if the Government continues its current economicpolicy stance. This assumes that the Government will take some actions toprevent a serious erosion of economic growth and stability, but not enough toprovide a sustained rapid growth and development. The major policyassumptions behind this scenario are:

) The Government initiates a financial stabilization program soonbut without a strong commitment to structural reform.

(ii) Budget stringency achieves some restraint on current expendituresand a modest prioritization of the public investment program, butdoes not address the more fundamental questions of expenditurepriorities, so that project implementation and aid utilizationfail to improve significantly.

(iii) The exchange rate is adjusted in stages over the coming months toits 1983 level in real terms, but further exchange rate movementsand the trade liberalization program make limited headway, leadingto slower export growth.

(iv) Financial sector reforms are introduced, but the implementation ofadjustments in interest rates and improving loan recovery proceedsslowly constraining the financing available for privateinvestment.

(v) The recent liberalization of minor irrigation equipment remainsintact, but foodgrain management policies continue to interferewith producer incentive prices.

Under these circumstances, it is realistic to expect that at best the economywill grow at around 3.5Z per annum on average; i.e. slightly below the rateachieved during the FYS8-89 period (see Table 3.1). Risks in this situationinclude a further decline in the investment rate in conjunction with thefinancial stabilization program, which could seriously compromise medium-termgrowth prospects, or political factors which could make public expenditurereform even more difficult than is assumed here. Nevertheless, given recentexperience in Bangladesh, it is plausible to expect that the shock effect of afinancial stabilization program would trigger a return to reasonably prudentmacroeconomic management and modest but continued progress in the mostessential structural reforms.

174. While financial stabilization and better macroeconomic management wouldsupport a reasonable level of economic growth under the Base Case scenario,the efficiency improvements needed to achieve a higher rate of growth would belargely foregone in order to minimize domestic opposition to structuralreforms. Economic growth on the order of 3.5Z p.a. would permit only marginalgains in average per-capita private consumption levels. Given the slow growthof agricultural production and the continuing high rate of population growth,economic conditions of the poorest members of society would undoubtedlydeteriorate. Targeted programs designed to address poverty concerns and humanresource programs such as health and education are unlikely to be effectivewithout higher economic growth, as shortages in local funding due to slowrevenue growth would limit their implementation. Thus, the Ba3e Case scenariowould be insufficient to address Bangladesh's long-term development problems,and the economy would make little overall headway during this period.

Table 8.1: SUMMARY OF BASE CASE SCENARIO:MODEST CROWTH

Actual Projected Average AverageFY89 FY90 FY91 FY92 FY9s FY94 FY96 FY9-9s6 FY9s FY97 FY98 FY96-98

_- -- -- -- _- - -- -- - -- ^-- -- -- - -- - -_- -- - -- - _-- -- - -- - -- - - -_-- -- -- - -- - -- -_- - -- - _-- -- - -- -- ----- ----- -----Real Growth Rates(X)

CDP 2.30 5.49 8.25 8.37 8.48 8.42 8.46 3.39 3.49 a.69 3.63 3.67ACRICULTURE 0.28 6.76 2.50 2.60 2.60 2.40 2.40 2.46 2.40 2.40 2.40 2.40TIMUSTRY 5.15 5.10 2.00 2.40 2.60 2.80 2.60 2.44 2.60 3.00 3.00 2.87

VICES 3.39 4.80 4.60 4.70 4.76 4.80 4.86 4.74 4.90 4.95 6.00 4.9sIVATE CONSUMPTION 3.00 4.23 1.90 2.82 2.88 8.00 3.03 2.73 8.06 3.15 3.16 3.12IVATE INVESTMENT 4.08 5.76 6.20 6.20 6.20 5.80 5.40 6.26 5.60 6.50 6.50 6.60-.IC CONSUMPTION 8.61 13.62 2.21 2.86 2.d8 3.20 3.58 2.97 8.69 3.64 8.66 3.63ULC INVESTMENT -2.98 -4.51 4.80 4.60 4.8b 4.28 4.18 4.42 4.16 4.12 4.68 4.48ORTS 6.62 1.60 6.72 5.84 5.92 8.02 6.10 5.92 6.18 6.27 6.36 6.27

MPORTS 8.41 5.97 -1.94 2.39 2.40 8.88 3.65 1.96 3.67 3.62 3.69 3.63

Ratios(S)

URRENT BALANCE/GDP -8.94 -6.70 -4.69 -8.37 -6.16 -4.02 -6.92 -4.28 -6.72 -5.51 -6.81 -5.51IXED INVESTMENT/QOP 11.69 11.02 11.24 11.41 11.56 11.72 11.88 11.68 12.04 12.19 12.37 12.20ATIONAL SAVINGS/GDP 4.75 4.80 4.65 6.04 6.42 6.70 6.98 5.33 6.32 6.68 7.06 6.69-ET BALANCE/GOP -7.42 -7.45 -4.74 -4.60 -4.82 -4.90 -4.98 -4.sl -4.91 -4.89 -6.77 -4.86

REVENUE/GODP 7.38 7.60 7.69 7.70 7.70 7.72 7.74 7.71 7.81 7.85 8.02 7.89, l REVENUE/ODP 9.08 9.0o 9.29 9.81 9.31 9.84 9.38 9.82 9.44 9.48 9.66 9.63OTAL EXPENG;TURE/WOP 18.50 16.68 16.03 15.91 16.13 16.23 16.84 16.13 16.36 16.38 10.43 16.39EDT SERVICE RATIO 21.20 26.67 24.70 20.10 18.40 17.90 16.40 19.60 15.80 15.20 14.40 16.10COR 5.68 2.58 8.77 8.70 3.68 3.74 8.76 3.73 3.77 3.71 3.72 3.73

DISGURSEMENTS .. (US1) 1670 1641 1840 1976 2106 2283 2820 2096 2521 2646 2786 2661of which

FOOD AID 227 261 290 808 al8 334 860 319 368 886 406 387PROGRAM AID 659 480 560 572 687 599 676 577 703 760 830 764PROJECT AID 904 900 1000 1100 1200 1800 1400 1200 1460 1500 1660 1600

Source: Staff estimtes.

ui I mm-

175. The High Case Scenario. The High Case scenario ("Accelerated Growth";Table 3.2) assumes that the Government renews its commitment to thestructural reform program and sound macroeconomic management. In particularit is assumed that, in the context of a reheved program for economicstabilization and structural adjustment, the Government will take vigorousactions to contain current expenditure growth in less essential areas,substantially increase revenue mobilization (including structural reform ofthe tax system) and allocate such resources to development activity. A majorreprioritization of the public expenditure program over the coming months,aggressive action to significantly improve the competitiveness of exports andregain external payments viability through a substantial depreciation of thereal exchange rate on a continuing basis, improving food management (throughdomestic procurement) to support agricultural development and seriouscommitment to the rapid implementation of financial sector and trade reformsto improve resource allocation, especially private sector activity, should beother elements of such a program. Such action should help increase the levelof public and private investment from 11.7Z of GDP in FY89 to 13.8Z in FY95and ensure rapid growth in agricultural production, non-traditional exports,and private sector-led industrial activity. Tk s scenario would supporteconomic growth on the order of 5.2Z of GDP per year, with current account andfiscal deficits remaining in the range of 6-7Z of GDP. Rapid growth in per-capita incomes would contribute to a significant improvement in per-capitaconsumption and provide the resources to begin making inroads into widespreadpoverty. While this scenario would require a significant increase in externalassistance as compared to the Base Case scenario (i.e., new commitments offoreign aid growing on the order of 52 per year in real terms), this is notoverly ambitious in the context of a credible structural adjustment programand in view of the interest of many donors to increase aid flows toBangladesh.

176. These two alternatives clearly do not exhaust the scenarios concerningthe possible course of the economy over the next few years. If vigorousaction is not taken on a timely basis to stabilize the present financialdeterioration, the economy could do significantly worse than assumed in the'base case" scenerio. In such a situation, economic growth would slow down,per-capita incomes, consumption, employment opportunities, and the pace ofhuman resource development and poverty alleviation programs would all suffer.Moreover, such a situation would generate social, economic and politicalpressures which are likely to be unsustainable even over the medium term. Itis assumed here that the Government is fully aware of these potential risksand will take the necessary action to prevent a further deterioration in theeconomic situation and to achieve at least the Base Case scenario. However,whether the Government will move more rapidly to accelerate economic growthand to address the structural problems of development cannot be prejudged atthis stage. Without a major commitment to structural reform, the "High Case"scenario outlined here is unlikely to be realized; and the economy couldcontinue to drift on a low-level equilibrium path, as it has over the pasttwo-to-three years.

Table 3.2: SUVMMARY OF HIGH CASE SCENARIO: ACCELERATED GROWTH

Actual Projected Average AverageFY89 FY90 FY91 FY9V FY98 FY94 FY9S FYOl-9s FY96 FY97 FY98 FYOs-9s

----- ----- - - - - - ----- - -- -- - -- - -- -- - -- -- -- - -- - - -_- - -- - -_- -- - -- - -- -- - -- - - - - - _- - -Roal I rowth Rate. (U)

CDP 2.80 5.49 4.91 5.01 5.31 5.85 5.43 S.20 5.51 5.59 5.68 5.59AGRICULTURE 0.26 6.75 8.60 8.60 8.70 8.70 8.eo 8.68 8.80 8.90 4.00 3.90INDUSTRY 5.16 5.10 5.00 6.00 7.40 7.50 7.60 6.70 7.70 7.80 7.90 7.e0SERVICES 8.39 4.80 8.30 6.10 8.10 8.10 8.10 6.14 6.20 8.20 8.20 6.20PRIVATE CONSUYPTION 8.00 4.28 8.65 v.74 4.24 4.42 4.60 4.10 4.50 4.61 4.58 4.56PRIVATE INVESTMENT 4.06 6.75 5.20 9.00 9.50 10.00 10.60 8.84 11.00 11.50 12.00 11.50PUBULIC CONSUNPTION 8.81 18.62 8.26 8.60 8.50 8.50 8.50 8.50 8.50 8.60 8.50 8.50PUBLIC INVESTMENT -2.96 -O6.1 1231 14.00 11.87 9.87 8.76 11.86 8.75 8.50 8.75 8.67EXPORTS 6.52 1.60 12.11 9.14 8.14 8.06 8.04 9.10 8.05 7.00 7.11 7.89IMPORTS 3.41 5.97 3.51 5.09 5.28 5.64 5.69 5.08 566" 5.62 5.69 S.6o

I-ARatio*($) 0

CURRENT BALANCE/GDP -6.94 -4.70 -6.94 -4.72 -6.65 -6.58 -6.49 -6.68 -4.80 -4.19 -4.07 -4.19FIXED INVESTMENT/GOP 11.69 11.02 11.48 12.12 12.78 18.28 18.82 12.68 14.89 15.00 15.69 15.03NATIONAL SAVINQS/GDP 4.75 4.80 4.48 5.40 6.06 6.70 7.88 6.00 8.09 8.81 9.62 6.84BUDOET BALANCE/GDP -7.42 -7.45 -4.54 4s.87 -6.54 -4.81 -7.01 .8.65 -6.98 -7.13 -7.18 -7.09TAX REVENUE/GDP 7.86 7.60 8.58 8.72 8.96 9.06 9.16 8.90 9.40 9.47 9.70 9.52TUTAL REVENUE/GDP 9.08 9.05 10.88 10.54 10.80 10.92 11.04 10.74 11.30 11.40 11.64 11.45TOTAL EXPENDrTURE/GOP 10.60 16.68 16.03 16.92 17.34 17.78 18.06 17.89 16.28 18.63 18.60 18.54DEBT SERVICE RATIO 20.45 25.67 22.70 18.06 16.43 15.78 14.08 17.40 18.00 12.40 11.80 12.40ICOR 5.68 2.38 2.49 2.52 2.58 2.84 2.71 2.58 2.78 2.85 2.93 2.85

DISBURSEMENTS . . (USS) 1670 1641 1926 2150 2810 2525 2700 2822 2976 3190 8400 8188of which

FOOD AID 227 261 250 226 200 176 150 200 150 1SO 1SO 1SOPROGRAM AID 589 480 600 700 760 826 900 757 1000 1050 1100 1050PROJECr AID 904 900 1075 1225 1860 1626 1650 1385 1825 1990 2150 1988

Source: Staff projections.

177. Creditworthiness. As a percentage of exports of goods and services(including remittances), Bangladesh's debt service ratio peaked at 28% inFY86; this ratio is expected to be around 26Z in FY90 although it hasgenerally fluctuated between 21-242 in recent years.411 These fluctuationshave been duc in large part to repayments of short-term food borrowings fromtime to time, while repayments to the IMF have generally increased the debtservice ratio in recent years. However, much of Bangladesh's hard-loanrepayments are being effectively refinanced on more concessional terms throughsuch mechanisms as the SAF/ESAF arrangement, Japanese debt-service grantrelief, and IDA supplemental assistance for IBRD interest payments. There isno significant amount of private non-guaranteed debt outstanding. The debt-service ratio is expected to decline in the coming years, assuming thatBangladesh limits its borrowing primarily to concescional credits, whichcurrently account for approximately 952 of total outstanding debt. Thus, thecurrent debt-service ratio should not be a significant impediment to growthprovided that Bangladesh continues to limit short-term external borrowing, asit has done so far.

178. Policy Matrix. The two economic scenarios described here present astylized situation that is unlikely to be fully realized in practice.Table 3.3 therefore provides a policy matrix of the type of actions that maybe expected under each scenario over the next five years, although the actualsituation is likely to exhibit a mix of policies from both cases. For thisreason, the most critical actions under each scenario are marked byunderlining in Table 3.3. The most important policy actions are deemed to be:

Ci) implementing a realistic financial stabilization program;

(ii) improvements in public resource management to control the growthof current expenditures and accelerate implementation of aprioritized investment program;

(iii) appropriate adjustments of the real effective exchange rate andcontinuation of the trade liberalization reforms;

(iv) financial sector reforms; and

(v) continued liberalization of minor irrigation equipment andimprovements in foodgrain management policies.

The other actions listed in Table 3.3 would be supportive of the alternativescenarios but are not judged to be as critical in determining the finaloutcome of medium-term economic growth path.

41/ Including IMP repurchases and service charges. The debt service ratio isin the range of 16-172 if payments to the IMF are excluded.

Table 3.8: THE FY81-96 POLICY AGENDA ASSUMED IN TWO ALTERNATIVE GROWTH SCENARIOS.

Area Base Case Modest Growth Hich Case: Accalerated Growth

1. Financial 1. Introduce a financial i. Macroeconomic policesoStability stabilization orogram with combicins fiiancil stabitization

limited commitment to structural with substantial structuralreforms. reforms.

2. Fiscal Poltcy 1. Modoet control on growth of t. Stringent controls on growthrecurrent *xpenditures, with no of recurrent expenditures andreallocation to priority increarod allocations foractivities (e.g. ONM). priority activities (social

sectors, O*M).

It. Limited re-prioritization of ii. Significant reprioritizationubnilc investment program and of public Invsstment program andfundintg of Core program, prot ction of core program.

ill. Modest revenue growth based iii. Structural tax reform andon existing tax Instruments and increasss in public pricing tochanges In public pricing. economic levels.

iv, No improvements In project lv. Full imploe'4ntation ofimploemntation. recaoniida-tU-noi, F the task

forces on project*-nd conimodttyai.

S. Trade and Exchange t. Movement of real effectivo t. Substantial movement of realRate Policies exchante rate to 1983 roforence effective exchange rate below

level. 1983 reference level to Improveexternal competitiveness.

i. No significant changes In II. Removal of all QRs exceptQRs and Import restrictions. for hoelth, religion and public

safety reasons.

il. Tariff changes geared to lit. Tariff reform to reducerevenue requirement. anti-export bias In level of

effective protection.

4. Financial Sector i. Market oriented interest rate 1. Market-orionted Interest rateRefoeftm structure Introduced but not structure adiusted frequently to

adjusted for higher Inflation, reflect macroeconomic conditions.

ii. Modest improvoment In loan It. Loan recovery pursuedrecovery due to polit:cal aggressively.Tnterforence.

6. Agriculture and i. Continued dereoulation of 1. Continued deregulstion ofFood Policy minor rrisation equipment. minor irriTation equipment.

It. Commerclal foodgrain Imports II. Foodgraln management pollcyInterfere with domestic gi vs oriority to domesticprocurement and producer procurement and adequate producerIncentives * Incentives

Ill. Government accepts Action Ill. Government accepts Action aPlan for Flood Conirol but fails Plan for Flood Control andto Improve project implements successfully.implemntation.

S. Industry '. Government rehabilitates t. Government imploments publicselected public enterprises but enterprise restructuring programfails to address labor on a case-by-cose basis,retrenchment, closure of unviable Including labor retrenchment andenterprises and public pricing closure of unviable enterprisoe.issues.

* . ~~~~~~~-111-

Area Sase Cases Modest Growth Htih Case: Accelerated Growth

it. Government tfils to close iI. Closure of uneconomic Juteuneconomic jute mills or Improve mills, Introduction of Jute pricoproduction; Jute export subsidies stabilization schem and removalcontinue at current level. of all subsidies.

7. Human Resources 1 Government supports rowth of i. Government gives priority toand Poverty primary education, health *nd primary education, health and

family plonning programs but family planning programs andfails to control costs In other limits growth of higher levelsocial sector programs. programs to affordable levels.

11. Government approves only ii. Government *liminotes foodmodest lncreases In ration prices ration programs except for thosethrough PFDS and some expansion targeted to the poor and expandsof FFW and VGD programs. FFW and VCD programs.

8 Energy and 1. Government gives highet 7. Government agrees with donorsIn;frstructure priority to Jamuns bridge and on priority investment program

flood control program. for each sub-sector, includingJamuna bridge and flood control.

Ii. Petroleum prlces maintained ii. Potroleum prices adJusted asat present levels; gas and power needed to maintain governmenttariffs Increase modestly. revenues, and gas and power

tariffs increase in line withagreemsnts under Energy SectorAdjustment credit.

B. Aid Recommendations for FY91

179. External assistance has played an important role in Bangladesh'sdevelopment. Given the large structural imbalances in the budget and thebalance of pPyments, external aid inflows (roughly of the order of 7-8Z of GDPduring the past decade) have been indispensable for maintaining budgetary andexternal stability. Even more important, external assistance now financesvirtually the entire public investment program. BaMgladesh's dependance onexternal assistance will continue in the foreseable future; the extent towhich investment (which is so necessary to accelerate economic growth andalleviate poverty) can rise is critically dependent on the availability ofsufficient 'Zoreign exchange and local counterpart funds through aid inflows,even with vigorous efforts to increase exports and government revenues.

180. Despite its critical role in the Bangladesh economy, there is concernamong donors about the utilization of external aid by Bangladesh. A majorissue is the pace of utilization/disbursement of aid, especially of the largeproject aid pipeline, which is expected to be nearly $5 billion by thebeginning of FY91. A related question is whether the Government is utilizingavailable aid efficiently to promote development activity, particularly sinceabout half of aid disbursements take the form of non-project (food andcommodity) aid, which generate local counterpart funds for supportingdevelopment projects. A third set of concerns has revolved around projectpreparation and processing - whether the Government is acting rapidly enoughto translate aid indications by donors into actual commitments. Underlyingall these has been the primary concern of whether external assistance issupporting the right priorities in the public expenditure program.

Recent aid utilization performance

181. Table 3.4 summarizes recent aid trends: (a) Actual aid commitments,which reached a peak of nearly $2.0 billion in FY86, have fallen to around$1.6 - 1.8 billion, in nominal terms in the last four years; in real terms,this is a substantial decline from the relatively high levels achieved in themid-eighties. (b) Aid disbursements, in nominal terms, also rose rapidly fromFY83 to FY87, as project aid disbursements more than doubled during thisperiod; and the ratio of project aid disbursements to the opening project aidpipeline improved steadily each year from 15Z in FY83 to 21Z in FY87. Overthe past three years, however, there has been ;,o further improvement inproject aid disbursements, even in nominal terms; (in fact, thesedisbursements are now lagging well behind the FY87 level). As a result, thedisbursement ratio for project aid fell from 212 in FY87 to 19Z in FY88 andFY89; and according to staff estimates is expected to remain at 19Z in FY90.Total aid disbursements have risen only marginally (by about 3Z or $46million), in nominal terms, in the last three years, and even this increasehas been entirely due to increased food and commodity aid, in large partassociated with the floods in FY88 and FY89. (c) Over the past decade,Bangladesh has built up a large project aid pipeline, which is expected toreach about $5 billion by end of FY90. This build-up, in the early to mid-eighties reflected W2 large differentitl between growth in project aid 4 o

commitments and disbursements, even though disbursements grew rapidly from alow base.

Table 8.4: EXTERNAL AID - TRENDS IN COMMITMENTS AND DISBURSEMENTS, FYSi-FY90

FY81 FY82 FY83 FY84 FY8S FY86 FY87 FY88 FY89 FY90/o

Openina Aid Piplin. (S in)Project Aid 2,003 2,444 8,044 8,374 8,044 4,081 4,838 4,890 4,699 4,680Non-Project Aid 449 420 503 519 652 570 764 816 751 781

(Food Aid) (50) (69) (49) (42) (60) (196) (824) (207) (299) (231)(Commodity Aid) (399) (381) (464) (477) (592) (876) (460) (609) (452) (600)

Total 2.462 2.8e4 8,547 3.893 4.296 4.631 6.417 S.206 S.460 5.311

Aid Commitments (I mn)Project Aid 1,001 1,189 800 882 1,340 923 932 916 1,107 1,200Non-Project Aid 568 734 722 813 632 788 671 615 767 676

(Food Aid) (203) (221) (248) (286) (380) (329) (109) (364) (168) (176)(Commodity Aid) (366) (513) (474) (628) (252) (409) (6B2) (261) (601) (400)

Total Coumitmentr 1.559 1.923 1.622 1.696 1.972 1.661 1.68 1.630 1.884 1.775Share of Non-Project Aid

in Total (S) a8 38 47 48 32 44 44 40 41 82

Aid Disbursements (f mn)Project Aid 680 689 470 553 590 710 987 831 904 900Non-Project Aid 86e 651 707 615 678 696 628 809 764 741

(Food Aid) (194) (231) (256) (276) (244) (203) (266) (300) (226) (261)(Commodity Aid) (392) (420) (462) (439) (482) (898) (403) (509) (638) (480)

Total Disbursements 1.146 1.240 1.177 1.268 1.267 1.806 1.S96 1.840 1.68 1.641Share of Non-Project Aid

in Total (X) 61 63 6o 49 58 48 89 49 46 46

Disbursement Ratios (in X)ProJect Aid /a 28 24 1S 16 16 18 21 19 19 19(Disbursement R&tio for IDA) (12) (13) (16) (16)/b (14) (12) (13) n.a.Non-Project Aid /e 125 1S5 144 119 104 105 80 99 102 101

(Commodity Aid) 98 118 100 92 73 105 88 84 119 96(Commodity Aid) f 101 98 99 90 85 98 8a 98 110 103

(Food Aid) Id 96 108 109 108 71 4 6 56 63 64 72

a Disbursements as a ratio of opening pipeline.1k Excludes f50 million for Initial deposits in SAFE accounts.ft Disbursements as a ratio of 75X of opening pipeline and 25X of now commitments.

Disbursements as a ratio of 1OOX of opening pipelin, and 76X of new commitments.fr Estimate.

Source: External Resource Division.

182. Underlying the donors' concerns with regard to project aid disbursementsis the perception that disbursement performance generally is not as good assuggested by aggregate data. First, even though project aid disbursementsreached $904 million, or 192 of the pipeline in FY89; it included some largeinflows of an exceptional nature - $77 million from Japan as capital equipment

for the Jamuna Fertilizer factory 42/ - from new aid commitments finalized inFY89, which were not part of the opening project aid pipeline for that year.Thus, project aid disbursements from the opening pipeline in FY89 was only$826 million (or 17.6X), lower even in nominal terms, than the $831 millionattained in FY88, and $967 million in FY87. Second, even this level wasachieved due to the fact that the aid pipeline primarily stagnated around $4.6billion in the last three years (see Table 3.4), not because of anyimprovement in the disbursement performance, but because new project aidcommitments finalized each year fell considerably short of pledges made bydonors at annual Aid Group meetings, due to increasing difficulties withproject preparation and processing (para 189). Had the Government been ableover the past few years to translate donors' pledges into actual commitments -- as it succeeded in doing until about FY86 -- the opening project aidpipeline would have been larger, and the disbursement ratio correspondinglysmaller, than the 192 for both FY88 and FY89. Third, this overall ratioconceals significant differences in the disbursement experience of variousdonors and sectors, which casts recent performance in a less favorable light.For example, Table 3.5 shows that disbursement rates for most donors havefallen over thL last two years, with a few exceptions - ADB, Netherlands andto a lesser extent Canada and Sweden. Some bilateral donors have disbursementrates which are well above the average 431 for all donors; but even for these,there is a general decline in performance. In the case of IDA, thedisbursement rate was only 132 in FY89 and 122 in FY88, significantly lessthan the 162 reached in FY86 (Table 3.5). While the nature of IDA's projectsand processing procedures may explain why IDA's disbursement rate is lowerthan other donors, it cannot explain why the disbursement rate on IDA projectshas actually faller. over the past few years.

42/ This is a new project (included in the FY90 ADP), for which preliminaryground-breaking commenced in November 1989. However, shipment of capitalequipment was made towards the end of FY89, from new aid commitments finalizedin mid FY89.

43/ Many bilateral donors make project aid commitments on a year by year basis;and once funds are committed these have to be utilized relatively quickly, unlikein the case of multilateral lenders who make multi-year project commitments.

Table 3.5 : PROJECT AID DISBURSEMENT RATIOS a/

FY81 FY82 FY83 FY84 FY85 FY86 FY87 FY88 FY89

Canada 21.2 29.3 11.4 21.7 17.9 14.1 19.6 8.2 34.2Denmark 165.5 199.9 71.5 18.2 23.5 19.3 43.4 52.5 18.5France 57.2 64.2 47.7 30.9 53.8 17.8 41.3 18.5 0.9FRG 25.7 74.4 9.2 33.7 9.7 14.4 21.2 17.5 20.9Japan 93.0 68.8 28.3 26.0 25.3 26.9 57.3 53.2 44.4/cNetherlands 47.4 52.0 18.1 11.6 4.0 27.8 13.7 21.8 22.9Norway 100.0 45.2 8.2 3.6 1.8 6.1 41.3 37.7 36.7Sweden 161.6 101.4 105.6 37.0 7.2 17.6 20.9 38.7 25.4U.K. 27.4 21.9 3.0 7.0 12.7 32.5 10.3 8.8 4.7U.S.A. 64.8 36.1 28.0 56.6 46.1 48.0 41.4 49.2 18.7ADB 13.6 7.7 7.7 6.0 11.4 11.2 13.8 14.8 16.1IDA 15.2 15.9 12.1 15.0 14.8 15.7/b 13.6 12.0 13.1IFAD 5.5 3.1 0.5 9.3 10.2 20.6 19.3 18.3 13.0

Total 27.9 24.1 15.4 16.4 14.8 17.5 20.9 18.9 18.8

La Disbursement as percent of the opening pipeline.,b Excludes $50 million for initial deposits in SAFE accounts.;c Disbursements and pipeline data for Japan include $77 million indisbursements for the Jamuna fertilizer factory from new commitments of$109 million made in FY89.

Source: External Resources Division (ERD).

183. Table 3.6 which disaggregates project aid disbursements in FY89 by keysectors and individual donors, provides another dimension of the project aiddisbursement problems. It shows for each donor, disbursements made in thepower sector which has generally performed well over the years given itssubstantial hardware component (column 4), and in one other sector where thedisbursement rate has been generally the highest (column 5); in addition,disbursements in all 'other" sectors together are shown in column 6, theopening project aid pipeline in these 'other" sectors in column 7, and theaverage disbursement rate for these "other" sectors, which constitute the bulkof the project aid pipeline, in column 9.

184. Some interesting conclusions on Bangladesh's aid utilization performancein FY89 can be drawn from Table 3.6. An average disbursement rate of 19? forall projects conveys the impression that the disbursement rate for the typicalproject is close to this rate; however, Table 3.6 shows that this has not beenthe case. For example, the disbursement rate in the power sector (whichaccounted for 24Z of total project aid disbursements in FY89, mainly on 22projects) was 31Z, while the average rate was less than 172 for all othersectors. Similarly, the fastest disbursing sector (excluding power) for each

major donor accounted for 272 of all project aid disbursements - the bulk ofit c'n approximately 30 projects; the disbursement rate on these faster-movingprojects was exceptionally high - 382 when Jamuna fertilizer project isincluded, and 32? when the it is excluded. Clearly, when the fastestdisbursing sectors are separated, the disbursement rate for other, sectorswould have to be less than the average. What is striking, however, is thefact that for the bulk of project aid, accounting for nearly three-fourths ofthe project aid pipeline, the average disbursement rate was less than 13Z.This is significantly lower than the impression conveyed by an averagedisbursement rate of 192 for all projects. Moreover, this low rate ofdisbu=sement on the bulk of their project aid programs was widely shared bymost donors; for example, ADB's average disbursement rate for "other' sectorscovering 78? of its project aid pipeline was only 132, not very different fromIDA's 11.42 on approximately two-thirds of its project aid pipeline. A fewbilateral donors had significantly better disbursement rates; but by and largethe majority experienced poor disbursement rates (Table 3.6). In other words,disbursement rates for most donors looked reasonably good only because acouple of projects disbursed exceptionally well, pulling up their overalldisbursement rate.

185. Thus, available data support the widely-held view among donors thatproject aid utilization performance is not satisfactory and need to besignificantly improved. Generally, disbursement rates have been very good fora limited number of highly capital and foreign exchange intensive (hardware)projects, such as those in the power sector, and in telecommunications andfertilizer (which fully accounted for Japan's disbursements of $112 millionunder gothere in Table 3.6); and in a handful of projects which have eitherreceived special emphasis from the Government (such as the crash programs forcrop rehabilitation and flood rehabilitations projects in connection with therecent disasters) or been largely funded and more or less managed by certainbilateral donors themselves. The majority of projects, however, have had muchlower disbursement rates than would be normally assumed.

Table 3.8: PROJECT AID DISBURSEMENT PERFORMANCE IN FY89 of DONORS AND KEY SECTORS(In US S million)

Disbursements .y SectorTotal Total Power Fastest-i -Otherw Pipeline 'Other'in Dlsb.Rate

Pipeline Disburseut. disbursing in "Other" I of total *Other-XSector

(1) (2) (3) (4) (6) (8) (7) (8) (9)

Bilateral Donors 1.631.2 397.6 83.2 168.1 148.3 1.093.6 67.0 13.4Canada 203.6 89.5 19.9 6.8 42.8 158.2 77.8 27.1Denmark 68.2 10.8 -- 2.3 8.6 64.9 94.3 16.6FRO 196.8 40.9 27.8 9.0 4.8 104.6 63.4 4.4Japan 337.9 L 149.9c/ 18.3 112.4 c/ 19.0 92.8 27.6 20.6Netherlands 122.1 27.9 -- 13.i 14.8 106.8 88.5 13.8Norway 60.0 18.3 -- 3.7 14.6 48.6 93.0 31.4Sweden 93.7 23.8 -- 7.3 16.5 78.0 81.1 21.7UK 216.2 10.1 6.6 3.4 0.1 183.0 84.8 --USA 122.3 22.9 S.1 9.8 8.0 81.8 60.6 12.9Other 231.4 23.5 5.7 -- 17.8 210.1 90.8 8.5

Multi latltrl Donors 2.922.2 430.7 79.9 79.8 271.6 2.198.8 76.2 12.4ADB 1,203.9 193.8 63.5 MI. 121.2 932.7 7 "f i176EEC 76.8 8.2 -- -- -- 78.8 100.0 10.7IDA 1,253.2 176.6 28.4 63.8 95.4 836.8 88.7 11.4IFAD 70.1 13.3 -- 8.4 8.9 44.6 83.6 15.5Other '/ 318.4 39.8 -- 39.8 309.8 97.1 12.9

Aid Group Total 4.6S8.4 828.8 188.1 247.3 417.9 3.292.4 72.6 12.7

All Other 256.2 76.6 62.7 - 22.8 182.9 71.7 12.3USSR 83.8 1 4 . 62.6 - 12.0 14.8 12.5

Total 4.809.6 908.8 215.8 247.8 440.7 8.475.3 72.3 12.7

Memo Item:Dl5b. Rotw: 18.8% 81.8X 88.41 12.7%

Mainly UN system.b Includes mn commitments of 3109 million mad in FY89 for Jamuna fertilizer project, from which 877 million was disbursed In FY89.

Includes disbursements of 177 million for Jamuna fertilizer factory.For each donor, sector where disbursement rate Is generally the highest (excluding power sector) : for Canads - ruraldevelopment sector (disbursements primarily on 1 project); Denmrk-water supply and sanitation (2); Federal Republic of Germany- private sector financing BSB and MKB (2); Japan - Telecommunications network; also Jamuns fertilizer factory (2); Netherlands- transport sector for rehabilitation of Kernaphuli bridge and ferries (2); Norway - Grameen Bank project and associated housingprogram (2); Swden - rural development and employment programs (3); UK - transport and institutional development project (1);USA - agricultural research and fertilizer development (3); ADS - agriculture for crop Intensification, livestock andfisheries (5); IDA - Irrigation and flood control sector for flood rehabilitation, flood control and BUDB smell schemes (6);IFAD - Irrigation (2).

Source: External Resource Division.

186. This analysis of aid utilization performance in FY89 confirms the basicconclusions of the Bank's Public expenditure Review last year and as discussedin paras 137-140 above, that : (a) the development program is overstretchedwith too many projects compared to the availability of local resources; andthat (b) aid-financed projects in particular are severely underfunded. Giventhe acute shortage of local currency and the large number of projects,resources are spread too thinly among projects, exacerbating the adverseimpact of other implementation problems (such as technical assistance,procurement, land acquisition etc.). This is also the result of therelatively low-priority accorded to the development program in recent years,and within it, the diversion of local currency resources to fully locallyfinanced, projects. In addition, the perception shared by many governmentofficials that externally aided projects are, in many casqs, 4nappropriatelydesigned or include components which are unnecessary, may have indirectlycontributed to the lack of support for donor-financed projects. In effect,only those aided projects which are of a turn-key nature, or receive specialattention from the government or donors, have progressed; while others havegenerally languished.

187. Disbursements of non project aid - both food and commodity aid - haveincreased substantially; and have not been a major problem in recent years;indeed, the main concern with these is not whether disbursements are risingfast enough, but whether the Government is using these resources effectively.In the case of food aid, disbursements in last two to three years could havebeen better; as noted earlier, excessive commercial food imports by theGovernment led to postponement of some food aid in both FY88 and FY89 (andpossibly again in FY90). In the case of commodity aid, while the disbursementperformance has improved, a major concern, as discussed below, has been theGovernment's inability to formulate reform programs in order to finalize newcommitments from multilateral agencies on a timaly basis.

188. Another important aspect of aid utilization performance is the timelypreparation and processing of projects, so that pledges made by donors couldbe translated into actual aid commitments in a timely manner. Table 3.7 showsthat during the FY81-86 period, actual commitments came close to, or generallyexceeded, pledges made by donors at Aid Group meetings; project aidcommitments broadly followed this pattern, except in FY83 when the developmentprogram (ADP) was cut back sharply in that year. However, in the last threeyears, actual aid commitments - both project and commodity aid -have fallenshort of donors' pledges by substantial margins; this is also likely to happenin FY90. (Table 3.7)

TABLE 3.7 : AID PLEDGES AND ACTUAL COMMITMENTS, FY81-FY9O(US $ MILLION)

FY81 FY82 FY83 FY84 FY85 FY86 FY87 FY88 FY89 FY90

Pledges At Annual Aid Group Meetings

Project Aid 802 1,068 1,003 919 932 999 1,126 1,233 1,257 1,423

Non-Project Aid 740 555 577 707 769 672 781 790 799 773

(Food Aid) (335) (189) (198) (219) (246) (235) (222) (226) (214) (183)

(Commodity Aid) (405) (366) (379) (488) (523) (437) (559) (564) (585) (590)

Total Pledges 1,542 1,623 1,580 1,626 1,701 1,671 1,907 2,022 2J05 2,197

Actual Annual Commitments

Project Aid 1,001 1,189 800 882 1,340 923 932 915 1,107 1,200

Non-Project Aid 558 734 722 813 632 738 671 615 757 575

(Food Aid) (203) (221) (248) (285) (380) (329) (109) (364) (156) (175)

(Commodity Aid) (355) (513) (474) (528) (252) (409) (562) (215) (601) (400)

Total Commitments 1,559 1,923 1,522 1,695 1 172 1,661 1,603 1,530 1,864 1,775

Memo Item s Ratio of actual commitments to pledges in percent

Total Aid 101.1 118.5 96.3 104.2 115.9 99.4 84.1 75.7 90.7 80.8

Project Aid 124.8 111.2 79.8 96.0 143.8 92.4 82.8 74.2 88.1 84.3

Source s External Resources Division; Chairman's Reports of the Bangladesh Aid Group Meetings.

IEma n-

189. The reasons for these shortfalls in actual aid commitments vis-a-visdonors' pledges are difficult to establish unequivocally. Nevertheless, basedon the experience of individual donors, it is possible to point out at leastthree causes: first, in the case of project aid, weak institutional capacityin Bangladesh has hampered the development and preparation of an adequateproject pipeline suitable for donor financing on a continuing basis, resultingin delays in translating aid pledges into actual commitments. Second,commodity aid commitments, (especially fast-disbursing assistance frommultilateral institutions), which are generally tied to policy reform havebeen delayed in a few important cases. In part this has been due to the factthat the complexities of formulating appropriate reform programs in keysectors have taxed the limited analytical capability within the Government;but it is also a reflection of the slowdown in the pace of policy reform aotedearlier. Third, many donors perceive that the delays in processing projectproposals and reaching agreement with the Government have lengthened in recentyears, not only for policy-based assistance but also for some traditionalprojects. As a result, aid commitments by IDA alone averaged only about $347million in the FY87-89 period, compared to pledges averaging $530 million ayear for this period at Aid Group meetings.

190. An even greater concern is the effectiveness of aid - whether theGovernment is utiAizing aid resources effectively to promote economicdevelopment. This question was discussed in detail earlier; but it is worthnoting that in the last few years, external assistance has not had theexpected impact in sustaining development activity for several importantreasons.

191. External donors have provided increasing amounts of assistance toBangladesh in a variety of ways : foreign exchange needed for projects throughtraditional project aid, and local currency for such projects through bothfood and commodity aid (which generate counterpart funds for the budget) andlocal cost financing of development projects through reimbursable project aid(RPA). 44L However, as discussed in para 137, increased external assistancehas not led to a commensurate increase in development activity; in fact, overthe past three years, the ADP has stagnated in nominal terms, and beeneffectively cut back substantially in real terms; while the Government'scurrent expenditures have grown rapidly. Thus, increased external assistancehas simply replaced the Government's own contribution to the ADP, so that thelatter is now virtually donor-funded. At the same time, as noted in para 138above (and in the Public Expenditure Review last year), despite thesubstantial increase in local currency provided by donors, externally aidedprojects have been starved of local currency resources, while about half ofsuch resources are allocated for local projects and block grants, whichimplicitly receive higher priority. Given the acute shortage of localresources and the fact these fully locally funded projects do not leverage

44/ Local cost financing through RPA now amounts to 15-20Z of total projectaid provided by donors.

external assistance which helps to support the budget and the balance ofpayments, the burden of proof of their economic viability and ability to earnhigher rates of return should be placed on such projects themselves beforethey receive preferred access to local funds.

192. The analysis contained in the Public Expenditure Review last year alsoprovides further important insights on the question whether externalassistance is supporting the right priorities in the Government's expenditureprogram. That report showed that the current pattern of expenditurepriorities has much to be desired. For example, even though currentexpenditures have increased rapidly, much of these is spent on salaries andbenefits, subsidies, relief, defense and local government expenditures.However, essential current expenditures for operations and maintenance and forthe social sectors are severely underfunded. The report also stresses theneed for greater priority to the development program; and within the ADP, tosubstantially improve its focus by cutting back on such areas as powergeneration and industry, and allocating more resources to water resourcedevelopment, agricultural research and extension services, power transmissionfacilities, rural roads, urban development and water supply and floodrehabilitation work. It also argued for the need to cut down the number ofprojects included in the ADP, and to reprioritize the development program, sothat the priority projects cculd be adequately supported by necessary donorand local funding and their implementation could proceed more rapidly. Asdiscussed above, these issues are at the bottom of the widely shared problemof project aid disbursements, particularly the low rate of disbursement onthree-fourths of externally financed projects. Much more needs to be done bythe Government both to improve the quality of the public expenditure programwhich is being supported by aid, and to improve the effectiveness of externalassistance.

Aid recommendations

193. The primary justification for continued high levels of externalassistance to Bangladesh is to promote economic development both in the shortand the longer term. Bangladesh's deep-seated poverty undoubtedly provides astrong rationale by itself for external aid; but poverty alleviation on asustainable basis can be achieved only through vigorous efforts to accelerateeconomic growth, improve access of the poor to economic opportunities andpromote human resource development, which are essential elements of a longerterm development strategy. The country's extreme vulnerability to naturaldisasters creates short term needs for relief and rehabilitation; but theseare of a transient nature and do not warrant sustained high levels of aid on along term basis. Similarly, Bangladesh's structural imbalances with regard tothe budget and the balance of payments are important considerations in thedetermination of external assistance needs; but these imbalances by themselvesare not reasons for providing additional external aid. It is only insituations where the Government pursues sound and pragmatic economic pol'.ciesto address these constraints, and yet the persistence of these structuralconstraints continues to hamper investment, growth and deve.-pment, thatadditional external assistance can be justified to bridge structural deficits.

In short, as argued in the Bank's economic report last year, higher levels ofexternal assistance is warranted only if the Government takes the necessarysteps to increase the rate of (public and private) investment and to mobilizemore domestic resources. Concomitantly, it needs to ensure that suchresources will be devoted to increasing development activity and higherpriority current expenditures in such areas as O&M and the social sectors.

194. In the light of the deterioration in economic management in Bangladesh,it is necessary in considering aid recommendations for next year, todistinguish between at least two possible situations : (a) a continuation ofpresent economic policies with marginal ections by the Government to deal withcurrent economic problems (corresponding to the "base case" scenario in Table3.1); and (b) greater commitment to policy reform and pragmatic and decisiveaotions to restore macroeconomic equilibrium, and accelerate economic growthand development, (corresponding to the "high case" scenario in table 3.2).Clearly, the implications for aid recommendations under the two scenarios willbe quite different. For example. if present trends in the economy continue,it will be difficult to justify substantial additional aid to Bangladesh, eventhough the need for such assistance (in terms of continued widespread povertyand possibly increasing structural imbalances in the budget and the balance ofpayments) will persist. In this situation, additional project aid is likelyto exacerbate the already serious overcommitment of the development program,aggravating project implementation and aid utilization problems, with littleimpact on development. Similarly, in the case of commodity aid, there is noassurance that additional assistance will help expand the development programinstead of substituting for the Government's limited contribution to the ADP.

195. On the other hand, if the Government were to take the necessary steps toaccelerate economic growth and development, the need as well as thejustification for additional external assistance will increase significantly.The projections which underlie Table 3.2 indicate that, to sustain an overallGDP growth rate of 5? p.a. over the medium term and to provide for acontrolled expansion of the social and economic infrastructure which is badlylacking in Bangladesh to support broader poverty alleviation efforts, theinvestment/GDP ratio should rise from about 112 in FY90 to about 14? by FY95.Even if the Government's revenue effort is improved significantly and currentexpenditure growth is restrained (as they must be), the budget deficit will bestill close to 7Z of GDP over the medium term, with attendant need forexternal assistance to support the development program. Similarly, on thebalance of payments front, even with a pragmatic exchange rate policy toprovide a strong boost for exports, the external current account deficit willexceed 6Z of GDP, given the. substantial needs for imported inputs and capitalgoods for production. To provide for these and to build up foreign exchangereserves from the currently lovw level (of 1.7 months' imports equivalent),substantial inilows of external assistance will be needed.

196. Projections in table 3.2 suggest that disbursements of externalassistance of the order of about 5-6? p.a. in real terms would be needed, ifthe Government decides to adopt a bolder approach to accelerate economicgrowth and development. Total aid commitments would not normally need toincrease proportionately, since the opening project aid pipeline at the

beginning of FY91 is expected to be quite large - about $5.0 billion.Moreover, even under the high case, there is an urgent need at present to takea hard look at the public expenditure program to limit the number of projectsand redefine priorities in order to ensure that priority projects can beallocated more resources and implemented more rapidly. This process ofconsolidation would require that new project starts should also be limitednext year to essential high priority projects. Therefore, even under the highcase, new commitments for traditional projects could conceivably declinesubstantially in FY91. However, the Government will be seeking new aidcommitments for flood management which it considers to be very high priority.As noted earlier, the total costs of this program are presently anticipated tobe around $500 million spread over a five year period, with likely aidcommitments of about $150 million for studies and pilot projects over the next2-3 years. It should be possible, however, to accommodate these commitmentsunder the normal project aid pledges this year, given the need for restraintover new project initiatives discussed above. (While the Government alsoattaches high priority to the Jamuna Bridge project, new commitments for thisFY92 project are expected to be made only next year. Nevertheless, over thenext few months the Government will need to review and establish clearpriorities within the ADP, so that these projects can be accommodated withoutundermining the pace of implementation of the rest of the developmentprogram). Taking these factors into account, total new project. aidcommitments of about $1.1 billion is recommended under the high case for FY91,compared with $800 million under the low case for FY91 and $1.1 billionrecommended in FY90.

197. If the Government were to adopt meaningful steps to accelerate economicgrowth and development, the need for commodity aid to support the developmentprogram will also increase. According to staff estimates, disbursements ofabout $600 million should suffice to meet local currency needs for the ADPnext year, provided that these resourzes are fully allocated to thedevelopment budget raJher than being diverted into current expenditures.Given an opening commodity aid pipeline of about $500 million at the beginningof FY91, new commitments of about $700 million should be sufficient to providedisbursements of $600 million next year, with appropriate actions by theGovernment (through the implementation of associated policy reforms) to ensureearly finalization of such program/commodity aid commitments. This issignificantly higher than the $500 million recommended under the base case.

198. Indications of nev- commitments of food aid to Bangladesh at the annualAid Group meetings in recent years have averaged about $250 million a year,although actual commitments have fluctuated widely with the food situation inBangladesh. This year, as noted earlier, the domestic food availability isunusually good, due to the absence of floods as well as significantly improvedagricultural policies. The sustained implementation of these policies,together with coordinated action on the food management front, hold out theprospects for significant progress towards self-reliance in foodgrains overthe next few years. This would counsel for some reduction in food aid thisyear. However, in view of Bangladesh's extreme vulnerability to naturaldisasters and the need to provide for programs for the poor (such as VGD andFFW), certain minimum amounts of food aid upto about $200 million would be

needed. In view of the expected trends in international wheat prices and thecurrent level of food-assisted programs in Bangladesh (about 882,000 tons offoodgrain are expected to be distributed through these programs this year),this level of new food aid commitments should permit a substantial expansionof food-assisted programs next year. The Government, however, should takesteps to develop a better system for food management (in particular, criteriagoverning commercial imports), and exercise extreme care to manage actualimports from these commitments in a manner which will not disrupt domesticproduction. Food donors, on their part, will need to provide flexibility tothe Government to postpone such imports, if needed.

199. Thus, if the Government were to simply take minimum action to containthe present crisis through some modest financial stabilization, but without astrong commitment to structural reform and economic development, it isrecommended that total new aid commitments for FY91 should be scaled back toabout $1.5 billion (including $800 million in project aid, $500 million incommodity aid and $200 million in food aid), compared with a recommendation of$2.0 billion made last year. However, if the Government were to indicate astrong commitment to structural reform, and to accelerate economic growth anddevelopment activity, total new commitments of about $2.0 billion (including$1.1 billion in project aid, $700 million in commodity aid and $200 million infood aid) would be warranted. Recent policy actions and intentions announcedby the Government (para 113) hold out promise for improvement in this re3ard;but much stronger efforts clearly need to be made and sustained over thecoming months. Nevertheless, on the basis of indications thus far, theprospects for the high case scenario are better today than they were at mid-fiscal year.

200. This approach of presenting alternative recommendations for aid maycreate difficulties for donors in arriving at their own pledges. However,despite corrective actions initiated very recently by the Government, there isnot yet a firm basis for making an unqualified endorsement of the high casescenario. Although a clear statement from the Government about its commitmentto economic reform should be expected at the Aid Group meeting, tangibleevidence of progress in addressing fundamental issues raised in this reportwill not be available until much later. Accordingly, it is recommended thatthe donors, while pledging higher levels of assistance (i.e. the $2.0 billionscenario), ensure that their policy-based operations/commodity aid programsare effectively addressing the fiscal and macroeconomic issues that have beenidentified,. and that their support for large projects be evaluated in thecontext of much needed reforms to rationalize the public expenditure program.However, the processing of projects which directly support poverty alleviationand human resource development (such as water supply and sanitation, ruraldevelopment, population, health and education), should proceed speedily.

201. As noted earlier, a substantial increase in new aid commitments iswarranted only if the Government takes significant steps to initiatestructural Luforms and promote economic development; merely containing thepresent pressures will do very little to alleviate Bangladesh's pervasiveproblems. It is therefore suggested that a few key trigger conditions shouldbe met (specified in greater detail in Table 3.3) before donors actually sign

aid agreements for larger projects during FY91. First and foremost,implementing a major program of financial stabilization and with substantialstructural measures over the coming months. Second, a thorough review of thepublic investment program with a view to protecting a core of high priorityprojects and limiting the number of projects to improve project implementationand aid utilization should be accomplished as a part of the FY91 budgetprocess. The FY91 budget should also include stringent controls on the growthof non essential recurrent expenditures (such as subsid.es and wages andsalaries) and increased allocations for priority activities such as O&M andthe social sectors. The Government should also take steps to fully implementthe recommendation3 of the joint Government-donor task forces on project andcommodity aid utilization. Third, steps should be initiated to implementstructural refoi:ms of the tax system and improvements in tax administration toenhance revenue collections. Fourth, in the area of food management, a clearenunciation of government policy giving priority to domestic procurement andto manage imports (including both aid-financed and commercial imports)carefully should be announced; and steps should be taken to implement thispolicy in consultation with donors.

202. The Government's own estimate of the necessary level of aid commitmentsfor FY91 is $2.5 billion - $1.4 tillion in project aid, $850 million incommodity aid and $250 million in food aid. This is about $500 million higherthan the Bank's recommendation; and mainly reflects government perceptionsregarding the need for additional project aid (by $300 million) and quick-disbursing assistance (by $150 million). The Government's rationale forhigher assistance is that, in the case of project aid, measures to be taken inthe near future to improve project implementation and local resourceavailability for aided projects will lead to a more rapid drawdown of theproject aid pipeline over the next few years; and unless substantially higherproject aid commitments are made now, the project aid pipeline a few yearshence will not be sufficient to ensure adequate disbursements to support theFourth Five Year Plan's goals. In regard to commodity/program aid, theGovernment's view is that a substantial increase of quick-disbursingassistance is essential to support the strong structural adjustment programnow contemplated, particularly to provide a reserve cushion for the balance ofpayments.

203. Indeed, if the Government were to evolve sound macro-economicpolicies and effective reform programs on a timely basis to address itspresent financial and structural problems and takes the necessary steps toimprove project preparation and implementation, the justification for higherlevels of external assistance to Bangladesh would be considerablystrengthened. Increased assistance could also be warranted in terms of need,poverty grounds, as well as to raise investment levels and sustain essentialpublic expenditures. In this context, an appropriate framework for publicresource management to enhance the Government's capacity to mobilize andeffectively utilize local resources for development projects and to improveproject preparation and implementation has been under discussion, but has yetto be acted upon by the Government. However, if Bangladesuls macroeconomicmanagement and absorptive capacity were to improve significwtly more thanwhat is assumed under the Bank's high case scenario and if the development

budget could be enlarged and better prioritized, then under such circumstancesexternal donors should be willing to provide increased assistance toBangladesh of the magnitude requested by the Government.

204. The very close links between policy improvements and enhanced aid flowsreflect the seriousness of the economic situation. Although piecemeal actionsby the Government can provide short term palliatives, tinkering at the marginof economic reform policies will not help solve Bangladesh's deep-seatedpoverty and fundamental structural problems. This perception is shared bymany donors; understandably, a number of donors have recently begun to addresstheir particular concerns by earmarking counterpart funds generated bycommodity aid for specific projects or development activities. While this isa sub-optimal way of ensuring allocation of counterpart funds for developmentactivities, it may need to be continued and even expanded if the Governmentdoes not take adequate actions to ensure effective use of aid funds. On theother hand, if the Government indicates a serious commitment to structuralreform and economic development by implementing key measures identified aboveon a timely basis, it should be possible to improve the allocation ofresources for the development budget, project implementation and theutilization of external resources; and under such circumstances, earmarking ofcounterpart funds would not be desirable or necessary.

Chapter IV

Improving Poverty Impact of Government Expenditures and the Role of Women inDevelopment

A. Poverty and Government Expenditures

Introduction

205. The preceding chapters of this report pointed out that, in view of theextent and depth of Bangladesh's poverty problem, its extreme vulnerability tonatural disastera and its severe structural constraints, it is essential forBangladesh to accelerate economic growth to at least 5Z per annum. This is anecessary condition for making any significant progress towards the country'sprimary development objective - the alleviation of widespread poverty.Without a significant improvement in economic growth performance of thisorder, leading in turn to a more rapid expansion in income generatingopportunities, income transfers and redistribution policies cannot berealistically expected to inciease per capita incomes and consumption levelson a sustainable basis, in order to mitigate poverty. However, economicgrowth alone cannot engineer the catalysis which transforms the prospects ofthe poor. This is because the bulk of the poor do not possess the humanskills and physical assets (such as education, technical skills, land, andcapital assets) which would enable them to benefit from the growth processthrough the acquisition of suitable jobs or increases in real wages, and/orhigher returns from physical and financial assets. Indeed, it is quite likelythat the extremely poor - the landless, unskilled and particularly vulnerablegroups such as women and children -could be easily bypassed by the growthprocess. It is therefore important that, as an essential part of thedevelopment strategy, special efforts are made in tandem with higher economicgrowth to improve the conditions of the poor. As discussed below, suchefforts should include targeted programs (relief and income transfers) toprovide a safety net for the lowest income groups; but even more importantly,a broader approach is needed to increase the opportunities for humandevelopment through the expansion and improvement of infrastructural programsin the social sectors (such as education, health, population control,nutrition and sanitation and water supply) and increasing the access of thepoor to employment opportunities, skills, as well as financial and productiveassets.

206. Government policy statements from time to time have recognized theseneeds. The basic thrust of the Government's declared strategy of alleviatingpoverty is to accelerate economic growth, especially agricultural growth andproductivity, as a mechanism for reaching the socio-economically disadvantagedgroups who are largely resident in rural areas. The Government, as noted, hasalso expanded relief programs for the lower income groups somewhat rapidly inthe last few years. Government policy also recognizes that the most promisinglong-term approach to reducing poverty is to provide the poor withopportunities to improve the quality and quantity of their human and non-humancapital by increasing their access to educational facilities, job trainingprograms, new agricultural techniques and credit. A number of programs to

achieve these goals are already in place - for example, those providing pricesupport and input subsidies, consumer subsidies as well as improved fooddistribution through the PFDS, short term employment creation through FFW, aswell as a range of social sector'programs designed to improve human resourcedevelopment in the longer term.

207. However, as discussed below, many of these programs need to besubstantially improved. For example, social sector infrastructural programsare heavily underfunded, and should be redirected in terms of the allocationof resources within these programs and reaching the necessary target groups.Existing targeted or special programs for the very poor, such as FFW and VGD,are largely relief-oriented. Moreover, the overwhelming majority of women,who form the bulk of the poor, are still underprivileged in terms of limitedaccess to employment outside homes and to credit and public resources topromote self-employment.

208. Thus, in all these areas, there is a general need to improve theeffectiveness and efficiency of existing programs. This need is even greaternow because, as noted earlier, resources available to the Government over theforeseeable future will be limited; and therefore every effort must be made tomaximize the benefits of these limited resources for the poor. Secondly,these constraints on the Government apply not only to financial resources, butAlso even more importantly, to administrative and managerial resources. Quiteclearly, the Government alone cannot and should rot be expected to operate andeffectively manage the bulk of poverty alleviation programs in Bangladesh.While the Government should provide a facilitating environment especiallythrough the provision of basic social infrastructure (which would be beyondthe scope of private initiatives), greater reliance must be placed on theprivate sector and NGOs for implementing programs to assist the poor in incomeearning activities particularly through self-employment. Against thisbackground, the next section of this report reviews the scope for improvingthe effectiveness of Government expenditures in order to maximize their impacton the poor; while the final section of the report discusses the status ofwomen in Bangladesh and a strategy to help increase their contribution to thedevelopment process.451

Fiscal Structure and Incidence

209. The need to maximize the effectiveness of government programs becomesvery clear when we look at the size and composition of government expendituresand revenues. The public expenditure/GDP ratio in Bangladesh, estimated at17Z during FY81-88, is one of the lowest in the Asia region; comparable ratiosfor selected Asian countries range from 23.1Z in Pakistan, 27.6Z in India and

45/ This chapter is based on the findings and recommendations of two recentreports prepared by World Bank staff: World Bank Report No. 7946 - BD,"Bangladesh - Poverty and Public Expenditures : An Evaluation of the Impact ofSelected Government Programs" January 16, 1990; and Report No. 7899 - BD,'Bangladesh - Strategy Paper on Women in Development, February 6, 1990.

30.5Z in Sri Lanka. The limited scope of government expenditure interventionin turn reflects Bangladesh's low resource mobilization efforts; currentrevenue/GDP ratio for FY81-88 stood at 9.12 in Bangladesh while comparableratios for selected Asian countries ranged from 20.6Z in Sri Lanka, 23.12 inIndonesia and 25.72 in India.. Although fiscal constraints limit the magnitudeof government efforts, the composition of expenditures and revenues isnevertheless broadly consistent with the Government's poverty alleviationobjectives. If the Government's expenditure programs with the potential forassisting in the poverty alleviation/reduction objectives are classified interms of (i) those w.tich enhance the earning capacity of the poor,46/ and(ii) those that directly or indirectly transfer income to the poor,47/ thensuch programs accounted for close to 402 of total current expenditures duringFY81-88. If expenditures on agriculture and water development are excluded,the ratio is still 382. This implies that even within existing resourceconstraints, there is substantial potential for redressing povertyalleviation, if available resources are properly allocated to the targetgroups within existing programs and effectively utilized.

210. While the composition of public expenditures reflects a broad potentialfor poverty alleviation, analysis of the beneficiaries of governmentexpenditures indicates that households above the poverty line are much moresuccessful in reaping the benefits of many of the social programs. Thisconclusion is supported by the evaluations of the effectiveness of programsfor human resource development and those involving direct and indirect incometransfers (para. 211) and summarized by estimates of expenditure incidence(Table 4.1). With regard to programs for human resource development(education, health and family planning), it is observed that at every level ofthe educational system, for example, enrollment rates were lower and drop-outrates were higher for the poor (para. 213). Similarly, although the publichealth and family planning services are relatively evenly distributed,coverage is extremely limited (para. 217). As a result, the estimates of thecurrent expenditure incidence for human resource development by income groupsshow that households above the poverty line accounted for Tk 782.60/householdper year as opposed to Tk 190.40/household for the poor during FY86 (Table

461 Examples of this are programs for improving the quality of and access toeducational and health services, establishing job training programs, promotingnew agricultural techniques and improving access to credit. Theseinterventions do not immediately alleviate poverty by increasing currentincome, but over the medium-term enhance the capacity of the poor to increasetheir future earnings, as well as to increase the returns on existing assets.

471 Examples of direct income transfers are rations of food and non-fooditems. Price subsidies for staple foods (rice and wheat), increased pricesfor agricultural crops and the provision of agricultural inputs at low pricesare examples of indirect income transfer policies.

4.1). The huge disparity reflects mainly the cost and financing pattern ofsecondary and higher education, where the poor are least represented. 48/

211. With respect to income transfer programs, the benefits of theGovernment's rural development and agricultural incentive programs., forexample, were largely reaped by large farmers who were easily reached bycredit and extension programs. Benefits from subsidized fertilizer were alsolargely a function of land size and access to irrigation. Furthermore, untilrecently, the subsidies inherent in the Public Foodgrain Distribution System(PFDS), except for the non-monetized channels, were also reaped largely by theurban population and those above the poverty line; (however, with theintroduction of a revamped Modified (rural) Rationing for the rural poor lastyear, this situation has improved somewhat now--para. 36). In terms of theaggregate allocations of expenditures by household income groups, direct andindirect income transfers were marginally higher for households above thepoverty line (table 4.1), as expenditures accruing to the poor through relief(including FFW) were more than offset by the expenditure benefits derived bythe not poor through subsidies on agricultural services. In general then,although the poor constituted about 52Z of all-households in FY86, only 34? ofthe total public expenditures on the social sectors and programs with poverty-orientation could be allotted to them, while 662 of the expenditures wereabsorbed by households above the poverty line.

48/ The unit recurrent cost of secondary/college education is about 6 timeshigher than primary education; that of university education is about 45 timeshigher.

Table 4.1: CURRENT EXPENDITURE AND TAX INCIDENCE (FY86)(Taka Per Household per year)

Exp.nditur./tax Share Ultra Poor Not AllCategory of Poor (Below Poor Groups

Totol (Below Tk 2,000/ (AboveTk 1,500/ month) Tk 2,000/

month) month)

Poverty Oriented Expenditures 41.81/a 864.87 697.16 1,276.77 912.92Human Resource Development 18.08 16.0S 190.40 782. 472.08Education 12.27 47.42 76.02 671 56 358.71Health & Population 3.81 116.63 116.44 111.05 113.35

Direct & Indirect Transfors /b 26.53 491.62 406.76 42%.17 447.86Subsidies 6.16 64.51 66.26 126.42 93.87Relief (FFW) 8.65 399.94 294.27 262.38 274.36Agric. A Water Development 2.67 88.64 48.88 118.63 82.00

Tax Revenues 100.00 469.71 638.01 8.390.08 1,948.82Income 14.01 0.00 0.00 573.71 272.84Property 7.24 16.22 24.69 269.66 141.09Import 40.32 207.19 272.68 1,367.09 788.39Sales 14.32 66.98 88.21 489.04 278.83Export 0.36 0.99 1.43 12.99 6.93Other Customs 0.83 3.54 4.84 28.74 16.21Excise 22.42 204.76 260.29 682.87 466.01Domestic Services 0.61 2.72 3.71 22.04 12.43

Average for FY81-80.Subcomponents exclude food account deficit and therofore may not add up to total.

Source: Staf4 estImate8.

212. Although it was not possible to estimate the net impact of the fiscalsystem, analysis of tax incidence, on the other hand, shows that there issignificant progressivity in the tax system, in the sense that the tax burdenrises with successive income brackets. Therefore. tax incidence could beconsidered as helping to neutralize the bias of the expenditure incidence infavor of households above the poverty line, especially as income ta-es are notpaid by hou -holds with incomes below Tk 2,000 per month. The total taxburden (i.e., ax/income ratio) was estimated at 7.14? of household income forthose above the poverty line, and only 4Z for the poor in FY86 (Table 4.1).Furthermore, although 65Z of total revenues were derived from indirect taxsources, the pattern of incidence was still progressive, since the taxes weremainly levied on commodities with substantial import content which wereconsumed largely by those above the poverty line. Thus, from a povertyalleviation view point, the problem is not with the revenue structure, butwith the efficient allocation of public expenditures. Program-specificevaluation indicates that while inadequate resource allocation resulted in theunderutilization of existing facilities, given the need for better targetingof expenditures, government programs have not been able to effectively reachthe poor. The following sections provide an evaluation of selectedexpenditure programs to support the conclusions derived above.

Evaluation of Programs to Enhance Earnings Capacity

213. Public Education. The Government recognizes that one of the mostpromising long-term approaches to reducing poverty is to provide the poor withthe opportunities to improve the quality of their human capital (throughaccess to education, health and family planning facilities). Nevertheless,the education system is not effectively reaching the poor:

(a) enrollment rates at the lower levels of the educational system aregenerally low; primary level gross enrollment averaged 58? during FY82-86, compared to about 92Z in 1986 for India. Drop-out and repeaterrates are also high, especially at the primary level where it isestimated that about a third of the first graders drops out beforesecond grade and close to 75? by the fifth grade;

(b) enrollment rates are generally lower, and dropout rates are higher,for the poor. It is estimated that primary school enrollment rate forchildren from poor households is under 16Z. Similarly, students frompoor household account for less than 132 of total students in post-secondary education; and

(c) the share of education in total government expenditures (estimatedat 10? for FYb8) is substantially below the average of 16.4Z for Africa,12.72 for Asia and 14.7? for developint, countries in 1980.

214. The Government is cognizant of these deficiencies, and efforts areunderway to reform the system with support from external donors. Towards thisend, emphasis is being placed on the attainment of universal primary educationby the year 2000, improvements in the primary school curriculum and expansionof educational facilities (including the construction of more primary schoolsin the rural areas, provision and improvement of school textbooks, provisionof laboratory facilities at the secondary level1 and training and employmentof more teachers, especially female teachers).-6/

215. In view of the Government's resource constraints in gereral and thelimited availability of funds for the education sector in particular, theissues of the effective allocation of resources within the sector and costsharing, especially at the post-primary levels, require urgent attention. Theshare of current expenditures on secondary and college education has increasedfrom 292 in FY82 to 412 in FY88 as a result of increased subventions toprivate secondary schools. At the same time, the share of currentexpenditures on primary education, where the need is greatest, has declined

491 Additional policies and programs to enhance this process are outlined inthe World Bank reports: "Bangladesh - A Review of Selected Issues in Education(1988), and "Bangladesh - Strategy Papers on Women in Development," February6, 1990.). In particular, it is recommended that in order to encourage femaleenrollment and retention, the policy of increased female teacher recruitmentshould be strengthened. Many of these recommendations are being incorporatedin a proposed General Education Project.

from 44S to 40?. The Government should establish a cap on subventions toprivate secondary schools, tailor its support to individual schools based ontheir ability to meet certain accreditation standards, and focus its effortsmainly on raising the quality of education and supporting institutions ineconomically depressed regions. Similarly, available evidence suggest thatthe benefits of secondary and university education accrur largely to the well-to-do. However, the sharing of the cost of education with those who benefitfrom it is almost non-existent, limiting the potential resources that could bechannelled to support human resource development. Attempts at some costrecovery at the post primary level should be undertaken. At the minimum,boarding and lodging costs (which would otherwise be met by parents ifstudents stayed at home) could be recovered. Part of the latter could besupported by a well-defined scholarship program for eligible poor students andappropriately developed students' loan programs. The specifics of a costrecovery program require detailed study.

216. Health and Family Planning. Given Bangladesh's demographic andenvironmental setting, 321 no poverty alleviation program could be effectivewithout a concerted effort at improving the provision of health and familyplanning services. Improvements in health constitute an investment in humancapital formation leading to increased productivity; health services alsodirectly satisfy a basic need as relief from illness is an important socialpolicy goal in itself. Similarly, failure to contain the high populationgrowth could frustrate the Government's poverty alleviation goals even withrapid growth and good aggregate economic performance.

217. The public health and family planning system, however, reaches less than30? of the population at the national level, and even less in the rural areas.As in the case of education, the prevailing health/family planning system isconstrained by several problems which limit its effectiveness:

(a) Government policy has emphasized the expansion of physicalinfrastructure, particularly the building of hospitals and basic healthfacilities. But because of the failure to allocate adequate resourcesto operate these facilities and the general shortage of budgetaryresources (health and family planning accounted for an average of 5.2?of total public expenditures during FY81-88), there is substantialunderutilization of existing physical facilities, especially in therural areas because of the lack of essential equipment, inadequatesupplies of drugs and medical facilities, and the relative shortage ofintermediate medical personnel. Efforts at remedying these shortcomingsrequire that greater priority should be given to the allocation ofbudgetary resources for current expenditures relative to capitaldevelopment within the sector.

50/ High population growth, estimated at 2.6Z during 1981-89; malnutritionwhich affects an estimated 502 of the population, especially children under Syears and pregnant and lactating women; and generally poor living conditions,especially in the rural areas and urban slums, exacerbated by successivefloods and associated disasters.

(b) Because the potential demand is very large relative to supply, theeffectiveness of the health/family planning system in reaching the poorcould be enhanced by improving resource allocation and by making use ofuntapped resources through cost recovery. There is sufficient evidencewhich indicates households' willingness to bear substantial cost-sharingfor curative care provided that the quality of services is improved.The scope for cost recovery, however, would require a detailed study todetermine its administrative feasibility.

218. Public Credit Programs. The concern with credit, as an instrument forenhancing the income generating capacity of the rural poor in Bangladesh, maybe traced to the well-documented effects of usury and rural indebtednessassociated with informal lending. Public intervention has thus beenconsidered necessary to broaden the sources of credit for productiveactivities. But, despite the proliferation of special or targeted publicprograms (with varying degrees of subsidies), credit programs have not reachedintended beneficiaries. Because of low interest rates charged (often farbelow market rates), public credit has had to be rationed, creating anenvironment which permitted the better off to reap the benefits as the poorare incapable of competing since they do not possess the relevantpolitical/social influence. Available data suggest that about 50Z of theurban and 75? of rural residents have no access to institutional credit.Access to institutional credit continues to be positively correlated withhousehold socio-economic characteristics such as education, income,landownership and status in the community. The poor, and especially women,derive little benefit from the conventional credit market, in terms of theiraccess to credit and low interest rates (implicit subsidies) for enhanciaigtheir incomes and asset base.

219. In order to improve credit delivery, the Government should move awayfrom interest rate subsidization and associated credit rationing. It shouldpromote competition among different credit institutions by implementingreforms in the financial sector outlined in paras. 56-62 earlier. Inaddition, to provide targeted credit to the poor, the Government shouldstrengthen existing institutions for delivering credit to the poor, as well asimprove credit recovery. In this context, the following factors should beconsidered, in order to improve the credit delivery and recovery system ofgovernment targeted programs, such as the Bangladesh Rural Development Board(BRDB):

(i) consolidate existing programs by temporarily restricting new groupformation and improving the functioning of existing groups. This couldbe done by strengthening ongoing group formation, streamliningcumbersome and time-consuming lending procedures, improving supervisioni,and eliminating interest rate subsidies.

(ii) promote vigorous competition in the provision of credit through amultiplicity of agencies, both government and non-government, as well asformal and non-'ormal, thereby widening the opportunities for the poor ito obtain credit; and

(iii) strengthen non-credit activities of lending institutions, sincethey are a useful instrument for increasing the productivity of poorclients. For example, educating and training recipients of credit inselected income generating activities, and the development ofentrepreneurship among the poor should be important elements of suchcredit programs; without such elements, the proper implementation ofprojects, the development of risk-taking ability and the exploration ofmarket possibilities for both factors and products would be difficult.Because of the cost implications of this approach, however, the costsincurred by such institutions in supporting non-credit activities shouldbe clearly separated and should be financed by the Government or throughgrants from dornor assistance.

Evaluation of Direct and Indirect Income Transfer Programs.

220. Rural Development and Agricultural Incentives. Since about 80Z of thepopulation (especially in the rural areas) depend on agriculture for a living,the Government's rural development program (RDP) was essentially designed asan instrument to provide support for increasing agricultural production.Implemented through BRDB, it emphasized the formation of cooperatives and theintegration of support services provided by government departments.Substantial public interventions through the supply of subsidized inputs tosmall farmers and price subsidies to consumers on wheat and rice were alsoundertaken. In addition, the Government has expanded the rural works programs(Table 4.2). Recently, however, some policy changes have been made whichinclude the reduction of subsidies on minor irrigation equipment and greateremphasis on price support, although as discussed elsewhere, this policy is noteffectively carried out.

Table 4.2: EUPLDYMENT GENERATION /a THROUGH THE RWP

AverageFYO1 FY83 FY85 FY87 r-Y88 FY81-88

Rural Works Program (RWP) 284.34 247.86 162.46 106.46 198.16 182.21Food for Work (FFW) 887.18 1,044.48 1,422.00 1,489.19 1,746.04 1,227.34RWP/Unemployed (X) 2.33 - 1.22 - - 1.78FFW/Un=mployed (X) 7.28 - 11.37 - - 9.33

/ Thousands of persons, based on an average working period of 60 days during slackperiod of four months.

Source: Staff estimates.

221. Analysis of the impact of Government's agricultural and ruraldevelopment programs indicates that generally large farmers were successful inreaping the benefits from subsidized input supply (especially fertilizer), andresearch and extension services. There also seems to be regional disparitiesin the distribution of the benefits of government incentive programs; forexample, the agricultural incentive programs benefitted those regions capableof employing irrigation and adopting new technology. For others, the combined

effects of rapid population increase and natural disasters exerted tremendouspressure on limited land resources, exacerbated rural landlessness andincreased the pool of rural unemployed and destitute women. On the otherhand, the rural works programs (including FFW) had some positive employmentbenefits; its operations provided seasonal jobs for about 10X of thepotentially rural unewployed (Table 4.2). In view of the magnitude of therural employment problem and the limited extent to which government programsalone can address this issue, it is important to redefine government policy onrural development and employment generation to encourage the mobilization ofresources outside the public sector (e.g. through NGOs) for orgaiiizing self-employment and other non-farm activities.

222. The Public Foodgrain Distribution System (PFDS) operates through twelvedistribution channels which broadly fall into two groups: monetized and non-monetized channels. The monetized channels which entail the sale of wheat andrice at ration prices are managed by the Ministry of Food, while the non-monetized channels in which foodgrain is essentially used as food wages forrural infrastructure works is managed by the Ministry of Relief. Themonetized channels accounted for about 52Z of total foodgrain distributedthrough PFDS in FY89, compared to 73Z in FY81. The declining share reflectsthe increasing importance of the non-monetized programs and the de-emphasis,in recent years, of the regular rationing channels in favor of marketoperations. These developments have implications for coverage (in terms ofpotential beneficiaries of the programs) and the inherent size of the subsidy.On the basis of data for FY87, it is estimated that the monetized PFDS reachedabout 15 million beneficiaries, i.e., 142 of the population at that time;these programs were also strongly urban biased, reaching about 36% of theurban population and only 92 of the rural. Similarly, a sample survey ofurban and rural households in FY85 indicated that only 39Z of households inthe lower income groups (income below Tk 1,499/month) had access to PFDS. Theaccess rates in the case of the middle and higher income groups wereconsiderably higher - 582 and 47Z, respectively. Besides unequal access bythe poor, the contribution of monetized PFDS in household cereal consumptionwas marginal. To remedy some of these deficiencies, the Government has soughtto reduce the urban bias of the PFDs by scaling back the relative share ofmonetized programs, as noted, and by introducing in early 1989, a ruralrationing program in place of the statutory rationing program to caterspecifically for the rural poor. As shown in Table 1.6, this program has beensubstantially expanded in FY90.

223. The non-monetized channels of PFDS, on the other hand, are reaching theintended beneficiaries. In FY88, FFW generated about 100 million person daysof employment. The Vulnerable Group Development (VGD) program also reached anestimated 500,000 women (with potential beneficiaries of about 1.5 million)and 60,000 children in FY88. However, to further enhance the povertyalleviation effectiveness of PFDS, the Government will need to:

(a) continue to expand the share of non-monetized channels, vis-a-visthe monetized channels;

(b) sustain efforts to reduce or phase out ineffective monetizedchannels, (the recent establishment of the rural modified rationingchannel is in the right direction); and

(c) strengthen FFW and VGD by enhancing their development impact. TheFFW program also undertakes infrastructure activities which are notintegrated into infrastructural development plans of the country. Theseneed to be properly integrated into the development planning process ofthe country. In addition, greater monetization of these programs topermit improvements to the quality of work undertaken through theseprograms and efforts to reduce leakages are also essential. Anappropriately targeted urban FFW type program to cater for the urbanpoor should be considered.

Policy Conclusions

224. In addition to program specific policy recommendations outlined above(and in various reports of the Bank and Government task forces), four prioritypolicy options which are relevant for enhancing tha effectiveness of theoverall povert- alleviation initiatives of the Government could behighlighted. They are the need to: (i) contain cost increases and improvecost recovery; (ii) enhan.ce program effectiveness through better targeting andstrengthening of project implementing agencies; (iii) bro:den theinstitutional base for poverty alleviation through the intensification ofefforts to increase local level participation and the expansion of the role ofnon-government and informal organizations; and (iv) intensify efforts toreduce rapid population growth.

225. Cost Containment and Resource Mobilization. In order to improveutilization and effectiveness of programs within existing resourceconstraints, the best strategy in the short term is to contain increases incosts through better prioritization of existing programs, thereby makingresources available for high priority programs. There is substantial scopefor cost containment in all existing programs. In the case of currentexpenditures, for example, tighter controls could be exercised onadministration and overhead costs of programs, many of which have grownrapidly in recent years. Similarly, in the case of the ADP, there are a largenumber of projects that rely solely on local financing sources (includingresources allocated to block grants for local development projects). In mostcases, these projects are overcommitted relative to availability of localresources. Furthermore, the development impact of most of these projects arenot well established, given the weak planning capability and inadequateproject supervision at the upazila level. It is recommended that, untilsubstantial local capability in project preparation and supervision isattained, the Government should limit the allocation of untargetted funds(block grants) for local level activities, thereby releasing resources tosupport well-defined high priority activities.

226. The issues of cost recovery, and those related to mobilizing additionalresources (financial or otherwise) through greater private and communityparticipation, have received insufficient attention. As noted above, costrecovery in public education, health and family planning programs, for

example, is almost non-existent; and it might be politically difficult toachieve substantial changes in the near future. Nevertheless, it is importantto make a start in these areas. The establishment of an appropriate costrecovery mechanism is necessary both for mobilizing non-tax revenues and inpromoting fiscal redistribution from the not poor to the poor. Adequate costrecovery (for programs such as education and health) can be also justified onefficiency grounds, since it helps to reduce waste and overutilization offacilities, and provide resources for expansion. Cost recovery is alsoimportant on equity grounds as most subsidized programs seem to provide morebenefit to the not poor. In this regard, efforts should also be made toencourage greater private and community involvement in implementing povertyalleviation programs, through community resource mobilization and increasedparticipation in planning and implementation (see below).

227. Enhancing Proaram Effectiveness. In order to ensure that the poorbenefit from the Government's general expenditure programs and policy reforms.their assets (both human and capital) would need to be developed and improvedso tr.at they can capitalize on the opportunities that may become available.This requires considerable improvements in efficiency of programs such aseducation, health, family planning and rural credit as a matter of theGovernment's highest medium-term priority. Efficiency enhancement wouldrequire:

- improved targeting of poverty-oriented programs. Across the boardsubsidy programs, such as those in agriculture, should be avoided inpreference to limited short-term support to small farmers, if necessary.Efforts should be made to seek out small farmers and provide them withstronger financial services and increased allocation of credit, improvedmarketing facilities, and more dependable supply of inputs. In thiscontext, as noted earlier, institutions providing credit to the poor mayneed government financial support to offset the cost of their non-creditactivities such as training and entrepreneurial development programs.

- strengthen program implementing agencies. The weakening performanceof some poverty-oriented programs (such as the development of thecooperatives and the slowdown in agricultural investment until recently)and the underutilization of existing capacity could be attributed toinstitutional weaknesses, resulting in poor project implementation andassociated inadequate uitilization of aid resources. A number of donor-supported sector-specific studies initiated by the Government (includingthe agricultural sector review, the review of the BRDB, a review of thefood-assisted development programs) have provided specific sectoralrecommendations for improving institutional capacity. These revie-need to be consolidated into a consistent framework to guide policyreforms. In particular, the Government should improve the capacity ofsector agencies to prepare sectoral strategies and to determineexpenditure priorities, especially to maintain an appropriate balancebetween programs fully financed with local resources and those requiringdonor support.

228. Broadening the institutional base. Resource constraints which hamperthe scope of Government programs and the large numbers of the poor which areyet to be reached by poverty-alleviation initiatives suggest thatopportunities for intensifying community level participation (through theGovernment's decentralization program) and collaboration with non-governmentand informal organizations (NGOn) should be further expanded. This could bedone through:

- Intensification of efforts to improve local institutional capacity.Although the central gover.ment should continue to carry the majorresponsibility for promoting rural development programs, localgovernments could play a greater role. Until recently, the system ofpublic administration did little to foster local initiatives; theGovernment, however, recently initiated decentralization efforts duringthe SFYP. But, although block grants have been made to upazilas forimplementing local projects, the development of local planningcapability and its integration into the central planning framework havelagged far behind. The limi-ed devolution of fiscal authority has notproceeded with adequate training of local officials and clearly definedguidelines on precisely what the role the upazilas should play in theimmediate future, much less in the longer term. Adnlinistrative reformsshould thus aim at enlarging local responsibility for formulating andimplementing (especially poverty-oriented) projects and programs, and atincreasing financial and planning capability and accountability at thelocal level. With the increased emphasis on training local officialsand the gradual expansion of their financial powers (including localresource mobilization, especially through cost recovery), the need for aclearer policy for increasing local level responsibility will becomemore urgent.

- Expansion of the role of NGOs. Closely related to expanding the roleof local participation in the formulation and implementation of ruraldevelopment programs for poverty alleviation, is the need to expand therole of NGOs. There are numerous non-avermaent and informalorganizations in Bangladesh; a number of them provide a valuable role inreaching target groups by providing income generation opportunities andservices such as credit, training, health care and nutrition education.Greater participation of NGOs can help expand the coverage of povertyalleviation programs. In this context, the facilitation of activit:esof the recently created Foundation to onlend resources to government andNGO credit programs targeted at the poor should be a very high priorityof the Government.

229. Intensifying efforts to reduce rapid populatio:4 growth. Although itsimpact on government expenditure programs is not d,ct, rapid populationgrowth constitutes one of the most serious obstacles to the realization of theGovernment's poverty alleviation objectives. If population continues to growrapidly, per-capita incomes will not rise rapidly even with good economicgrowth performance. Although there is no aspect of the economy that isunaffected by rapid population growth, its impact on incomes, employment,foodgrain availability, and human resource devclopment as they relate toGovernment's poverty alleviation objectives requires special attention. In

addition to other effects, rapid population growth would have two criticalnegative effects on income growth in Bangladesh. It adds to the labor force,and given the limited employment opportunities, exerts downward pressure onreal wages and increases underer?loyment. It also diverts resources towardsconsumption and away from investment, thus reducing the growth of capitalrequired for economic growth. Rapid population growth could also frustrateefforts to achieve foodgrain self-sufficiency. Besides food aid, substantialamounts of foreign exchange, which otherwise could be utilized for developmentprograms, will need to be diverted for foodgrain imports to feed the growingpopulation, while the overall dimensions of the poverty problem would becomeunmanageable.

230. An effective population program requires further intensification ofgovernment commitment to this objective and, since the acceptance of familyplanning measures may involve a change in social attitudes and practices,meaningful community participation is essential in formulating programs,implementing them and evaluating their success. It would also require greateremphasis on human resource development, especially by enhancing the status ofwomen. In adopting a general approach to population growth and familyplanning, it would thus be important to stress the importance of women'shealth, the right to education and personal growth of girls and the benefitsof contraceptive use as discussed below.

B. A Strategy For Enhancing the Role of Women In Development 51/

Introduction.

231. Development policies in Bangladesh, as in many other countries, havepaid insufficient attention so far to the role of women in the developmentprocess and the need for improving their status and economic contributionwithin the socio-economic fabric. However, it is now increasingly recognizedthat the status of women should receive greater attention. As noted earlier,women and children constitute a large part of the poor in Bangladesh; andpoverty alleviation efforts must therefore recognize the special needs ofthese target groups. Secondly, women need to be recognized for the importantcontributions they already make to the development process; women contributefar more to the economy than generally reflected in official statistics. Moreimportantly, because of the critical role women play in family health andnutrition and in the education of children, the benefits from investments madein improving the status of women tend to permeate more widely through thesociety and across generations. Finally, although the contribution of womento economic activity is substantial, their productivity is still low becauseof constraints of culture and tradition and lack of access to economicopportunities and resources; the removal of these constraints could lead toenhanced productivity and ultimately increases in household income. The

511 This section is based on World Bank Report No. 7899-BD, "Bkngladesh -Strategy Paper on Women in Development; February 6, 1990.

integration of women into the development process is therefore not onlybeneficial but also necessary.

232. The overwhelming majority of women in Bangladesh are not only poor butare also caught between two different worlds: one determined by culture andtradition that confine their activities inside family homes and the othershaped by socio-economic changes that force them outside into wage employmentfor economic survival. In particular, over the past two decades, women fromlandless and near landless households, as well as destitutes, are being drawninto paid employment outside their homesteads. The numbers of householdsheaded by females are increasing due to stresses from poverty as men migratefrom rural to urban areas in search of employment, as well as from desertionsand divorces. Within this context, the following sections discuss thecurrent status of women in Bangladesh, review government policies towards themand outline specific policy recommendations aimed at removing constraintsfacing women, especially in the areas of education and training, water supplyand sanitation, agriculture, industry aid credit.

Current Status of Women

233. Women in the Labor Force. The official statistics indicate that theshare of women in the civilian labor force increased nearly threefold from 0.9million in 1974 to 2.5 million in 1985/85. Although this is subject tosubstantial underestimation, female labor force participation is still only afraction of that of males, which rose by two-thirds from 16.1 million to 26.8million over the same period. The Labor Force Survey (LFS) of 1984/85, alsoindicated that of the 2.5 million of working women about 80? were engaged ineconomic activities in the rural and nearly 20? in the urban a eas; (thedistribution for male workers was 87Z and 13? respectively).52 The LFSestimated that women accounted for only about 1.2? of total agriculturalemployment. This appears to be substantially underestimated however, as theInternational Labor Organization reported an 18? participation in 1970, andsample surveys and studies which looked specifically at female employmentrevealed much higher rates of participation. For instance, a recent study onwomen's role in agriculture found that, in addition to household work,agriculture was the primary occupation of 43? the of women who responded, anda secondary occupation for another 152.

234. On the basis of available information, the following conclusions couldbe drawn: First, female earnings capacity, particularly among wage dependentlandless and marginal households, must be recognized as a critical factor forthe survival of many households. Among female wage workers, about half aremarried with young children and are relatively young themselves. Most comefrom households with insufficient male earnings to meet subsistence needs.Second, a growing number of groups for landless women, organized andsupervised by NGOs have successfully ventured into collective non-traditional

521 Women workers were distributed as employees (51? of the total), self-employed (16?), day laborers (13?), unpaid family workers (13Z), and thebalance as undefined.

activities outside homes, including joint farming on leased or sharecroppedland, joint pond fisheries, management and operation of irrigation equipment,operation of rice mills, brick-breaking and export-oriented garments andfrozen fish and shrimp processing industries. These developments suggest thatfemales would benefit from appropriate training in basic skills and managementand supervisory support in order to enhance their productivity.

235. Health, Fertility and Nutrition. Indicators of health, fertility, andnutrition clearly reveal the extent to which women are disadvantaged inBangladesh. In contrast to global demographic norms, women comprise less thanhalf of the population and have somewhat a shorter life expectancy than men.Female infant mortality is among the highest in Asia, in part because lessresources are devoted to them, as parents consider boys to be economic assetsand old age security. Malnutrition, pregnancy and childbirth-relatedcomplications are the principal causes of morbidity specific to females.Maternal mortality (5-7 per 1,000 live births) is among the highest in theworld. Gender discrimination in household food distribution leads tonutritionally deprived women producing malnourished babies and alsocontributes to higher female mortality rates. Insufficient access toantenatal care, poor obstetric techniques, lack of access to lifesavingemergency procedures during childbirth and to reliable blood typing andtransf.asing, and lack of adequate transportation to referral centers are majormaternal care deficiencies. Fertility reduction is the most effective way inthe short term to improve maternal and child health and should be furtherencouraged. To effectively reduce birth rates, expanded family planningservices need to be linked with health care services, improved education andincome earning opporttnities for women. At the same time other measures forreducing fertility rates, for example by encouraging contraceptive use, needto be pursued vigorously. Demand for and supply of contraceptives have risensteadily to date, but the level of demand remains below what is necessary toachieve desirable total fertility rates.

236. Legal Status. On the surface, the legal status of women in Bangladeshappears to be almost at par with, yet not quite equal to, that of men. TheConstitution ensures equality of the sexes, but also acknowledges unequalstatus for women by reserving the right of making special provisions for them,including employment quotas. While the Constitution empowers the Governmentto take affirmative action for women, civil laws in affording women protectiontend to reduce their status and mobility. Labor laws provide women manybenefits, but women effectively enjoy few because of negative culturalperceptions related to the employment of women in certain occupations. Lawsrelating to marriage, divorce, child custody, inheritance and maintenance aregoverned by community and religious laws which are, in certain cases,favorable to men. Although dowry is prohibited by law, this prohibition isnot effective because fines and imprisonment are not enforced.

Government Strategy and Sector Priorities

237. Government Strategy. The need for an increasing number of women to earnindependent income has not yet been fully recognized in Government'sdevelopment strategy and programs. The economic role of women is stilldefined within the rural household which is the basic unit of production. In

this context, women are viewed as members of male-headed households :n whichmen are seen to require employment for its survival. Income-generatingactivities undertaken by women are viewed as extensions of domestic servicesand as supplementary sources of household income. Given this perspective,limited efforts are made to generate employment opportunities for women.There are also inadequate training facilities for women. The Government iscognizant of the weaknesses of existing strategy. It has recently establisheda Ministry of Women's Affairs with the objective of promoting greaterparticipation of women in development activities and integrating women intothe development process. tIoreover, the Planning Commission is setting up aWomen's Wing as a focal point for WID issues in policy formulation andinvestment planning. To capitalize on initiatives that are already underwayto improve the situation of women, sectoral policies should be alsosignificantly improved, as discussed below.

238. Education and Technical Training. The most important priority of theGovernment is to increase girls' and womens' access to general education andskills training which can facilitate their transition to the world outside thehomestead and increase their options in the labor market. Education, linkedwith increased earnings capacity, will help strengthen women's position withinthe household and the economy. Attainments of women in education inBangladesh are among the lowest levels in the world; tle female literacy rateof 19Z is about half that of males. This is because female education isconstrained by: (a) a limited enabling environment related to (i) inadequateincentives (food, clothing, and scholarships) to induce the poor to send girlsto school, (ii) dependency on child labor that causes females to drop out,(iii) negative attitudes of society about education for girls destined tobecome ahousewivesO; and (b) in school factors such as (i) inappropriatenessof the curriculum for the poor, (ii) insufficient female teachers and poorlymotivated teaching staff; (iii) inadequate physical facilities (water,latrines, and security), (iv) inconvenient class schedules which conflict withfamily requirements for female domestic involvement. For Bangladesh toutilize fully its female human capital, several measures need to be taken. Itis important to expand enrollment of females in basic primary education byincreasing the recruitment of female teachers and by providing incentives(such as uniforms, food, scholarships) to encourage the poor to send theirdaughters to school. (The Government is proposing to implement many of theserecommendations through a General Education project with assistance from IDAand a number of other donors). Adult literacy programs are also important toprovide older women (who have been bypassed) with basic skills to enhancetheir productivity. It is critical to improve opportunities in vocational andtechnical education (VTE) to provide women with skills required for wage andself-employment. The objective of VTE should be to provide technicaleducation in occupations where placement in wage or self-employment is likely.

239. Besides emphasis on education, the Government could adopt a multifacetedand sustained program to incorporate women in the other sectors of theeconomy. These could include specific sectoral policy initiatives andinvestments aimed at removing the many constraints facing women, especially inwater and sanitation, agriculture, industry and credit.

240. Water SupPly and Sanitation. While safe water and sanitation facilitiesare important health requirements for all family members, in Bangladesh womenare largely responsible for ensuring availability of potable water for thehousehold. But, extreme poverty constrains the typical family from affordingeven subsidized conmmnity tubewells and low-cost latrines. As a result, mostwomen use unsafe wrater which increases the incidence of sickness. Since womenare the main healthcare providers for the family, tney have to bear a dualburden of caring for their own ill health while caring for sick familymembers. This reduces both the time available for productive activities andfor leisure. In order to facilitate access of women to safe water supply andsanitation, a number of improvements should be considered. First, poor womenneed to be educated about the beneficial role of safe water for improvedfamily health in order to counteract the convenience of using easily availablepolluted water sources. Second, least-cost latrines should be promoted to fitthe financial resources of users. Third, women should be consulted abouttheir needs for safe water and sanitation in formulating programs for waterand sanitation at local levels; expanding female employment in technical andmanagerial levels in Government agencies concerned with water and sanitationshould help in this regard.

241. Agriculture. The role of women in agriculture is changing as a resultof increasing population pressure and limited economic opportunities in therural economy. With increasing migration of men in search of wage income,women are taking up responsibility, in addition to homestead agriculture, forfield crop production on family landholdings. But the persistence of theerroneous perception that women are only involved in post-harvest cropprocessing and homestead activities means that very little attention is beingpaid to their need for extension services for field crop production. Theimplications of this include: (a) effective elimination of women producersfrom institutional support (credit, inputs, extension, and research) neededfor productive agricultural activities; (b) inability of the small cadre ofnot very mobile female extension workers to respond to the growing numbers ofwomen who need information about improved agricultural production methods; and(c) failure to recognize positive and negative impacts of technologicalchanges on women, e.g., high yielding variety crops have led to increasedemployment in pre and post-harvest work for rural women, while mechanized ricemills have displaced about 50,000 women from employment (assuming 150 days ofwork per year). In order to remedy these deficiencies, it is necessary to (a)restructure the extension services to enable male and female extension workersto effectively reach women's groups; (b) increase agricultural credit forproductive new activities that interest women (para 242); and (c) promoteintensified homestead activities, such as vegetable growing, livestock andpoultry raising, fish farming, sericulture, social forestry, and cropproduction.

242. Industry. Because of insufficient employment opportunities inagriculture and the limited scope for home-based processing of agriculturalproducts (paddy, oilseeds, spices, etc.), female labor from landlesshouseholds is increasingly seeking employment outside the home in themanufacturing industry. According to the Labor Force Survey of 1984/85,female workers comprised 242 of total employees in manufacturing, only secondto the household sector in which women accounted for 79? of participants. It

is likely that this ratio has risen even more in recent years, with the rapidgrowth of the ready-made garments industry which predominantly uses femalelabor. Despite their importance in industrial labor, there are a number offactors which inhibit the prospects for women as industrial workers orentrepreneurs: (a) the perception that working women only supplement familyincome and therefore, in most private enterprises, do not earn equitable wagesfor comparable work; (b) inadequate training facilities for femaleentrepreneurs to acquire business skills; and (c) women are often deniedcredit despite excellent loan repayment records, in part due to theinefficiencies of the financial system.

243. To promote employment opportunities for women, several options should beexplored. Rapid growth of industry would help to expand productive employmentfor a growing female labor force. Given relative prices and the resourceendowments of Bangladesh. such industries should be relatively labor intensiveto achieve a positive impact on employment and incomes, particularly forwomen. Training and credit programs should be developed to assist womenentrepreneurs and focus on activities in demand by women. To ensare thatwomen do not suffer disproportionate displacement from technologicalinnovation, it is essential to equip women with the skills needed toparticipate effectively in the modernization process. In view of thepredominance of the public sector in industrial development in the country, itseems appropriate that public sector corporations and enterprises assume therole of the 'standard setter". The Government should ensure that publicsector corporations improve the balance between male and female employeeswhile undertaking reforms to reduce overemployment. Government could alsoencourage private enterprises to train women and provide better workingconditions (e.g., security, compensation for overtime, toilet facilities, andchild care).

244. Credit. Women need improved access to credit to expand "expenditure-saving' activities of the homestead into 'income-generating' activities thatcan improve their economic status. Even though women tend to be better creditrisks than men, their access to formal credit is constrained by three factors:(a) traditional collateral requirements of financial institutions based onland ownership; (b) cumbersome and lengthy formalities, including detailed andcomplicated loan application forms; and (c) the emphasis of financialinstitutions on providing credit for traditional activities, mainly cropagriculture, which essentially limit womens' access to credit. Although anumber of special credit programs have been developed by the Goverrnent andnon-government organizations (NGO) directed at the rural poor, especiallylandless and destitute women, progress has been slow. 53/ The effectivenessof special credit programs for women is constrained by: (i) weakorganizational structure and poor loan supervision of most agencies,especially government agencies (with the unique exception of the Grameen Bankand some NGOs); (ii) tendencies Gf women because of their low skill levels to

531 Special credit programs reached about 1 million rural women (or onlyabout 9Z of the target group) by 1985186. The cumulative amount disbursedamounted to only about 52 of the amount of loans disbursed by financialinstitutions in rural areas during 1980-88.

invest in activities with inherent low rates of return, exacerbated by marketconstraints, and (iii) high operating costs of credit agencies because theyneed to provide non-credit services (such as training and basic literacy) toclients. To effectively and successfully provide credit to women, theseissues need to be addressed. In particular, attempts should be made toconsolidate and strengthen existing credit programs, especially those of theGovernment, by streamlining credit delivery and recovery mechanisms. This canbe done by improving group formation by keeping such groups to manageablesize. Emphasis should also be placed on expanding and strengthening non-credit activities, especially training and extension services as discussedearlier. Because these activities could lead to higher operating costs,credit agencies would need some government or donor support.

ANNEX A

A Survey of Major Development Issues

1. This ai.nex provides a brief summary of the major development issues facingBangladesh at the current time. It is designed to provide an alternative forthe reader who does not have the time to read the more detailed discussionappearing in Chapters 1, 2, and 4. The issues described in this annex aregrouped into two major blocks. In the first block headed "Economic Growth withStability", the focus is on medium-term actions required to restore macroeconomicstability and accelerate growth in the productive sectors. In the second blockheaded "Poverty Reduction and Sustainable Development', the focus is on longer-term actions needed to ensure that the benefits of economic growth reach allsegments of society and that growth takes place in a context (including bothenvironmental and institutional issues) that is consistent with sustainable long-term development.

Economic Growth with Stability

2. In order to accelerate economic growth without exacerbating inflationaryand/or balance of payments pressures, the pattern of growth needs to besignificantly different from the experience of the past decade, which reliedheavily on the growth of services, particularly the public sector. There area number of areas where the economy could perform better in the context of amore accommodating macroeconomic environment. High-yielding crop varietiescoupled with extensive use of minor irrigation equipment and fertilizer, providea well tested technological package which is capable of significantly expandingfoodgrain production. Jute production, where Bangladesh maintains a dominantposition in world trade, could continue to be an important source of exportearnings if costs are reduced and supplies and prices are stabilized in orderto offset the competitive advantages of synthetic fibers. There is alsoconsiderable potential for expansion of fish production for both localconsumption and export. Industrial production, including many areas forefficient import substitution, can grow rapidly if regulatory barriers arereduced and domestic demand increases in response to higher growth. Finally,Bangladesh's striking success in exports of ready-made garments demonstratesthat it can compete for low-end export markets with the assistance of foreigntechnology and investment. There is no intrinsic reason why economic growthcannot improve, therefore, provided the policy framework encourages low costproduction, greater efficiency in resource use, and increased levels ofinvestment in productive activities.

3. Restoring Financial Stability. The rapid deterioration in themacroeconomic situation during the past year indicates that the Government mayhave lost an important opportunity to achieve higher growth on a sustainablebasis. In many respects, the real economy is responding well to more favorableweather conditions and the recent policy initiatives in the agricultural sector,and foodgrain production is expected to reach a record level of 19.2-19.5 milliontons in FY90. Private sector imports have increased sharply, reflecting a more

favorable outlook for domestic industrial production and demand. The mosttroublesome factor is the government's management of the short-term fiscalsituation. Revenue collections are running well below expected levels, andcurrent expenditures have increased substantially, with much of the increasegoing into low priority areas such as generous wage adjustments for lower-levelpublic sector employees, large increases in food subsidies, export subsidies forjute goods and other products, interest remission on agricultural credit, anddefense and internal security forces. This situation has been exacerbated byexcessive commercial food purchases, despite very favorable crop forecasts. Asa result, public sector borrowing from the domestic banking sector has increasedrapidly, which has led to an increase in the inflation rate for non-food itemsto 142 in recent months as compared to 82 in FY89. Foreign exchange reserves,which peaked at a high point of $1.15 billion in February 1989, have been drawndown rapidly to about $500 million (approximately 1.7 months' importrequirements). While many of these trends would have been manageable if remedialactions had been taken in time, efforts to address these problems have begunonly very recently (para 113). As a result, it appears likely that Bangladeshwill have to go through another period of financial stabilization, underminingthe prospects for higher economic growth for the next few years.

4. Public Resource Management. In addition to short-term fiscal problems,there are a number of longer-term structural problems which need to be addressedin the management of the public expenditure program. Current expenditures haveincreased from 6.6Z of GDP in FY83 to 8.9Z in FY89, while revenue performancehas stagnated due to inelasticity of the existing tax system and the failure toenact longer-term tax reforms. As a result, the public investment program fellfrom 10.3Z of GDP in PY83 to 6.5Z in FY89, and funding constraints, particularlyin terms of the availability of local counterpart funds, have becomeprogressively more binding on project implementation. The donors have helpedto offset these problems by increasing their share of funding for project costs(including local costs), establishing revolving funds in foreign exchange toeconomize on the need for working capital, and by providing program credits togenerate additional local funds for the budget. These actions have had littlesuccess in improving the disbursement rate for project aid, however, which fellfrom 242 of the outstanding pipeline (142 for IDA) in FY82 to 192 in FY89. TheGovernment is cognizant that public expenditures in recent years have notgenerated the requisite returns. Excessive funds have gone into large capital-intensive projects and a number of locally-funded projects with questionableeconomic justification, while the level of public investment declined foragriculture, water resources, and other infrastructure. Operations andmaintenance costs have been substantially underfunded, and recurrent financinghas not been provided to support the rapid build-up in capacity in the socialsectors from donor-financed projects. There is thus a need for a thorough reviewand prioritization of the public investment program, stringent controls on thegrowth of current expenditures, greater emphasis on domestic revenuemobilization, reduced transfers to public enterprises, improvements in projectimplementation procedures, and institutional reforms to strengthen expendituremanagement and control.

5. While better management of the public expenditure program is the mosturgent issue at present, improvements in domestic revenue mobilization will beessential to support the longer-term growth of the budget. Revenue mobilizationis quite low (approximately 92 of GDP), even by the standards of other low incomecountries. Conflicting objectives in the revenue system involving concessionsas well as protection to special interest groups (such as industrialists), andcontinuing ad hoc adjustments in taxes in order to maintain revenue yields haveresulted in a highly distortionary tax structure that impedes economicefficiency. In this situation, structural reform of the tax system and revenuegrowth both hold high priority as development objectives. IDA recently completeda major review of tax policy which recommended the introduction of a VATconsumption tax levied at the manufacturer-cum-import level, reform of directtaxation to eliminate excessive exemptions and allowances that erode the taxbase, and improvements in tax administration. A program in this area shouldinclude the introduction of tax reform measures over several years in order tobroaden the tax base and increase the elasticity of the revenue structure,supplemented by public pricing and improved cost recovery measures and thesubstitution of tariffs for QRs in connection with the ongoing program of tradepolicy reform. The Government has recently indicated that it is interested inmoving forward with a program of medium-term tax reform, although a detailedaction plan for implementing the reforms still needs to be worked out.

6. Expanding the Role of the Private Sector. A number of important actionswere taken in the early to mid-eighties to promote private sector development.An extensive denationalization program resulted in a reduction in the share ofpublic sector ownership in the manufacturing sector from about 80Z of fixedassets in 1980 to less than 40Z in 1988, and government regulations on privateinvestment were liberalized in 1982 and 1986. Despite this progress, in manyrespects the government's liberalization process has been piecemeal and hesitantin recent years. The Government has continued to provide protective measuressuch as import and investment restrictions which have helped the interests ofimportant groups, particularly public enterprises. Similarly, the Governmenthas made little effort to pursue the larger and more influential defaulters onloans from public development finance institutions (DFIs). Thus, while thecommitment of the Government to private sector development is undoubtedlygenuine, there is a significant gap between policy statements and the abilityof the Government to implement such policies effectively.

7. One of the most effective measures for encouraging private sectordevelopment would be the establishment of sound financial institutions operatingaccording to commercial principles. Credit outstanding from the scheduled banksincreased from 6.2Z to 15.7Z of GDP between FY78-86, with most of the increasecoming from public financial institutions. Less attention was directed towardscredit appraisal and loan recovery, however, with the result that the majorityof borrowers have been unwilling and/or unable to service their loans; and byFY86, most public financial institutions were insolvent. While the Governmenttook some ir.itial steps to address the situation, particularly to enforce therepayment of agricultural loans, this process, as discussed in Chapter I, haslost momentum. A financial sector reform program has been prepared with theassistance of IDA which would introduce a more market-oriented interest ratestructure, financially restructure the nationalized commercial banks (NCBs),

improve credit recovery, and generally strengthen the efficiency of financialintermediaries in providing credit to the private sector. The first steps inthis direction (i.e., the introduction of a more flexible interest ratestructure) were taken by the Government in December 1989, and it is expected thpLmany of the remaining supporting actions will be taken withir. the next severalmonths.

8. Exchange rate policies and trade liberalization can also provide animportant stimulus for the growth of the private sector. Bangladesh maintaineda relatively flexible exchange rate policy between FY86-FY88, with frequent smalladjustments in the nominal exchange rate to offset the differential belowdomestic and internatior.al inflation. This policy facilitated the rapid growthin non-traditional export earnings, particularly ready-made garments, whichincreased from $7 million in FY82 to $471 million in FY89, as well as a stronginflow of workers' remittances exceeding $700 million per year from FY87-89.Since November 1988, however, the Government did not make any adjustments in thenominal exchange rate, and with the rapid appreciation in the US dollar (to whichthe Taka is tied), the real effective exchange rate appreciated by over 10?during the ensuing 15 months. Although a 5? depreciation was announced recentlyin early March 1990, this is not sufficient even to regain lost ground; andexchange rate adjustments need to be continued as a matter of priority in orderto provide adequate incentives for exports and workers' remittances, as well asto dampen the demand for foreign exchange through the secondary foreign exchangemarket. Other actions that the Government has recently taken regardilig foreignexchange policies include narrowing the differential between the officialexchange rate and the secondary market rate from 122 in FY88 to less than 22 inFY89 and broadening the secondary market to cover a greater range of imports,which provides the main source of access for private importers to foreignexchange.

9. With regard to trade policies, the Government recently completed the firstphase of a trade liberalization program with a movement from a positive list ofpermitted imports (in FY86) to a combined list of negative and restricted importsand a decrease in the number of import categories on the combined list byapproximately 50Z between FY86-89. The tariff structure has been simplified,with the number of separate tariff rates reduced from 24 to 11 during thisperiod. Despite these reforms, the overall trade regime continues to be heavilyanti-export biased. The effective rates of protection for selected non-traditional exports such as garments and frozen fish (which are producedprimarily by the private sector) are considerably lower than for a 'ide rangeof import-substituting products, most of which are produced by public sectorenterprises. While there is considerable scope for further encouragement ofprivate sector investment and exports through exchange rate and tradeliberalization reforms, this will require greater commitment from the Governmentto implement these reforms.

10. Revitalizing Agriculture. Natural disasters, inconsistent policyimplementation, and insufficient resources devoted to the agricultural sectorall contributed to a decline in the agricultural growth rate from about 3.5?per annum during F'(81-86 to 0.4? during FY87-89. With better policies and agreater commitment of resources, there is scope for a considerable improvement

in agricultural growth, particularly in the winter crops. Given Bangladesh'scontinued dependence on large foodgrain imports, priority in agriculturaldevelopment over the next few years should be given to foodgrain production.Over the longer term, however, efforts should be made to diversify agriculturalproduction into other crops, as well as fisheries and livestock. For thefoodgrain sector, the Government recently endorsed the recommendations of a majoragriculture sector review initiated two years ago with assistance from UNDP andother donors. The recommendations of the report call for increased invpstmentin minor irrigation, expanded drainage and flood control, intensified commandarea development, improved research and extension services, and strengtheneddelivery systems for credit and input distribution, and expansion of ruralinfrastructure such as farm-to-market access roads, local markets, and ruralelectrification. In many respects, therefore, the sector review endorsed areturn to policies that were originally introduced in 1980 but which languishedin the mid-eighties due to a lack of commitment from the Government.

11. The key to improving agricultural production in the near term lies ingreater investment in minor irrigaticn development (especially groundwater) toa sustained level of about 250,000 ha per year. The Government recentlyannounced important policy changes designed to expand the private sector's rolein the supply of minor irrigation equipment and fertilizer, including the removalof import restrictions and tariffs on minor irrigation equipment, exemption ofborehole spacing requirements that had become a major bottleneck to privateinvestment in groundwater development, and greater freedom for the private sectorin the import and distribution of fertilizer. These actions, which were takenfollowing the severe floods in 1988, have had a substantial impact onagricultural production. With better harvests, there is now a critical need toimprove foodgrain management policies. Large commercial imports of foodgrainsduring 1989 increased foodstock levels to near storage capacity, and constrainedthe ability of the Government to procure domestically in order to maintain anadequate floor price to protect producer incentives. As a result, the Governmenthas had to delay food aid shipments and find temporary storage capacity in orderto support domestic procurement. This situation illustrates the critical needto improve the timing of external foodgrain procurement and give adequateattention to the maintenance of domestic market prices.

12. Industrial Development. With the exception of non-traditional exportsand public sector urea fertilizer production, the performance of the industrialsector has been generally disappointing during the 1980s. Output of some of themost important products in the public sector (sugar, steel, cement, jute goods,textile yarn and cloth) has stagnated or declined. The financial position ofthe major public sector industrial corporations deteriorated from an averageannual profit of Tk 450 million during FY80-84 to an annual average loss of Tk1,450 million during FY85-88. While a large proportion of the losses can beattributed to the public sector jute mills, most of the other corporations showeda deterioration in their financial performance as well. Even the private sector,new investment has tapered off after registering an initial spurt between FY&2-85, a situation which probably mirrors the easy availability of credit frompublic sector DFIs in the early eighties and the subsequent constraints on newlending.

13. The Government has provided a wide range of financial incentives over thepast several years to try to encourage industrial investment, many of which havebeen very costly to the budget (such as the recent extension of tax holidays tothe year Q000 and the introduction of export subsidies for jute goods). Noneof these measures have been particularly effective in attracting new productlines, however, other than those already established in Bangladesh. On thisbasis, many senior officials have begun to question the benefits of recentliberalization policies, without addressing some of the more fundamental factorsthat constrain industrial growth. For example, many of Bangladesh's Asiancompetitors (such as India, Pakistan, China and Thailand} carried out substantialreal devaluations during the period since FY85 in order to improve theircompetitive position, which Bangladesh has not matched. In this context, theneed for a more aggressive exchange rate policy, particularly in view of theserious structural imbalance in the balance of payments and the continued heavydependence on external aid, especially commodity/program assistance, should berecognized. The Government also needs to address the continuing drain on theeconomy through direct and indirect subsidies to the public enterprises. Thisis a very difficult situation, as a number of enterprises are economicallyunviable and substantially overstaffed, while the labor unions are generallyhostile. The only politically acceptable solution will probably lie in a case-by-case restructuring program and generous retrenchment payments, rather thanbroad approaches such as further privatization. Finally, the Government willhave to tackle its serious problems in human resource development, which wouldbe a major constraint on long-term industrial growth. While economic growth inthe medium term will continue to rely on agriculture, the fundamental constraintso- land availability and high population growth will ultimately place a limiton the extent to which Bangladesh can be an agricultural economy. Thus,industrial growth is essential for the country's survival, although given thesignificant obstacles to industrial development, this will require a very long-term perspective and considerable commitment to achieve.14. Jute Sector Restructuring. While jute no 'onger commands a dominantposition in the Bangladesh economy, jute production can continue to be a majorsource of employment and cash generation for the rural sector for the foreseeablefuture. Bangladesh is the largest supplier of jute in world trade, accountingfor about 30Z of world production and 552 of world exports. With India and Chinareducing exports in order to meet domestic requirements, Bangladesh has theopportunity to help shape the future prospects for jute in world markets. Thelong-term export prospects for jute are not especially favorable, and jute hasbeen steadily losing its market share to synthetic fibers due to pricing andreliability problems. To maintain or expand its market share in a contractingworld market, Bangladesh will have to restructure its jute industry to lower unitcosts, improve yields, strengthen domestic marketing arrangements, and addressthe problems of price and supply instability in export markets.

15. The Government recently announced a reform program for the jute sector,which, in terms of its medium-term objectives, largely endorses therecommendations of a 1986 IDA sector report. The immediate components of theprogram, however, focus mainly on the liquidity problems of public and privatejute mills by introducing large export subsidies for jute goods and segregatingpast loans to the jute industry, with the Government assuming the carrying costsfor the loans in the short term. Apart from their adverse impact on the

government budget, thai viability of these measures will depend on whether theylead to a restructuring of manufacturing capacity in the jute industry alongeconomically efficient lines. To accomplish this objective, closure ofinefficient public jute mills and a reduction in excess labor will be essential,actions that the Government has previously failed to implement because of strongopposition from the labor unions. Thus, the current reform program could proveto be a costly and fruitless delaying action unless the Government demonstratesa stronger comLitment to address the underlying structural problems of theindustry.

16. Infrastructure Development. Bangladesh's historical development as anagricultural hinterland with difficult phyrical access limited the amount ofinfrastructure inherited at independence. The difficult topography, particularlythe large number of river crossings, significantly increases the unit costs ofconstruction. Infrastructure development has been hampered since independenceby poor project planning, lack of cost recovery, inadequate provisions fcroperations and maintenance, and frequent time and cost overruns duringimplementation. There is a need for continued investment in extending andupgrading energy, transportation, telecommunications and water supply networksto ensure that these services are available to support economic growth throughoutthe country.

17. The energy sector has received the highest priority from the Governmentin order to utilize Bangladesh's large reserves'of natural gas and reduce thecountry's dependency on imported oil. Investments in gas development have beenrelatively successful in reducing Bangladesh's dependence on imported oil; inFY88 petroleum imports at $272 million absorbed about 22Z of the country's exportearnings, compared with $503 million or 702 in FY81. On the other hand, poorinvestment planning by the Bangladesh Power Development Board (BPDB) has limitedthe efficiency of the power system, with undue emphasis on the zonstruction ofpower generation plants and lack of attention to transmission and distributionnetworks. This problem has recently been addressed through a Priority InvestmentProgram which includes extensive measures to improve project selection, increaserevenue collection, and strengthen the finances of BPDB. Rural electrification(which is an essential element in the government's stratagy for agriculturedevelopment and the promotion of off-farm employment) is nrovided through theRural Electrification Board, which is a relatively well-run organization.

18. The development of an efficient transportation system has been a seriousproblem since independence due to poor project selection and excessive amountsof funding going to poorly performing public entities, particularly BangladeshRailways. 'While the Government has recently strengthened its program of roadmaintenance and rehabilitation, it has placed special emphasis on the completionof major bridges, particulurly the Jamuna bridge which would provide a directlink between the eastern ard western parts of the country. A recent feasibilitystudy has determined that a multipurpose bridge across the Jamuna river(including a four-lane roadway, power transmission lines, and the capacity fora gas pipeline and telecommunications links) would be technically andeconomically viable. However, there is a need for the Government to review itsoverall public investment program to ensure that the Jamuna bridge can beaccommodated without c.mmpromising the implementation of other high priority

projects. In particular, the Government will have to address the rationale forcontinued large operating subsidies to Bangladesh Railways, which constitutesa serious drain on budgetary resources. Regarding other infrastructure sectors,the development of an efficient telecommunications system has been hampered byinefficient management by Bangladesh Telephone and Telegraph Board, inadequaterevenue generation, and poor network design. Water supply for human consumptionhas relied largely on groundwater resources, which are being increasinglyaffected by salinization and the lowering of the water table as the irrigationprogram expands. In addition, while there are a large number of worthwhileinfrastructure projects potentially available, in general, progress is likelyto continue to be hampered by weak implementation capacity, in the absence ofeffective steps to improve project priorities and implementation.

Poverty Reduction and Sustainable Development

19. In its broad policy statements, the Government has repeatedly stressed acommitment to poverty alleviation. Given the magnitude of the problem and thelimitations inherent in relying solely on economic growth, a variety ofapproaches will be required to channel assistance directly to the poor. Sinceincome distribution is fairly uniform throughout Bangladesh, povertyconsiderations can be included in the design of programs at the national level,rather than focusing on particular regions or sub-areas. For example, supportfor productive activities should keep the interests of the poor in mind by makingagricultural services available to small farmers and by providing infrastructuresuch as rural roads and markets and rural electrification. A second major focusof poverty alleviation programs should be human resource development,particularly family planning, primary education and primary health care services.Finally, a variety of targeted relief programs, as well as programs providingcredit and training for small scale self-employment activities, will be requiredto meet the needs of the most disadvantaged groups, particularly landless workersand women.

20. Population Growth. Rapid population growth exacerbates almost all otherdevelopment problems in Bangladesh. Since independence, Bangladesh hasexperienced an increase in population of 35-40 million people, half again aslarge as the population level in 1971. This increase has been reflected in alarge expansion of the number of rural landless households, who form the primarylocus of poverty. Population growth has over-stretched the social services andworsened the impact of natural disasters through encroachment on marginal lands.At an average annual rate of 2.62 during 1980-86, Bangladesh's population growthrate is one of the highest in the Asian region, compared to 2.22 for India, 2.02for Bhutan, and 1.22 for China during the same period. The Government has hadan active family planning program since 1975, which has been successful inincreasing the contraceptive prevalence rate from 82 in 1975 to 31Z in 1989, witha corresponding reduction in the average number of live births per female from4.0 in 1975 to 3.4 in 1989. These programs are being expanded over time in linewith the implementation capacity of the sector institutions and are being mademore effective by improving the linkages of family planning to maternal and childhealth care activities in order to enhance parental confidence in the survivalof children already born. However, it is increasingly recognized that programsaimed solely ac the supply of family planning services will not be sufficient

to achieve the desired reduction in fertility. Greater efforts are needed topromote awareness and demand for family planning as well. This should includepromoting the general status of women in society, as well as specific programsto reach the population in greatest need, for example, by including familyplanning in the primary and secondary school curriculum and by strengthening thetraining of family planning in medical schools.

21. Human Resource Development. Human resource development, measured in termsof basic indicators of literacy, health and nutrition, is extremely low inBangladesh. The adult literacy rate (approximately 292) is one of the lowestin the world, and primary and secondary school enrollment rates (roughly 582 and27?, respectively) are significantly below the levels achieved in comparablecountries. Child and adult malnutrition is widespread, and there is a high'ncidence of diseases that can be prevented through relatively simpleinterventions. Programs to improve the quality and coverage of basic services,particularly primary education and primary health care, and reach disadvantagedgroups such as women can have very high benefits in terms of social and economicdevelopment. The Government has been working to e.;.pand services in these areas,but progress has been hampered by financial constraints and by manpower andinstitutional weaknesses. Public expenditures for human resource developmenthave remained roughly constant at about 2.4Z of GDP between FY81-88, which iswell below the amount required. Increases in funding have been provided by donoragencies, but this effort has not been matched by the Government from its ownrevenues. In recent years, funding problems have been exacerbated by decisionswhich directed a large share of local funding into areas with relatively littleimpact on the expansion of primary services (e.g., increases in governmentstipends to cover the cost of teachers' salaries in private secondary schools).Greater emphasis on cost containment and cost sharing will be necessary if theGovernment is to succeed in achieving its long-term objectives in these sectors.

22. Targeting Assistance to the Poor. In order to have a significant impacton poverty reduction, the Government will need to make a conscious effort toensure that public programs reach the poor and provide goods and services thatwill enable the poor to enhance their income-earning capabilities. Whileprograms with the potential for addressing poverty (including education, healthand family planning, as well as income transfers such as subsidies and fooddistribution programs) account for close to 40? of the total public expenditureprog.am, by and large the poor are under-represented in terms of directbeneficiaries of the programs. For example, while the poor constituted 52Z ofall households in FY86, only 34Z of public expenditures on the social sectorsreached the poor, while 66? of expenditures benefitted households above thepoverty line. Despite the rapid increase in current expenaitures in recentyears, the social sectors and programs that benefit the poor have remainedunderfunded because of inadequate prioritization in the use of resources. Mostprograms that benefit the poor are financed largely from external resources,while domestically-mobilized revenues show little evidence of redistribution infavor of the poor. This indicates that the major issues constraining theexpansion of poverty-oriented programs are those associated with the overallmanagement of the public expenditure program; i.e., weak linkages betweengovernment policy statements and the actual allocation of budgetary resources,poor implementation performance, and inadequate domestic resource mobilization

to support major social sector programs. There is considerable scope for theGovernment to improve the targeting of poverty programs by addressing questionsof the efficiency of resource utilization in poverty-oriented programs as partof its overall reforms of public resource management policies.

23. Targeted foodgrain distribution programs aimed at vulnerable groupsaccounted for roughly half of the food distributed through the public foodgraindistribution system in FY89. Besides providing income to the poorest sectionsof the population, particularly rural landless households and women. the programsalso constitute a significant share of development spending for localinfrastructure projects through the Food for Work program. In addition to reliefprograms, it is important that the poor have access to income-generatingopportunities. The Government has had limited success with its integrated ruraldevelopment programs, and the programs have been widely criticized for internalinefficiencies and failing to reach the very poor. For this reason, manybilateral donors have preferred to use NGOs for targeted assistance programs tothe poor. The NGOs can provide valuable intermediary services between the verypoor and formal institutions by providing credit and training for a range ofsmall scale self-employment activities. However, the government's attitudetoward the participation of NGOs has been ambiguous. While it recognizes thesuccess of particular local institutions such as BRAC and Grameen Bank, ingeneral many officials are suspicious of NGOs, particularly foreign-sponsoredones, because of concerns about religious and political activities andcompetition with government sponsored programs. This has resulted in cumbersomeprocedures for the approval of NGO programs and delays in reaching agreement onthe establishment of an IDA-supported foundation to channel public funds topoverty programs, including NGO-supported programs. Given the magnitude andextent of the poverty problem and the very limited progreus made by governmentagencies in addressing this issue, the Government will need to cooperate morepositively with the considerable array of NGOs operating in Bangladesh in orderto be more effective in reaching the poor.

24. Women in Development. Poverty and cultural factors have comoined toproduce widespread discrimination against women in terms of access to services,employment and income. Women comprise the largest share of those living belowthe poverty line. Growing landlessness has forced many women to join the wagelabor force to supplement family incomes, and increasing numbers of women areeffectively heads of households and primary income earners for the family dueto divorces and desertions as men migrate to urban areas in search of employment.Indicators of health, fertility, and nutrition status clearly indicate the extenito which women are disadvantaged in Bangladesh; and although their legal statusappears to be almost equal to that of men, in practice women do not receive equaltreatment. The Government has recognized the role of women in policy statements,and it has taken a number of largely symbolic steps to promote women in society.However, in order to assist women in realizing their full economic potential andraise their prospects for a fulfilling life, the Government needs to takeadditional steps to overcome past patterns of gender discrimination by makingspecial efforts to attract and retain females in primary schooling, institutingadult literacy programs for older women, increasing access to maternal and childhealth services and family planning methods, and expanding programs (many of thempioneered by NGOs) to provide women with training in income-earning activities

and access to credit.

25. Environmental Concerns. Bangladesh's flat deltaic topography makes itprone to natural disasters, especially floods, drought and cyclones. Thegreatest attention at present is directed towards flood control, which elicitedbroad international concern following two years of major flooding in FY88 andFY89. In response, four major studies of flood control strategies wereundertaken, sponsored by UNDP, France, Japan and U.S.A. At the request of theGovernment of Bangladesh and in response to a resolution of the G-7 summitmeeting in July 1989, IDA agreed to take a lead role in coordinatinginternational action on flood control, and IDA's Action Plan for Flood Controlwas endorsed at a conference of donors in London in D,ecember 1989.

26. In thet inmediate aftermath of the disastrous floods of FY89, a large bodyof international opinion took the view that a lasting solution to the Bangladeshflood problem had to be addressed on a regional basis, involving all theconcerned riparian countries (India, Nepal, China and Bhutan as well asBangladesh). More considered analysis of the problem indicates, however, thatthe principal cause of the FY88 flood was exceptionally heavy monsoon rainfallwithin the boundaries of Bangladesh. while in FY89 the simultaneous peaking ofthe Ganges and Brabmaputra Rivers was the major cause. Thus, while it would bedesirable to have closer cooperation among the riparians for improved watershedmanaiement, at this stage the approach to flood control should focus on measuresthat. can be taken within the boundaries of Bangladesh itself to deal with theproblem. Such measures should include improved flood forecasting and earlywarning and upgraded flood preparedness arrangements (e.g., population andlivestock evacuation, emergency supplies, flood relief and rehabilitationprograms), as well as a phased program to extend flood control and drainagestructures. The Action Plan for Flood Control adopts a cautious approach tolarge-scale embankment schemes and recommends that they be examined along withother alternatives in studies covering the five main regions of Bangladesh asthe basis for a longer-term flood control program which is technically andeconomically viable as well as environmentally sound. An added concern isprotection from cyclones which struck Bangladesh during FY85 and FY89 and causedan estimated 300,000 deaths in 1971. The EEC is currently sponsoring a studyof coastal embankments and other measures to reduce cyclone damage.

27. While flood management is the foremost environmental concern at present,Bangladesh faces a number of longer-term environmental problems, includingdeforestation, depletion of inland fisheries, saline intrusion of groundwatersupplies, water pollution, susceptibility to sea-level changes, and earthquakes.The remaining forests are concentrated in the Chittagong Hill Tracts, which aresubject to continued tribal strife, and the Sundarbans coastal areas. Forestdepletion greatly exceeds the natural replenishment rate, particularly in theSundarbans, which could increase the vulnerability of Bangladesh to cyclonedamage. The reduction in fuel wood availability is causing rural households touse agricultural residues and animal dung as an energy source, which iscontributing to soil depletion and reduced fodder availability for draft animals.On the positive side, Bangladesh has substantial reserves of natural gasavailable which can provide a clean and economical alternative in manyapplications. Depletion of inland fisheries is to some extent linked to road

and flood protection construction, which interferes with the breeding cycle offish during the annual floods. As fish production constitutes the main sourceof animal protein in the Bangladeshi diet, remedial actions in terms of openwater stocking and fisheries development will become increasingly important.Groundwater salinization is largely related to reduced water flows during thedry season from the Ganges river, which will require greater cooperation betweenthe riparian countries than seems likely to occur in the near future. Waterpollution is an increasing problem due to heavy population pressure, expandingindustrialization and the growing use of agro-chemicals. Problems of sea-levelrise could become important over the long term, although there is not at thistime reliable data upon which to base predictions about the likely effect ofglobal warming on Bangladesh. Finally, earthquakes have the potential for doingserious damage in this seismically active region, which is a concern at presentin the design of major infrastructure (e.g. the Jamuna bridge), which must beconstructed to withstand both vibration and soil liquefaction.

28. Public Administration. A number of factors have combined over time toreduce the efficiency of public administration and demoralize the civil service,including extended wage and employment freezes in the early eighties forbudgetary purposes, high vacancy rates in upper-level positions, wage compressionand overstaffing as a result of generous awards for lower-level staff, increasingpoliticization in appointments and promotions, frequent changes in top civilservants due to rotation every three years, and excessive centralization ofdecision-making authority. A recent study financed by USAID addressed a numberof issues in the area of public administration; however, it was unable to reacha consensus on many of the major structural constraints affecting the qualityof public administration because the government steering committee was generallyunwilling to move beyond a consideration of purely administrative processes.Progress in these highly politicized areas is clearly dependent on the interestand willingness of the Government to make the necessary changes and providedynamic leadership and motivation to the civil service. While there are a numberof dedicated and competent top civil servants, they are a shrinking band andinsufficient by themselves to galvanize the bureaucracy into a more aggressivedevelopment stance.

ANNEX B

Impact of Food Operations on the Budget

1. Food operations have an important influence on the availability of localresources for the development budget (ADP) in two ways: food subsidies generallyrequire transfers from the budget and have the same effect on the availabilityof resources for the ADP as increases in current expenditures. An increase infood stocks, whether financed from budgetary transfers or from bank borrowing,have the same effect on ADP financing so long as the Government limits its bankborrowing. On the other hand a rundown of food stocks generates additional localresources for the budget (and the ADP) from food sales. Food subsidies had beengradually reduced over the eighties until they were eliminated in FY87 and FY88,but have reappeared on a large scale in FY89 and FY90. Foodstocks have been morevolatile, with substantial swings from year to year, depending on fluctuationsin domestic production (largely as a result of v&garies of the weather) and theGovernment's foodgrain import policy.

2. While the reasons for and effects of food stock changes are wellunderstood, the reasons for the re-emergence of food subsidies and their impacton the budget and the ADP are less clear. This is partly because food budgetaccounting in Bangladesh is extremely complicated, so that only a few officialswithin the Government fully understand its ramifications. Moreover, theGovernment's presentation of the budget is not fully on a cash basis and includesaccounting valuations (for food aid and FFW, VGD and relief programs) andimplicit economic subsidies on food operations. The Government also receivesaubstantial amounts of food aid as grants each year,which are used in large partto finance FFW, VGD and relief operations. Therefore, many officials believethat accounting subsidies arise from the fact that food aid and its uses (suchas FFW and VGD) are valued at different prices and have little practicalsignificance for the availability of resources for the budget.

3. However, what is not often fully appreciated is the fact that foodoperations involve substantial cash costs to the budget on both monetized andnon-monetized (VGD, FFW and relief) channels. For example, apart from food aiu,the Government purchases substantial amounts of grain commercially bothdomestically and abroad; (such commercial imports amounted to 1.1 million tonsin FY88, 782,000 tons in FY89 and 526,000 tons so far in FY90). Transport anddistribution costs of these purchases and food aid imports are peid for by theGovernment in cash or bank borrowing. Similarly, stock losses (which are over100,000 tons each year) and stock accumulations, as well as administrativeoverheads of the Food Department, involve cash expenditures. These cash costsin turn are recovered by the Government from the sales of foodgrain throughmarketing (monetized) channels. However, if average ration prices under thesemonetized channels do not fully cover the cash costs of food operations, it ispossible to have substantial cash subsidies on these monetized sales. Cashexpenditures for financing accumulation of food stocks would add to theseoutlays, even though the Government may be receiving substantial food aid whichfully finances non-monetized (FFW, VGD and relief) operations.

4. It is possible to separate accounting subsidies on non-monetized channelsin order to arrive at the cash impact of food operations on the budget. Table1 below shows both accounting/economic subsidies on food operations (which areincluded in the government budget presentation in Table 1.9) and the budgetaryimpact of cash subsidies and the build-up of food stocks. Thus, contrary to thegenerally-held view within government circles, cash subsidies on food are quitelarge, though not as large as accounting/economic subsidies. In fact, cashsubsidies on monetized channels (which had been eliminated in FY87 and FY88) wereas large as Tk 6 billion in FY89 and are expected to be about Tk 4.8 billion thisyear. In FY89, however, the Government ran down food stocks substantially (toless than 1.0 million tons) generating Tk 3.6 billion in additional salesreceipts, which limited the net cash impact of food operations to about Tk 3.1billion. This year, however, the substantial build-up of food stocks notedearlier is expected to claim budgetary resources to the extent of over Tk 4billion, so that the net cash impact of food operations (including cash subsidieson market sales) will be about Tk 9.2 billion - an unpreceedentedly large amount.To that extent, the amount of local funds available for other budgetary purposeswill be reduced, assuming that the Government will limit bank borrowing toprudent levels.

Table 1: IMPACT OF FOOD OPERATIONS ON THE BUDGETJ.a FY87-90(In billion Taka)

FY87 FY88 FY89 FY90 FY90Budget Estimate

A. Net Cash Impact -1.98 5.86 3.06 2.48 9.16Cash Subsidy -2.10 -0.14 6.64 0.99 4.81Stock Change 0.12 6.00 -3.58 1.49 4.35

B. Accounting Impact 0.13 5.84 2.42 7.11 10.85Accounting Subsidy 0.01 -0.16 6.00 5.62 6.50Stock Change 0.12 6.00 -3.58 1.49 4.35

la Positive sign indicates net budgetary expenditures on food operations andnegative sign indicates net generation of resources for the budget from foodoperations.

Source: Sraff estimates based on GOB and World Food Program data.

STATISTICAL APPENDIX

TableNo. Section/Title Page No.

HUMAN RESOURCES .164

1.1 Population Projections, 1985-20301.2 Population Benchmarks by District, 1961-19851.3 Vital Population Statistics, 1980-19871.4 Comparison of Child Nutritional Status Results from

Three National Surveys1.5 Health Statistics, 1980-19881.6 Family Planning Statistics, 1980/81-1988/891.7 Education Statistics, 1974 and 1981 Census1.8 Distribution of Population by Economic Activities,

1981,1983184 to ;985/8(1.9 Employment by Occupation and by Sex, 1983/84 and 1984/851.10 Income Distribution and Poverty Indicators, 1973/74-1985/861.11 Number of Persons Going Abroad for Employment, 1976/79-1989

NATIONAL ACCOUNTS . . . . . . . . . . . . . . . . . . . 175

2.1 GDP at Current Prices by Sector of Origin, 1980/81-1988/892.2 GDP at Constant Prices, 1980/81-1988/892.3 GDP Deflators, 1977/78-1988/89

BALANCE OF PAYMENTS . . . . . . . . . . . . . . . . . . . 178

3.1 Balance of Payments, 1980/81-19881893.2 Balance of Payments - Requirements and Sources Format,

1980/81-88/893.3 Value of Total Exports by Commodity, 1980/81-1988/893.4 Quantity and Value of Traditional Goods Exports, 1980/81-1988/893.5 Quantity and Value of Non-Traditional Exports, 1980/81-1988/893.6 Quantity and Value of Major Import Commodities, 1980/81-1988/893.7 Imports and Exports Volume and Price Indices and

Terms of Trade, 1981/82-1988/893.8 Total Import Financing, 1972/73-1987/893.9 Aid Pipeline, 1980/81-1988/893.10 Commitments and Disbursements of Aid by Type of Aid,

1976/77-1988/893.11 Average Exchange Rates, 1976/77-1988/89

EXTERNAL DEBT . . . . . . . . . . . . . . . . . . . . . . 187

4.1 External Public Debt Outstanding Including Undisbursed(December 31, 1988)

4.2 Service Payments, Commitments, Disbursements and OutstandingAmounts of External Public Debt (December 31, 1988)

-162-TableNo. Section/Title Page No.

BUDGET . . . . . . . . . . . . . . . . . . . . . . . . . 192

5.1 Conventional Budget Summary, 1980/81-1989/905.2 Current Budget, 1980/81-1988/895.3 Annual Development Program, 1978/79-1989/905.4 Financial Performance of Public Sector Industrial

Corporations, 1980/81-1989190

MONEY AND BANKING .......... . . .. . 196

6.1 Money Supply and Domestic Liquidity, 1983-19896.2 Agricultural Credit Issued by Major Credit Institutions,

1977/78-1988/896.3 Loans Sanctioned by Development Finance Institutions, .

1977178-1988/896.4 Nominal Interest Rates on Selected Saving Instruments,

August 1977 - August 19886.5 Nominal Interest Rates on Advances,

August 1977 - August 1988

AGRICULTURE . . .. . . . . . .. 201

7.1 Land Use by Area, 1986/877.2 Farm Size Pattern and Landlessness, 1960-1983/847.3 Area Under Main Crops, 1980/81-1988/897.4 Irrigation Summary, 1980/81-1987/887.5 Public Sector Irrigation Programs, 1980/81-1988/897.6 Commercial Fertilizer Distribution by Type and Region,

1980-81-1988/897.7 Production of Main Crops, 1970/75-1988/897.8 Public Foodgrain Distribution System Operations7.9 Seasonality of Public Foodgrain Distribution System Offtake,

1975/80-1988/897.10 Aus and Aman Production by District, 1970/75-1989/907.11 Production of Boro and Wheat by District, 1970/75-1988/897.12 Jute Production by District, 1970/75-1989/907.13 Supply and Disposition of Raw Jute, FY79-FY897.14 Public Foodgrain Procurement by District, 1975/80-1988/897.15 Public Procurement of Aus and Aman Rice and Paddy by

District, 1975/80-1988/897.16 Public Procurement of Boro and Irri Rice and Paddy and

Wheat, 1975/80-1988/89

-163-TableNo. Section/Title Page No.

INDUSTRY AND INFRASTRUCTURE . . . . . . . . . . . . . . . 217

8.1 Bangladesh Bureau of Statistics Industrial ProductionIndices, 1980181-1988/89

8.2 Jute and Cotton Hilling Statistics, 1980/81-1988/898.3 Sugar and Pulp and Paper Mill Statistics, l980/81-1988/898.4 Production of Selected Industrial Products by Public

Sector Corporations, 1972175-1988/898.5 Natural Gas Statistics, 1979/80-1988/898.6 Electricity Production and Consumption, 1975/80-1988/898.7 Railway Statistics, 1972/75-1988/898.8 Transport Statistics, 1974/75-1987/88

PRICES AND WAGES . . . . . . . . . .. 225

9.1 Consumer Price Indices, 1980/81-1988/899.2 Natural Gas and Petroleum Product Prices, 1980-19899.3 Electricity Tariff Structure, Effective July 1, 19899.4 Wholesale Prices of Consumer Goods in Urban Areas,

1980/81-1988/899.5 Wholesale Price Indices of Agricultural and Industrial

Products, 1976/77-1988/899.6 Public Foodgrain Ration Quotas and Issue and Sales

Prices, 1965-19909.7 Daily Wages for Unskilled Labor, 1979/80-1988/899.8 Wage Differentials, 1978/79-1988/899.9 Agricultural Wage Rates, 1980/81-1987/88

Table 1.1POPULATION PROJECTIONS, 1965-2030 -164-(thousands)

WIOLAESH Projection (0006) with MEAl by 225........................................ ........................................................................... ***w*o@s*@@*Bv.e.s*@...............................................e-wo

AGE GRO/P 1905 1990 199s 200o 2005 2010 2015 2020 2025 2030..................................................................................................................................

TOTAL NF 100593 11441S 129113 1t4486 161154 176963 192141 206&S' 219413 232407VALES

0-4 9101 9647 10255 109 11252 119 11031 1o05 10319 105215-9 7837 863 9250 9876 10569 l096 10919 10810 10557 10201

10-14 6630 MO73 8582 9142 977 10670 10836 10842 10746 1050715-19 5553 6529 7619 8469 903 9667 1037 10745 10763 1068020-24 4606 5430 6392 7473 86 a 953 022 0629 1066325-29 3903 441 5291 6242 7320 s8n u48 9393 10110 1051230-34 2804 3735 4353 5153 6101 7171 80W s607 9261 998935.39 2319 2705 3659 4220 5017 555 7017 7870 8462 912740-44 1974 2218 2594 3521 4061 4* s572 684 7697 830045-49 1666 166 2103 2468 3366 3916 4685 5595 6633 748350-54 1453 1565 17?, 1946 2321 3180 3711 4455 5341 635455-59 1189 1312 1418 1181 1801 2136 2939 3445 4154 500060-64 908 1030 1140 1238 l393 l595 1901 2429 3097 375365-69 671 737 839 935 1026 1162 1339 1606 2236 265170-74 531 494 545 626 706 781 82 1036 1253 175775. 473 537 537 571 652 ?51 3 961 1149 1389TOTAL 51639 s5s87 66315 7416 8273 90m 9l 105824 112406 118890

FEMALES0-4 8656 9081 9700 10430 10903 10811 10620 10292 9871 100335-9 7362 8161 8622 9293 10108 10607 1057 10409 10125 9746

10-14 6418 3O 800 8502 9189 10007 10516 10419 10345 1007615-19 5308 6295 7102 7900 8m 9071 9896 1041T 10399 1028520-24 4412 5176 6146 6942 m 8216 692 9759 10301 1031225-29 3713 4282 5029 5976 6748 7r3 044 8765 9622 1019130-34 2697 3589 4144 48rt 5m 652 735s 7U 8622 950135-39 2241 2596 3460 396 4699 Sw 64 71es 73 849340-44 1924 2147 2491 3323 340 4S533 5A2 6211 7024 758945-49 1619 1832 2048 2378 3172 3661 436 5253 6033 685250-54 1325 1523 1726 1931 2M2 3006 30 4175 5049 582755-59 1060 1219 1405 1594 1782 2Q82 2MT 3293 3947 480260-64 794 941 106 125 1421 1601 188S 2562 3029 365865-69 58 666 7" 916 1056 1210 1371 1639 2249 26S670474 423 44 514 612 707 826 959 1105 1331 185075. 420 471 504 563 65T 7?? 931 1113 1326 1616TOTAL 48954 55658 62796 7042 7814 86133 93554 100543 107006 113517

BIRTH RATE 40.6 37.7 35.3 32.2 28.7 25.6 22.7 20.2 19.2OEATH RATE 14.8 13.5 12.2 10.9 9.9 9.1 8.4 8.0 7.7RATE OF IUT. INC. 2.58 2.42 2.31 2.13 1.88 1.65 1.43 1.23 1.13NET NIGRATION RATE -.1 -.1 -.1 .0 -.0 -. 0 -. 0 .0 .0ORNTH RATE 2.5 2.42 2.31 2.13 1.87 1.65 1.43 1.23 1.15TOTAL FERTILITY 5.540 5.030 4.520 4.010 3.500 3.078 2.706 2.380 2.260miR 1.971 1.835 1.709 1.581 1.413 1.273 1.145 1.030 1.000etO) - BOTH SEXES 50.75 52.14 53.84 55.76 57.56 59.42 61.37 63.39 65.506(15) - OTH SEXES 48.14 48.64 49.16 49.78 50.80 51.85 52.95 54.08 55.26156 * BOTH SEXES 119.0 110.5 99.5 87.3 79.1 70.9 62.8 54.6 46.4q(5) - BOTH SEXES .1757 .1615 .1431 .1237 .1111 .096 .0857 .0729 .05990EP. RATIO 95.4 89.1 82.0 75.6 70.4 64.7 58.4 52.5 48.3 45.8

___ _ - - _ - _ - -_____._________________----------------------

GRR a Gross reproducttion rate.NRR a Net reproduction rate.

Note: Asualng net roproduct-on rate lowered to unity by the year 2030.

Source: World oank staff estimatos.

Table 1.2POPULATION BENCHMARKS BY DISTRICT, 1961-1985(thcusands)

ExtrapolationDivision 1961 1974 ---------- 1981 Census---------- Average 1974-to-1981 to 1985 /a

District Census Consus Total dale Femlo Households Size Growth Rate Total Per he

Rajshahi h11850 1782 21087 10769 10298 8716 5.7 2.8 24339 626Dinajpur 1710 2571 3198 1847 1551 S8 5.5 3.2 3738 478Rnngpur 8796 5447 6490 8325 1815 1196 5.4 2.5 7401 677Bo0ra 1574 2281 2718 1384 1834 489 5.6 2.9 3189 699Raijehahl 2811 4288 6268 2677 2686 894 5.9 8.0 6121 558Pabna 1959 2816 3418 1750 1662 557 6.1 2.8 3940 693

Khuilna 10067 14105 17150 8831 8819 2884 8.0 2.7 19715 S0oKushtis 1160 1884 2273 1167 1106 859 C6.8 2.7 2611 654.iesore 2190 8827 4016 2069 1947 Is38 6.8 2.7 4614 600Khulna 2449 3557 4833 2264 2009 741 5.9 2.9 5041 8SlBarisal 8068 8928 4J68 2398 2270 630 5.6 2.5 5315 64Patuakhali 1194 1499 1840 983 907 821 5.7 8.0 2134 424

Dhaka 15294 21816 28249 18882 12816 4643 6.7 8.0 8os42 850J amlpur 1449 2069 2445 1241 1204 452 5.4 2.5 2783 718Mdymensingh 4083 6508 s64a 8865 3188 1208 5.4 2.5 7449 674Tangaill 1487 2078 2444 1243 1200 420 6.8 2.8 2767 721 IDhaka 5096 7612 10049 5870 4673 1706 5.9 4.0 12161 1347iFarldpur 8179 4060 4768 2417 2351 8s5 5.6 2.8 6593 690

Chittagong 18630 18686 22565 11597 10968 8892 s.e 2.8 26996 604S b et 8490 4759 5650 2897 2758 968 5.9 2.5 6480 465Comills 4899 6819 60so 3481 3399 1203 6.7 2.4 7811 1026Noakhali 2888 8234 3881 1899 1914 6so 5.6 2.4 4322 570Chittagong 2983 4815 6458 2913 2683 906 6.0 8.6 6474 769Chittagong H. T. 38 S08 748 407 889 187 5.6 5.6 959 57

TOTAL 50840 71479 87062 44860 42202 16515 5.8 2.9 100592 605

NHte: Data shown represent actual census results, not adjusted for probable undercounting.The adjusted 1981 Census estimat of total population Is 69,940,000 for the Census date of March 8, 1981.

/a Extrapolated to 1985 at 1974 to 1981 growth rate and adjusted proportionately to estimated 1985 total.

Source: Bangladesh Bureau of Statistics and staff estimates.

T bi 1.SVTl PAATICN STATISTICS. 1910-1907

--- - - - --- - -- -- -- -- -- ----- - - - -- -- -- -- -- -- -- -- - -- - -- -- -¢- -- - -- - -- -- -- -- -- -- -- - - -*- -

196W 191 12 196 1964 19go 1986 1967- - - -- -- -- -- ----- - -- -- -- -- -- -- - -- - - -- -- - -- - - -- - -- - - - -- -- -- -- -- -- -- -- -- -- -- -- -- -

CRUDE OEATH RATE EC,r t1oandJNational 10.16. 11.50 12.20 12.30 12.80 12.00 &I.90 11.80

Rural 0. 77 12.28 12.76 18.20 12.90 12.90 12.20 11.80Urban 6.61 7.21 6.92 7.80 S.8so 0.30 .40 7.6o

DUFAT IALXTY RAT3 fetr UthuandNational 101.40 111.50 121.9o 117.S0 121.60 112.00 116.00 111.00

Rural 108.50 112.50 12S.20 120.60 120.OD 113.00 116.00 114.00Urban 60.70 99.40 108.00 e8.60 119.80 99.00 101.00 97.00

Hale 102.30 113.40 124.10 116.60 113.80 114.20 122.00 120.00Femle 97.40 109.40 119.40 116.00 109.30 109.00 111.00 99.00

LIFE 0(PECTAHY Al BIdRTH (reare]"w0anal 56.90 64.60 84.80 83.90 54.80 55.10o 5.20 65.30

Rural 56.60 54.80 83.90 W0.1o 54.40 84.70 s4.64 54.90.Urban 61.90 60.10 60.50 e0.30 58.70 60.10 55.81 86.90

Halo 57.00 55.30 84.40 54.20 54.90 58.70 55.20 5s.60Femac 57.10 54.40 54.U0 83.60 54.70 64.60 55.90 54.90

CRUE O1 H RATE te'r tlousand)National 33.40 54.60 34.80 35.00 34.60 34.60 34.40 83.33

Rural 33.90 38.70 36.90 36.40 36.10 38.30 35.40 34.61Urban 29.20 24.80 22.90 27.10 25.00 26.00 28.93 24.78

FERTILTY RATE (pr aoman]National 4.99 5.04 5.21 5.07 4.63 4.71 4.70 4.41

Rural 8.13 5.28 5.80 s.36 5.00 4.91 4.69 4.64Urban 3.87 3.20 8.01 3.48 8.10 3.52 3.26 3.08

------ - ---- - ---- -------------- _ -a -- - - - - - - - - - - -i- -- -------

Source: gong1*db Bueau of Statietics

Table 1.4COMPARISON OF CHILD MURITIONAL STATUS RESULTS FROM THREE NATIONAL SURVEYS

Indicator INfS, 1976-70 INfS 1981-62 8S, 1986-80

(Wet ghted)Chronic malnutrition /a 73.7X 67.3x 56.1% (NotionalT

67.6X (Rural)44.2X (Urban)

(Weighted)Acute malnutrition /a 21.6I 20O0X 8.1X (National)

8.2X (Rural)6.9X (Urban)

Definitions of:Chronic maInutritior < 90X mdian 90 median ( 903 mdian

height for age height for age height for age

Acute malnutrition ( 80X mdian ( 80 mdion ( 80X median1stght for height *eight for hoight weight for height

Actual sampl size 430 cros-sectional 510 cross-sectional 3283 urban and ruralcross-sectional; fourdate collectionperiods

Age range 0-69 months 0-59 months 6-71 months

Reference standard used Harvard Harvard NCHS

Population covered Rural Rural Urban and rural

…------ ------ - ----------------…-------------- ---------

INFS a Institut of Nutrition and Food Sciences, Dhaka University.99S a Bangladesh Bureau of Statistics, National Nutrition Survoy *nd Household

Sxpenditure Survey.

/a Shows percent rate among total population.

Note: The INFS survoys used the Harvard Standard as the International referencesandard for conparlson of child growth data while SS used NCHS referonce.Some variation in nutritional atue would be accounted for by the differentstandards used. Random variation due to small sample sizes used by INFS are morelikely to account for the differences in nutritional statue found by thethree surveys. Th- 88S survey sample was divided into four data collectionperiods ov*r a yearo time whilo INFS survoys collected data once duringtho yoar.

Source: Bangladesh Bureau of Statistics.

Tb.i 1 .6HEAL7N STATICST. 1900-1900

xqao iwas awn awat aoaU aSet i9Ua i"v a

NOgetaBe (flu - r)0evenwauf8 S10 S81 844 860 66a S6 nO0 606 N.A.PrIvate 89 16 164 164 164 164 I 25 N.A.

4e,.rn .exi Oiensarries a Hapitt l 6 8i7 9l021 19136 20266 91670 MUM 23806. 267 h.A.

Registered 0Octrer ( er) 1Ois t1006 103 11496 13800 14891 16090 16929 N.A.Ritered Nuree & iduiwen (numewr) 4372 8978 7484 68t 9680 t10it7 1211 12687 WA.

PuAlIc bpe.oiture (lb mIllion) /aRovwee 68 932 10t2 1362 1620 1920 2463 30U (Nt.E.) 31J7 (G.E.)ADP 6M 742 5 5 1134 12 906 l08 246 (I.E.) 3411 (I.E.)

-otal Evven4itures as t of GOP /a 0.65 0.6J O.6 0.2 0.78 0.61 0.67 1.08 (R.E.) 1.28 (G.E.)

Per Cait. Eapedture (TUk) /a 16.64 io.26 20.81 26.29 31.38 27.0; 34.02 52.97 (R.E.) 63.38 (G.E.)

HtE uRevised eetleste65u dgt eatImte

/a Ficai year date.

Saurce: eaagledeah Bureu at Sta.tica.

Table 1.6FAMILY PLANNING STATISTICS, 1980/81-1988/89[thousands]

1980/81 1981/82 1982/83 1983/84 1984/85 1985/86 1988/87 1987/88 1988/89

Voluntary SterilizationsTubectomles 232.50 236.08 274.84 836.50 232.89 116.42 140.63 97.17 130.94Vasectomies 26.30 67.82 88.82 215.87 259.21 151.13 209.93 99.89 100.03

Total 258.79 302.91 863.16 552.17 491.60 267.65 350.65 197.06 230.97

Delivery of Contraceptive DevicesIUDW 41.60 83.67 117.74 803,R4 482.45 867.87 420.34 379.13 381.70Pills (cycles) 8238 7751 8268 97zu 11565 12137 16023 19100 24620Condos (doz.) 87112 93230 116821 181096 161940 136907 1492W8 168436 181976ENCO 60.79 68.56 69.83 64.25 71.98 46.42 39.S1 14.78 10.12InJections 112.01 91.07 72.70 122.46 165.93 216.49 814.75 892.00 598.70Fom tablts 50ll 4126 5404 4886 3222 3126 3463 3890 4101

COUPLE-YEARS OF PROTECTION (thousands]

By Sterilization /aTubectomises 22 706 909 1156 1272 1261 1276 1246 1262Vasectomies 819 386 408 583 784 857 981 983 984Total 841 1060 1817 1738 2056 2118 2257 2228 2286

With Contraceptive Devices JbIwo /c 122 189 238 469 761 900 1060 1114 1141Pilis 0;43 517 551 648 770 809 1002 1273 1641Condoms S5l 622 779 874 1018 908 995 1108 1213EWCO 16 16 17 16 18 12 10 4 3Injections 28 20 18 31 41 54 79 97 150Fom tablets 88 28 g8 29 21 21 28 26 27Total 1322 1371 1837 2067 2626 2702 3159 8622 4175

Total 2130 2404 2918 3776 4680 4820 6416 5Sso 6411

Married Fw les Aged 15-49 /d 16097 18829 17179 17746 18382 18937 19562 20208 20876

Apparent Contraceptive Rate /e 13.2 14.6 17.0 21.3 25.6 25.5 27.7 28.9 30.7

/a Cumulative, assuming year-to-year carry-over of 90s./b Assuming one couple-year of protection per 16 cycles of pills, 150 condoms

or foam tablet., or 4 doses of injectables or vials of EMKO./c Cumulative, assuming year-to-year carry-over of 70%./d Staff estimates based on age-specific marriage rates from 1981 census./e Couple-years of protection per married female aged 1649.

Sources: MIS, Directorate of Family Planning, Bangladesh Bureau of Statistics, and staff estimates.

Table 1.?EICATIO4 STATISTICS. 1974 and 1961 Cmnsus

1974 1961

AODUT LiTO.Cy RATE (as. 15 and up)

National 25.6 29.2

Rural 25.4 25.4Urban 4t.1 461

4a1e W.2 39.?FPala 13.2 16.0

ATrANCE RATES

NationalAges 5-9 16.? 22.5Ages 10-14 8.6 8.SAges 18-19 16.6 17.0Ago 20-24 7.3 7.?

RuralAges 8-9 17.7 21.1Ag.a 10-14 321 31.3Ages 16-19 16.9 14.9Ago, 20-24 6.4 5.5

UrbanAges S-9 31.5 31.6Ago 10-14 50.7 44.6Ag" 18-19 34.6 37.1Aga 20-24 l5.9 13.2

AO" 8-9 22.0 24.?AD" eo-I& 40.S 37.eAges 15-19 29.0 25.4Agap 20-24 14.2 12.2

Ages 5-9 13.4 20.2Ages 10-14 25.6 25.1Ages 18-19 7.1 6.3Agae 20-24 1.1 2.3

Soure:a BangIadesh Bureau of Statioties.

Table 1.8OrSMIRUzz OF Pa'ro TINM BY MoEaulC ACrIVfTE. 1961. 1983184 TO 1965/86(in percent)

1961 1983/64 1964/6 1965/66 (p)

Ohl. Femle Total Oblo Femas Total Role F.l* Total Help Femal Tot I

1. KationetPopulation aed 10 yteO md above 67.60 66.06 66.65 68.31 66.02 68.1? 66 J7 66.68 68.76 n9.63 6a.40 69.02Econeeic participatien:Civilian taber force /a 73.46 4.17 40.27 78.31 7.89 43.91 I.6S1 S.64 30.19 83.56 6.40 30.38

- Emloyed 72.20 3.62 39.46 77.1S 7.57 43.14 63.01 5.43 29.68 53.19 6.20 30.09- Ieomployad 1.26 0.38 0.6e 1.20 0.31 0.77 0.60 0.21 0. S1 0.9 0.20 O.2"

Otler 26.52 et.s3 69.73 21.09 92.11 56.06 18.06 63.04 88.59 16.05 62.00 6s.e4- lhuae_old VGA 3.63 74.61 67.66 0.30 741.78 36.7 0.20 51.56 25.28 - 49.60 24.48- Inaettve 22.66 21.63 22.13 21.39 17.35 19.41 14.66 11.46 13.31 16.05 12.20 14.16

Population Dow 10 fera an above 66.15 65.51 65.63 67.78 66.12 67.94 68.37 66.72 66.s4 69.46 68.61 I. 13EconP. ic Particilption:

Civilian labor force /a 74.60 4.06 40.06 78.67 7.45 43.31 63.72 5.21 29.61 3.39 ° .19 29.95 i-- ealoped 78.62 8.67 39.26 77.62 7.o9 42.61 S3.25 4.94 29.34 82.94 B.se 29.16- UWeeloyed 1.16 0.41 0.60 1.05 0.38 0.70 0.47 0.47 0.47 0.45 0.23 0.34

Otler 25.20 9s.2 59.n 21.33 9.s5 66.69 14.6t 63.51 36.73 16.07 62.62 39.16- Household awrk 3.94 re.73 39.66 0.38 76.24 36.03 - 52.61 26.06 0.46 S.1s 25.63- Inactive 21.26 19.16 20.24 20.96 16.31 16.66 14.65 10.90 12.67 15.61 11.47 13.55

8. Urfbn

Powlation aged 10 yeara an above 74.66 69.35 72.34 73.43 67.92 70.69 72.06 6.42 70.40 72.97 65.63 69.s5Economic partkicition:

Civilian labor force /a 67.60 6.96 42.16 72.34 13.69 47. 5 54.4. 6.77 32.60 54.05 9.56 38.33- glOpred * 66.10 8.96 41.18 70.21 13.69 46.84 51.47 7.02 32.00 54.08 9.36 32.61- Ulheloyed 1.70 - 0.96 2.13 - 1.22 2.94 1.76 o.60 - - 0.72

Other 32.20 93.02 57.64 27.66 66.11 52.44 17.65 59.e6 37.60 1S."2 86.25 36.23- Homeeold work 3.3a 6O.4" 27.45 - 63.60 28.05 - 43.86 20.00 1.85 39.06 16.64- InactIve 26.61 32.56 30.89 27.66 22.22 24.39 17.65 15.79 17.60 17.57 17.19 17.89

/a The refined rate of civilian labor force io the percentage of Persona 10 years old end *bove found ena"gd in productiveactivity during the survey Period.

Source: PopulatIon Ceese 1961, LPS 1983/64, and LFS 1984/3 eand 16S5s66; MS6.

Table 1.9S.I.OWW BY O=DATIUrND iv W. UUl/J4 afid InAlj /a(thauand)

196616 1964/66

Occupation "i.c Femle To4 l l4s c Feml 1 Totl

Profeeionl A Tehnical 623 76 701 88 f2 6J

Adminietrative 162 8 1i 216 4 M

Clerical 69 40 67a $0 139 "4

Sale* 21176 134 3010 8240 11 3M

Services 916 1117 20M 71 1131 19I

1621 216 1429 18474 MS 16712

Production & Tr-nsert 89 771 4166 4116 768 479

NEI 308 69 872 281 an 29

Total 284? 2426 2 8 2640 2847 2U ?

/a Pereo above 10 yge age included above.

Somme: ifS 196e8/4 and 1964/68 M8.

Table 1.10I1H DISTRZTIO4N AND POVERTY IDICATTOM. 197/f74-1985/88

1978/74 191/82 1988/84 1985/86

I. Income Distribution:

Percent of inco secruing to:Bottom 405 - Rural 19.10 18.82 19.24 19.95

Urban 17.80 16.07 18.87 19.20

Lower *iddle 401S - Rural 88.40 88.77 88.0S 88.21Urban 88.00 86.02 87.91 87.87

Upper middle 15 - Rural 26.50 25.64 24.86 28.71Urban 26.60 27.01 27.79 28 10

Top SS - Rural 16.00 16.70 18.14 21.dsUrban 18.60 20.89 16.98 18.04

Cini Coefficient - Rural 0.85 O.88 0.36 0.86Urban 0.38 0.41 0.87 0.87

II. Poverty Incidence:

Percent of population with dailycalorie intake per person below:2122 calories - Rural 8S 74 ST 51

Urban 61 66 66 56

1805 calories - Rural 44 82 8o 22Urban 29 31 aS 19

Numbers of people with daily calorieintake per person below (millions):2122 calories - Rural 67.4 60.9 47.0 44.2

Urban 56. 8.4 7.1 7.0

1S80 calorie - Rural 80.7 48.1 81.3 19.1Urban 2.0 8.0 8.8 2.4

Source: 8SO. Household Expenditure Surveys.

ablo 1.11VUMER OF PERSONS GOING ABRt1D FOR EMPLOYMENT, 1976/179-1989

IJLTIYEAR AVERACESI CALENDAR YEAR DATA__________________I--- ---- - _ - -__________________________----…-…- …----

I First Half76-79 90-64 1960 1982 1968 1984 1986 106 1987 1989 1989

By Occupation

Constructlon workers 2119 2446 I 2590 2641 a814 3779 5393 4487 227N 1425 1853Vehicl-drlvere 1162 2111 1070 3867 1811 1448 8026 4109 4229 4234 2749Workers (skilled, semi-skilled A unskilled) 4879 85484 17706 34870 40410 37886 50956 42657 48V27 50601 34305Technicians 3057 5965 I 4247 7697 6113 4992 9271 8317 6705 4761 3329Engineers 870 1471 194 175 6T 60 148 83 79 56 3S FDoctors and nurses 284 420 2Y4 224 492 2008 1126 556 294 193 97 4'Professionals 896 1620 I 886 2805 3871 3s88 8620 3185 38se 2421 2147Catering workors 791 2187 I 1336 2604 2225 1209 2052 2835 2992 4430 2649Miscellaneous 8946 1862 I 2271 8072 827 1450 2107 2284 6127 - -

Total 17277 51982 I 80573 ?575 59220 S6753 77694 68663 74017 68121 47164

By Destination

United Arab Eelrates 5094 5037 | 4847 6501 6616 5802 8329 S8l 9968 13437 7116Qatar 1642 8910 14556 6504 7681 2768 4751 4847 5831 7309 4625Kuwait 1323 8395 3687 6a48 10302 5677 7298 10286 9569 8624 8971Iraq 1410 7873 1927 12162 4932 4701 5061 4908 3848 4191 1312Saudi Arabia 2799 14076 9 8695 14770 12942 20587 37222 27336 39337 27703 19966Libya 1314 2934 I 2976 1929 2215 3386 1546 3111 2271 2759 1449Bahrain 099 1880 0 1361 1860 2470 2325 2969 2417 2056 3268 2283Oman 2052 8130 47F45 7309 11126 10119 9200 6255 440 2213 5673Singppore 28 s92 669 804 179 728 20 25 136 - -Others 717 757 I 221 400 878 1174 1328 798 677 717 770

Source: Bureau of Manpower. Employment and Training, USS.

* hSiIEM

Table 2.1GOP AT Ct T PRICU SW SITM OF' ORIGI N 0/1-1(Tb *i II ion)

Iwoel ieSI/8 1662/6 Io/"4 1"4/66 198/6 16/67? 196/6 1l6/69

Ariculture 106953 121_39 13861 16 21244 22240 2 2~ 26266 2__06

- Crpes , 3632 94922 1044to "1 1*16 IUU2 1"Z1 4406 12-m6Fo-etrg S6 O60 6O0 11676 11631 20249 22317 21641 23641

- Livatacb 12451 12713 1470 16S09 267 184 3291 336 39549- Fihere 7022 765 8131 10ow 14641 1699 20917 24262 26110

Zoduotrg 38626 42530 44713 5063 8I802 66114 72U 1622 23874

Mining A 2urrying 3 8 3 4 4 a 6 S 4Nfrtn.faetrinu 2261 28702 23070 804 346 37338 40Z6 43420 47926

- Large A _adiua-acle 13214 14728 188 17260 121 2067 2267 24 27225- Son, -e I & cottage 9647 1O274 21124 13698 15 16646 17341 177 20744

Construction 130681 ISM 182011 10m 226s 206 2661 34602 30130electricity. ga" ter 744 259 16t 1939 284 213 8848 427 471

Services 67614 100773 10763 1261 14306 176672 20646 22586 266

Tran.ort & commuiccetons l63 22666 25046 26013 276 8s8 36F 40U0 43016Trade a catering 2060 21068 2518 26313 31260 39174 44- r s587 5S3341r1-hing & inaurance 4131 4191 4341 s5s 666 62 10116 114t 13482Oaner-occuaiad hleing 17525 19s78 12812 2467 1999 31771 34817 42103 S04uOthr services 16461 22626 28489 31002 8486 46096 801 06502 79207Public adeinietation * daane 813m 242 10628 18 1328 1786 2e67 2473 27313

Groes Ogemati Product at market *ricce 233263 265144 236428 349022 417021 485193 54114 89019 650441

Nat indirect tales 1344 1224 1540 lO 21764 25616 30068 32698 37S?3

Gross Omeetic Product at actor ceet 219279 261320 276 1S0 39s2 4S9 511061 5575s 61306

Source: Bangladesh Mreha o Statiat;ce.

TebIl 2.2M0P AT CYWANT PNIm. 1960/81-1966/60(TI. *Iin asur 19721 somrhet prices)

1980/01 1901/62 19/83 1963/4 4 19/j5 MS5/66 1966/87 MUM7/3 198/9

Agricituteo 34 35225 36M1 37"442 37795 4007? 4002s 368 39770

- Crops 27627 27441 2W4 2910 29468 81314 31U 306 3EMO- Frestery 1703 I62 9l17 209s 199 2076 204 209 2098- Li v.tc6 3477 36610 3767 SW3 3 4028 41 4226 4332- Fihueries 2101 2222 2373 230 244 24 2497 2537 2841

Industry lO1S191 11023 11090 12010 12784 130M 13902 14666 15653

Mining A g u,rEying 1 1 1 1 1 2 1 1 1tnifmacturing 7602 7m2 759 7675 6t13 622 66 9051 9308. Larg & modi..a-s . 4394 4423 42G 4390 454 48 SU1 141 520- Small-eele A cebtas 3206 3297 330 3463 aSeo 3M SS0 310 40

Construction 234 3004 3036 3649 4095 4169 449 4995 s2Electricity. a" & water 250 2es 483 46S 528 592 721 6s9 1060

Service 2636 25976 26894 265U 30354 80 34144 346 3706

Tro.nee t A comnicatiana 4U6 452 522 531 540 s77 6163 6377 6692Trad A cater. 636 6 272 6432 6796 700 84m8611 6687 8760

anking & ;ineuruce 1387 t29 1220 1291 1 1951 209 2066 2206Owner-eccu;"; housing 5297 5422 sw 5676 612 5949 606 63 6439Other services 4910 8225 s6 5941 63 6734 7149 7567 9Putlic administration £ defana 2733 2914 2e0 3302 3966 378 4246 4516 4577

Greos omestic Product. at e.rket prices 71644 72226 7483 6S05 69 04932 6151 9001s 92129

Net indirect taes 4130 3767 4016 4199 4224 42 4916 4987 5291

Cr*3. 0eatic Product. at f ctor coat 67514 68439 70817 73604 766e7 60230 6323 S 5031 8

(Real Annual routh,. in 5) /a 6.6 0.8 3.5 4.2 3.7 8.0 3.6 2.1 2.3

- -- - - - ------------- - - - --------- - ---- - - - -- - - - - - - ------------------ -- - -- -- - -- -- - -- -- - -- -- - -- --

p *roviienal *atiete.

/a Crath in MP at ark*t prices.

Source: Bangladesh Sureau of Statistics.

Table- 2.3W OEFtATO15 197711S.1t96(17/78 * 1.00Ul

1977"/1 197"/7 197910 1t10/1 1t16112 192/6 1165/84 1416/65 1965/6 l166167 1976 1ow13

Agricuttasr. 2.9106 2.7810 J.000 SA. Sa4 3.67 4.S24 S.A S.494 6.4942 6.7661 7.2482

- Croe 9.8-590 2.6470 2.8640 3.0272 S.4591 .62 4.4696 8.4060 4.71 S.6--2 -.- 6-- 6.4---- ioPseb., 2.71100 3.1280 .0760 S.4M S.4i0 .4A0 .86 S.00 0.75 11.5171 11.3745 11.6745- LSAM 2.4180 .1740 3.8n0 3.8610 3.48U S.A 4.8647 6.6072 7.6518 7.4152 8.464 .1S29- Fidmtias 2.8740 3.2740 3.3378 8.642 3.444 8.4258S 4.56151 S.96W? 6.6 6.76m 9.5711 10.2M5

1adstu 2.85S0 2.4860 2.9040 3.4982 S.67M 4.081:6 4.2450 4.6634 8.0661 8.1915 S.S506 8.976M

minng a qry;n 2.0000 2.50S0 2.200 8.0000 8.0000 8.0000 4.0000 4.0000 4.0000 4.0000 3.0000 4.0000ibeQfcturin. 2.ISM0 2.2410 2.7180 8.0072 3.8214 8.6944 3 .929S 4.2567 4.5060 4.6S 4.77 5.1836

- Lire A agldu-secal 2.1 S0 2.2410 2.7130 S.AM8 8.264 8.6W44 8.994 4.25116 4.5060 *4.US 4.7073 5.1863- Small-sa_le a c@t"bi 2.1520 2.2410 2.7130 8.0072 3.8 S.A44 3.97 4.25W 4.SIOD *.i4 4.772 S.64

Contruction 2.6860 3.4020 3.7100 4.6004 S.206 4.9488 4.1569 5.4969 6.204 6.421 6.S2 7.8164Electricity. VW a water 2.5!E0 2.4120 2.7200 2.9790 3.29 J.57 8.997 4.4689 4.6626 4.916 S I.471 4.1047

Services 2.1ISM 2.4480 2.878O 3.8IG49 3.6O2 4.00" *4.tiJf 4.777 8.5842 6.1106 6.7436 7.52

Trsport & commnicat;ns 2.0710 2.0700 2.4480 3.1 83 4.7110 4.7920 4.6704 4.97S4 8.7591 .59S2 6.21 6.4263Trade A cater'! 2.2U0 2.6000 2.8090 3.0061 8.sooe 8.8996 4.1948 4.6ti2 .15"4 5.8858 5.9119 4.8289

uning A Inuurune 2.2150 2.4850 2.73O 2.9764 8.2413 8.8562 3.9eor 4.4869 4.S79M 4.9131 8.47M5 6.1060Omn.r-occu,i.d hbouing 2.tits 2.520 3.0860 3.2707 3.6687 3.1810 4.379Q 4.8174 8.8406 5.7160 6.7549 7.6844Othser service. 2.1400 2.6400 8.3110 3.76540 4.3J03 4.8748 5.2818 5.419 6.6456N S.209 e.ut4e9 9.6516Public 8d-;nistration & defense 2.2150 2.4670 2.MO 2.9rm 3.2402 3.s579 3.9981 3.3354 .5s4s 4.9145 S.4772 5.9s6e

- - - -- ...... - - - - - - ---- ---- _-- ---.-- --- ---- ......- - -- --- - -- --- - -- ---

Greos Doestic Product at market prie.- 2.3110 2.6090 2.9510 8.2559 3.t710 8.6641 4.4100 S. 1548 8.47 6.9 .5584 7.0601Aversg change in CDP deflator (1) 30.4 12.9 13.1 10.3 12.7 5.0 16.4 14.9 6.8 12.1 6.6 7.7

p * prelisinsrl.

Source: Bangladash Bureau of Statistics.

1- _. _ _ rn li!

Table 3.1BALANCE OF PAYET3.1901-060(USI a I I tos)

___--___________________________________________________________________________________.____________.___________.___._______..___

1900/U1 1991/t2 1ltit2/tt JIM/64 196i14/40 1911/11 19"0/17 190i7/88 l190/69(P)

Merchandise exports, fob 710.7 626.0 tti.0 011.0 904.0 819.0 1074.0 1231.0 W1IW.IHerchandioe Imports. fob/eU / -2218.0 -2872.0 -2209.0 -2i51.0 -264?.0 -2tt4.0 -2620.0 -2913.0 -3276 0

Trede Balance -1622.2 -194i.0 -1622.0 -1542.0 -1713.0 -1154.0 -540i.0 -1705.0 .-1089.0

Non-factor servics., net J7.8 27.0 5a.0 02.4 11.4 1.0 -29.7 -10.5 -46.0Non-factor services, rcipt 222.J 214.0 218.0 222.4 M.0 22S.9 226.6 265.2 272.0

(- Other transport) 40., 06.0 -- 26.0 01.0 20.3 22.0 27.1 J1.5

t- Travel) 16.6 16.0 -- 00.0 29.2 1i.0 14.1 9.7 10.9(- Government s*rvices. n...l.) 80.J it.0 -- 53.0 88.0 82.3 26.6 89.2 61.4

O- Other) 115.1 129.0 -- 11r.4 1i2.6 180.8 162.0 179.2 172.2Non-factor service. paymwnt -lt4.8 -167.0 -1t16.0 -190.0 -216.6 *2t2.9 -2U6.3 -2S6.7 -317.0

C- Other trenaport) -89.2 -47.0 - -0.0 -8.5a -9.0 -48.1 -41.1 -82.2C- Travel) -10.4 -20.0 -- -24.0 -39.9 -88.0 -47.t -77.1 -113.6C- Governent services. no.i.) -47.0 49.0 -- -70.0 -70.8 -08.8 -110.4 -106.1 -107.5(- Other) -90.2 -41.0 - -26.0 -41.4 -47.3 -55.0 -41.4 -43.8

Investment Income. not -22.6 -97.0 -169.0 -041.4 .49.6 -120.1 -121.6 -121.0 -104.0

Investment income, receipts 51.9 84.0 17.0 "i.0 86.0 S6.1 85.2 84.9 119.0l- Ioterest an reserve pb) 10.4 18.0 -- 47.0 82.0 31.0 80.0 41.1 --

(- Othor :nteroot * invtotmnt income) 80.8 20.6 -- 0. .0 a .1 5.2 18.8 --

Investment incoe, payents -74.0 -11.0 -li68.0 -121.0 -147.6 -162.2 -186.8 -187.9 -223.0

(- Interest on external public HALT debt) -42.0 -47.2 -46.$ -63.0 -65.0 -72.5 -81.5 -123.0 -156.7- IWF service chorge.) -4.0 -47.1 -8.7 47.0 -4.0 -37.5 -36.9 48.9 -42.8

(- Other interest A investent income) -24.0 -48.2 -105.0 -21.0 -485.0 -84.6 -S6.4 -28.0 -21.3

Private unrequ;t*ed transfers. not 879.1 424.0 028.0 027.0 470.h 880.0 731.0 788.0 :38.0Private unrequited transfers, receipts 879.4 424.1 620.0 027.0 477.0 85.0 6904.0 737.0 771.0Private unrequited transfers, pay-nts -0.4 -0.1 -0.2 *4.2 - - -

Current Account Belance -1428.a -1592.0 -1107.0 -948.0 -1814.4 -1084.1 -96b.S -1110.5 -1402.0

Amortization of public NiIT de-t -0.1 -49.0 -74.0 -72.0 -110.0 -117.0 -154.0 -16t.0 -191.0

Total WPe traneactions, noc 193.1 49.5 48.9 19.0 -7.0 -28.0 134.0 -18.0 68.0

Aid diabur-esnts. total 1147.2 =3.1 134b.5 121.0 Wi6.0 1t06.0 15f95.0 1640.0 165q.0

Other long-term cepitel, net 40.1 0.0 0.0 -0.0 -1.0 -5.0 -7.0 -8.6 52.8C- Direct A portfolio investont, net) 0.0 0.0 0.0 -- 1.2 -4.1 2.4 2.0 1.5(- Subscriptions to int'l nwn-aonotery cras) -1.9 0.0 0.0 -- -. o -0.2 -2.5 -1.0 -2.4(- Other, not) 42.0 0.0 0.0 -8.0 -0.7 0.3 -6.9 -7.5 53.7

Short-term capital. not 28.1 05.0 -88.0 64.8 -34.9 10.0 -140.0 -159.5 -112.8

C- Resident official sector, not) 07.6 0.0 0.0 40.7 11.8 2.5 -10.2 -5.2 3.7(- Deposit eoney banks. not) -94.8 0.0 0.0 88.0 -21.2 1.6 -69.8 -97.4 -116.5

(- other. not) 84.9 65.0 -30.0 -9.5 -25.5 5.9 -60.0 -56.9 -

Liabilitaa constituting foreign authorities"reserves, net 90.7 168.0 -4.0 -9t.0 -o0.0 0.0 -40.0 -40.0 -

Food borrowing. not 0.0 0.0 0.0 -9.0 91.0 -69.0 -96.0 6.0 4t.0

F- Food Borrowing. groea) 0.0 0.0 0.0 51.0 190.0 18.0 0.0 89.0 55.0C- Food Loan Amortiastion) 0.0 0.0 0.0 -00.0 -99.0 4-2.0 -96.0 -S3.0 -12.0

Errors A omisi;ons. not /c -48.2 -12.0 65.8 436.e -4.7 07.1 -00.7 -1.5 -70.0

Change in reserves /d (- a increas) 24.4 120.0 -235.2 -1t2.0 144.0 -100.0 -257.0 -144.0 -57.0

Reserve level, end of June (U0S a) 250.6 122.8 SS8.0 889.9 894.8 . 495.0 752.0 s6w.0 953.0- Rserves. excluding gold (LSSO a) 281.5 87.9 22.65 56.8 380.8 478.5 729.4 072.3 931.9

- Cold, national valuation QJS6 a) 18.5 17.0 17.8 10.1 14.3 10.5 26.6 23.7 21.1Average annual exchange rate (TC/US0) 10.8447 20.0400 2S.7600 24.9000 28.0500 29.86!1 30.0294 31.2422 32.1399

-- - not aveileble sparately.

/a Merchandias imports are reported on a mixed veluation besir. pertly fob end partly cif./b 7n on overage lsvel of reervwe./c Including valuation changes other than those of reserves./d Including changes In the valustion of resrves.

-179-Table 8.2BA.NCE OF PAYMENTS - RtUIR8l4T AND SOU f4AT. 1980/81-;iO6/89(USS ai I1 ion*)

1O98/Si 1981/82 1982/8U 198314 190411 1908/U 1968/6? 1907/88 N198/89(P)

FOREIGN LXMOA6E HtEOUDWS

URRENT ACCOLHTHerchandloe imports 2533.0 2572.0 2S09.0 2511.0 2U47.0 2564.0 2620.0 2986.0 3375.0Pay,nta on investents 74.* 181.0 1S5.0 M21.0 147.6 162.2 1W.6 187.9 223.0Non-factor services 184.8 187.0 208.0 191.0 210.6 222.9 256.3 265.7 817.0

Subtotal' 2792.4 2890.0 2652.0 26.0 8011.2 2749.1 8033.1 8439.6 3915.0

CAPITAL ACCOUITPublic HALT dekt amortization 50.1 89.0 74.0 72.0 110.0 117.0 154.0 188.0 191 0Food loan amortization 0.0 0.0 0.0 60.0 99.0 82.0 98.0 38.0 12.0Long-term capital, not -40.1 0.0 0.0 6.0 1.0 5.0 7.0 6.5 -52.8Short-term capital, net -28.2 -65.0 86.0 -64.6 J4.9 -10.0 140.0 159.5 112.8

Subtotal -18.2 -26.0 110.0 75.2 244.9 104.0 897.0 365.0 263.0

TGTAL RQUIRI0ETS 2774.2 2884.0 2762.0 2740.2 3256.1 2943.0 3430.1 3804.6 4178.0

FOREIGI ECKA6K SOtRCE

OCUT ACCOUNTMerchandiae exports 710.7 626.0 686.0 811.0 934.0 619.0 1074.0 12S1.0 1286.0Resittance 879.1 424.0 626.0 627.0 476.3 686.0 731.0 788.0 836.0Inveatent income 51.9 84.0 27.0 86.6 66.0 86.1 85.2 5.9 119.0Non-factor services 222.3 214.0 203.0 222.4 228.0 228.9 226.6 255.2 272.0

Subtotal 1364.0 1298.0 144.0 1717.0 1696.8 1665.0 2068.8 2529.1 2513.0

CAPIT-' JTAid tii. aents 1147.2 236.1 134.5 1218.0 1257.0 130.0 1595.0 1640.0 1669.0IMF transactions. not 193.1 49.5 48.9 19.0 -7.0 -28.0 184.0 -18.0 68.0food borrowing, groam 0.0 0.0 0.0 61.0 190.0 18.0 0.0 89.0 55.0Other 90.7 165.0 -6.0 -96.0 -8.0 0.0 -40.0 -40.0 -

Subtotal 1431.0 1450.6 1386.4 1242.0 1420.0 1291.0 1689.0 1621.0 1792.0

TOTAL SWURCS 2795.0 2748.6 2930.4 2095.0 8116.8 2966.0 6783.8 5i9O.1 4306.0

Incres.. in qroom reerves -24 4 -128.0 235.2 162.0 -146.1 100.0 257.0 144.0 57.0

Erroro and omiasions 45.2 12.6 -e6.8 86.8 5.8 -07.1 68.7 1.5 70.0

P . ProviaionalSource: annl_desh Bank.

Tahle .3V*uL OF TOTAL OITS BY ceoorm. 1990/01-1900/(USM mli ion)

._ - -------------- .- --............ - -- _- -. - .--.--- -....... ... ------ - -... -- - -..... - - ------------

1910/01 1901 /02 1012/11 191/64 1964.16 t19/U 16/PI 1987/U 1988/09._w^> ...........-*w*- - ^- *- - ^- ------------ .=~ .... ............................... -. - - _- - -- * - -- * - - "*- - @ - * - -- -- -- -- ------

Raw juts llJ" 101.69 109.01 117.11 1s."1 128.0 104.00 00.5 97.27

Jute Ponufacture 837.0,4 268.50 301.52 30.12 8W7.72 204.32 274.78 08.01 243.84Jute specialty product. 9.42 6.04 12.80 20.17 12.00 .U 20.01 8.80 3S.82

Leather a leather products SCes oa.oo 56.46 U.27 ".00 60.7J 186.12 147.17 188.e9Frozen ehripe, fish 4 froplege 39.98 52.01 72.w0 9.c00 9.05 114.70 16.20 189.68 141.38

Othlr fish products 1.96 0.00 1.4 2.10 2.48 8.42 4.02 8.21 .s

Tea 40.57 37.94 40.8 ".690 61.0 12.70 29.60 80.95 39.68

Spice, icl. temrinnd seee, O 22 0.00 0.21 0.01 0.40 0.1s 0.1i 0.14 0.04Fruits & vegetables 1.02 1.47 0.00 8.40 4.28 14.73 17.79 15.67 0.98

Toteue 0.02 0.00 2.20 3.25 2.57 0.06 1.29 0 82 1.6iet.1 leavees O . 0.00 1.20 1.2S 1.8 4.88 8.48 2.17 1.16

Raw cotton 0.17 0.00 0.00 0.14 0.40 0.48 0.09 0.24 0.55

Cotton yarn & thread ceet. 0.12 0.00 0.80 0.81 0.1i 0.00 0.00 0.08 0.02

Sugar 0.03 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00*tieeee, 1.03 2.00 0.08 0.00 0.00 0.00 0.00 0.73 0.82

Oil coee 0.86 0.00 0.18 0.09 0.00 0.00 0.00 0.00 0.00Wheat A rice bran 1.1S 2.42 2.26 8.49 3.09 0.00 0.00 0.00 0.00Rice 0.00 5.6I 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Crude f rt:li;sre 0.49 0.00 0.40 0.82 0.24 0.39 0.60 1.67 0.51Animal casing 0.14 r.00 0.19 0.00 0.0 0.00 0.00 0.12 0.1SLizard eirne 0.06 0.00 0.40 0.95 0.91 1.11 0.04 0.00 0.23Tortojee & turtle e-at A s9IelIs 1.00 0.00 0.96 o.99 0.90 1.8 1.183 1.64 0.70

se was 0.06 0.00 0.10 0.06 0.02 0.00 0.00 0.0 0.00

Teatileo incl. tilk & silk wmet. 0.6s 0.55 0.68 0.42 0.32 0.00 1.04 0.70 2.31Readymade garmento 8.24 7.00 10.04 81.S7 116.20 181.40 296.67 488.92 471.09

Handicrafts 8.40 0.00 2.40 2.80 1.91 1.93 8.99 8.76 3.9zocaery a coir products, 0.07 0.00 0.00 0.01 0.02 0.00 0.46 0.01 0.00Wood & furniture component. 0.28 0.00 O.80 0.20 0.00 0.00 0.06 0.02 0.02Samboo A bamboo products 1.24 0.00 0.e8 0.24 o.59 0.00 0.12 0.06 0.08

Pulp 0.01 .o0oo 0.0 0.02 0.00 0.00 0.02 0.02 0.00

Newsprint 7.SS 0.00 4.16 6.50 *.60 7.34 7.6s 7.06 4.29Paper 0.90 0.00 0.11 1.80 1.50 0.00 1.66 4.50 3.12Hardboerd A Particle board 0.05 0.00 0.04 0.08 0.01 0.00 0.00 0.00 0.05Cellophane 0.0c 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Rayon 0.61 0.00 0.2 0.02 0.00 0.00 0.00 0.29 0.24Phoraceuticale A crude drugs 0.02 0.00 0.55 0.18 0.00 0.00 0.25 0.09 0.04Glycerine 0.3d 0.00 0.62 0.58 1.1S 1.09 0.87 0.78 1.24Urea 9.88 0.00 10.35 9.74 4.79 2.57 4.18 24.98 5.87

Naphths 29.05 80.10 10.01 22.72 20.60 18.91 10.24 6.06 11.94Furnace oil 19.20 11.25 0.81 0.00 0.00 0.00 1.96 8.60 4.01Bitumn 0.00 1.00 4.00 8.12 0.11 0.05 0.44 0.22 0.10

Wire A cables 0.02 0.00 0.14 0.72 O.5 0.00 0.01 0.00 2.72

All others /c 1.81 18.16 0.42 2.60 2.72 4.78 7.20 6.01 9.82

Total 710.69 626.97 686.60 622.00 984.43 619.00 1073.77 1281.20 128.00

Traditional esports 582.67 49*.25 b32.00 627.52 671.43 512.57 s70.62 567.81 558.94Readymade garments 3.24 7.00 10.64 81.57 110.20 131.48 298.67 438.92 471.09Other nontraditional exports 124.78 125.72 143.76 162.91 140.60 165.95 204.40 M29.47 260.97

/a Includes itee for which detaile are not ehown * perately.

Table 3.4QUANTITY AND VALUE OF TRADITIONAL GOODS EXPORTS, 1980/81-1988/89

1900/81 1901/82 1982/88 1083/U4 1984/86 1965/66 106/87 1967/$6 1986/69

Raw JuteVolue ('000 USS) 11684 1014592 l1oo10 117182 I6O0. 128690 104000 30530 97270Qu;ntity (b ale) 1948940 1911870 22400 1902000 1406000 2801000 2241000 1345000 1017000Unit price (US/bale) 01.14 68.20 48.91 61.01 107.15 65.64 46.41 59.67 60.15

--=ian Quantity (mtric tons) 182782 188562 224699 214097 104041 161371 204601 19U70o 100700eking Quantity (metric tons) 286676 292912 196961 162234 176946 242466 194490 178700 155600arpet-backing Quantity (metric tons) 76244 6480 90750 94199 72600 69737 72168 71100 3SI0Oarpet Quantity (metrc tone) 67 221 697 20- - - - -

U ers/discrepancy Quantity (mtric tons) 8677 1854 -a30 87234 1o0o0 10200 17500 16500 145100

Total Jut. Manufe-turesValue ('000 US$) 357033 283602 3060oo 886115 3aw722 294318 274780 265010 248340Quantity (metric tons) 601486 637856 650900 60800" 440000 46760 479900 465000 438000*'-- price (USS/mtric ton) 712.02 627.89 656.60 61.04 840.02 634.43 672.47 659.91 601.99

Jute Speciality Product.Valuo (000 US$) 9422 8086 1200C 20047 82079 065 2"10 38O0 36620quantity (metric tons) 14600 13200 2200lJ 80000 36161 1011 n.a. 60000 64000Unit price (USS/metric ton) 650.00 600.71 646.40 666.28 912.61 640.69 n.o. 006.00 670.68

TeeHValue (000 US$) 40672 87988 40000 68900 61018 82760 29660 8 8000 396O aoquantity ('000 lbe) 65676 69041 07647 6760 65633 6703 47102 60400 55242Unit price (US6/000 Ib) 619.29 549.60 680.00 1018.60 1079.80 499.60 629.70 640.00 1590.00

Leather and Leather Products /aValue ('000 USS) 66682 6O081 68000 86261 69793 00730 134620 147170 186960Quantity ('000 square feet) 80607 87278 08890 102910 61760 71620 137460 116210 127660Unit price (USS/000 square f"et) 703.19 722.76 617.74 628.60 868.30 649.10 900.79 1246.00 107(.00

Total Value, Traditional Exiports 682670 494260 682000 627620 6714. 512570 670020 56C710 558uoIn Constant FY81 Pricee 682670 612190 621960 611760 504040 56260 626820 687270 672660

/a Excludes hide, and skins, but include leather goods.

Source: Bangladesh Export Promotion Bureu and Boggladesh Te Board.

-182-Table 3.5QUAtTK AbO VAlE OF NON-TRDITIONAL PU"5. 1900/61-191/69

- _. - __ - -................. ---- -------- _ -.............. -- - --- - -------- . ... . .... . .................................. ................. ..

196/61 9ee1/s2 10112/0 I/e6 £114/1a6 iwseu/9 19/67 19"?/" Imn/69......._ ___ ..----................. ._-- .. . ...... . . .. -. -- _. --- -..... -------.- - ----- - - .. ---------........ -----........ -_--------- ------

Frozen Shrimp. Frogle59 end FlahValue ('000 15) 8s9 52611 70 9300 664 114700 134160 1365 1at18Quantity (C OD lb) ltAIL 2063 2740 3S2 820 47160 4560 433M 451N0Unit price (1/Ib) 2.41 2.67 2.62 2.47 2.27 2.40 2.99 2.65 3.13

Other Fish Product. and Pruepratione /aValue ('000 US$) 1934 1473 ., 21 2430 420 4020 5210 6a50

Newsprint

Value ('000 usO) 7562 se5 4000 60 3496 7340 7650 7060 4290Quantity (tons) . 16498 10842 900o 14W 10 160 19000 1595 7700Unit price (US1/ton) 457.75 437.48 482.22 467.14 472.11 467 5 402.68 506.09 557.14

Papervalue (OoO UN) 965 12 .. 2560 136U .. .. 4500 8120Quantity (tone) 1t69 25 .. 2871 24sS .. .. 5948 5766Unit price CMS/ton) 552.00 480.00 .. 67.9S 8.6 .. .. 766.56 626.00

NaphthaValue (lo00 USN) 290 30160 19000 26000 2067? 13910 10240 0 11940Quantity (metric toge) 116367 106910 s5o90 1O0700 69000000 77766 65000 69000Unit crice (USS/aetric ton) 256.47 282.11 320.60 256.16 232.35 173.38 131.78 124.81 1?7 82

Furnace Oi IValue ('000 US) 19261 1120 00a .. .. .. .. 36s0 4010

Quantity (_tric tons) 106544 9169 m000 a o9000 54000Unit price (USS/aetric ton) 11.31 152.65 :46.20 .. .. .. .. 94.36 74.09

8i tumenValue ('000 OS6) 0 1000 400 3120 106t 60 440 220 100Quantity (eetric tone) 4323 ueoo L1800 459 209 2006 1000 500Unit price (LU/aetric ton) 0.00 251.30 225.63 240.00 230.94 239.2s 219.12 220.00 200.00

Rice,Value (000US$) 0 s508 0 0 0 0 0 0quantity (Oo tons) 0 20000 0 0 0 0 .. 0 0Unit price (146/ton) 0.00 294.00 0.00 0.00 0.00 0.00 .. 0.00 0.00

Ureavalue ('000 UN) 9554 0 10o0O O7m4 4790 2570 4160 24930 53WQuantity (tune) 3976 0 66000 61000 26300 20499 56000 22348 46Unit orico (11/ton) 241.02 0.00 156.62 159.57 12.13 US.37 119.48 111.66 114.73

SugarVoluo (OO USS) 26 0 0 0 0 0 .. 0 0

CarmeatsValue ('000 U11) 3240 70eo0 0640 sU70 1120 181460 296670 456.92 4?1090

T,t l Non-traditionel Eaporta ('000 US)/b 1219 s219 1540 194490 263000 506480 504430 663400 731020:n constant piUcee of FY61 (000 us) L28019 W1i7 162575 199430 276940 27940 "1320 576890 645970

total Exporte ('000 Use) 710659 6269 666000 6so 220oo0 94448 019200 1073770 1231200 12ss820in constant prices oa FY61 ('000 US1) 710689 780 774540 6120 761359 87000 1066940 144170 1216680

u a not avoilable *eparetely.

/a Include, dried and *aIted if. and fish products, ahmritin.. *nd flaham../b Include other item not ahown above.

Note: Nan-traditional exports eaclud* raw jute. jute manufactures. tea. and leather.

Source: Epoart Promott- Bureau.

Table 8.6 -183-QUANrrrY AND VALUE OF MAJOR DtIRT C9iDOZ5 194110/81-19M8/89

1980/81 1981/62 1982/83 19SS/84 1984/65 1985/86 1988/87 1987/68 1988/89

Rice /aValue (mill. USI) 40.4 48.0 97.0 568.0 176.0 8.0 49.5 150.0 17.0Quantity (long tons) 82.8 144.0 846.0 179.0 690.0 39.0 261.0 671.0 60.0Unit Price /a (US1) 487.7 819.4 281.2 818.0 255.1 205.1 187.7 223.0 283.0

Wheat /aValue (mill. US) 210.0 289.0 289.0 842.0 822.0 212.0 22.0 389.0 857.0Quantity (long tons) 976.6 1111.0 1527.0 1877.0 1899.0 1164.0 1508.0 2342.0 2077.0Unit Price /a (USI/long ton) 218.0 215.1 169.3 182.0 169.6 182.1 147.9 148.0 172.0

Edible Oil /aValue (will. USI) 92.0 71.0 88.0 87.0 108.0 135!.5 115.0 178.0 170.0 UQuantity (000 tons) 141.0 109.0 129.0 100.0 188.0 272.0 288.0 882.0 408.0Unit Priac (IsA/ton) 652.8 651.4 648.4 070.0 757.4 498.0 406.4 461.0 417.0

Oi lesd-Value (mill. US1) 11.0 5.0 5.0 2.0 e.0 0.1 25.0 89.0 11.0Quantity (metric tone) 29.7 18.0 17.0 5.4 20.0 0.4 116.0 148.0 42.0Unit Price (II/metric ton) 870.0 884.6 294.1 870.0 800.0 868.0 215.5 264.0 262.0

Crude Petroloum /bValue (mill. US$) 848.8 834.0 873.0 288.0 226.0 177.0 128.0 186.0 128.0Quantity ('000 tons) 1804.7 1177.9 1448.0 1004.0 98E5.0 1008.0 1000.0 988.0 1098.0Unit Price (UII/ton) 268.8 288.2 266.5 232.0 229.4 175.6 126.0 188.0 117.0

Petroleum Producte /cValue (mill. US6) 159.8 218.0 83.0 122.0 188.0 165.0 104.0 186.0 15.0Quantity (COOO tone) 528.9 5S8.0 219.0 484.0 570.0 803.0 782.0 790.0 926.0Unit Price (US1/ton) 805.1 865.4 897.0 268.0 298.8 205.0 142.1 170.0 168.0

Fertilizer /dValue (mill. USII) 104.0 104.4 66.0 75.0 187.0 108.0 25.0 46.0 108.0Quantity (long tons) 950.3 457.2 880.0 886.0 688.0 640.0 14.0 277.0 585.0Unit Price (US$/long ton) 298.9 228.8 200.0 211.0 205.7 168.8 172.4 166.0 202.0

CemntValue (mill. USI) 82.8 81.0 44.0 87.0 26.0 57.0 64.0 67.0 8S.0Quantity (metric tons) 446.0 488.0 759.0 748.0 588.0 1388.0 1601.0 1568.0 189S.0Unit Price (USS/ton) 78.8 71.8 S8.0 49.0 44.2 42.8 40.0 48.0 44.0

Roe CottonValue (mill. USI) 10S.0 79.0 56.0 128.0 106.0 51.6 48.0 68.0 93.0Quantity ('000 bales) 256.0 187.0 194.0 988.0 805.0 181.0 205.0 267.0 849.0Unit Price (USO/bale) 421.9 422.5 288.7 822.0 847.8 285.0 219.5 380.0 266.0

Stapie FibresValue (mill. UIS) 18.0 5.0 4.0 9.0 8.0 1.0 7.0 7.0 9.0Quantity ('000 bale) 42.0 18.0 19.0 27.0 10.0 8.0 29.0 24.0 24.0Unit Price (O/bale) 809.5 812.5 807.7 333.8 500.0 342.0 241.4 212.0 875.0

YarnValue (mill. OSO) 20.1 22.0 80.0 89.0 81.0 50.0 42.0 48.0 50.0Quantity (million .lb-) 14.0 18.0 20.0 87.0 26.0 56.0 39.0 40.0 40.0Unit Price (US centa/.lb) 142.9 122.2 150.0 105.4 119.2 89.3 107.7 112.0 123.0

(p) n provisional.

/a As a l.eae portion of food importe is financed on a grant basis. unit prices aro oftenavai lable for accounting purpose only.

/b Does not include crude oil ehipped to and refined in Singapore for the account of SPC during FY8O-FY89./c Includes petroleum products imported by BPC fre its refining operations in Sinegpore as well as

imports of non-fuel petroleum products./d As asoe fertilizer iports are finrnred on a grant bsis, unit prices are often available

for accounting purpose only.

Note: 1 bale of raw cotton * 500 Ibs; I bale of polyester - 618 lbo;I bale of viscoe m 441 lbe; I bale of yarn * 400 lb-.

Source: Planning Coeiseion.

-184-Table 8.7DCOVS 4N0 OtS VOLLE AND PRICE 6OICC N0 tENS OF TRADE. 1i1/i02-2Wm/ie(1980/81.100)

1961/62 1942/63 1983/64 1984/63 19165/U8 1966/7 1987/66 1.66/69

RiceValue tnde 113866 240.10 186.61 438.64 19.60 122.2 871.29 47.08Volum index 173.91 416.67 216.16 648.41 47.10 818.22 810.89 76.80unit Price Index 6.47 57.62 84.12 51.58 42.04 88.67 4S.82 59.91

Value Index .118.61 137.62 162.66 1SS.S3 100.95 106.19 161.43 15. 71Volum indea 1U.76 16.36 192.20 194.45 116.66 154.21 239.81 22s.e6Unit Price Wadc 100.04 86.01 04.78 76.68 84.92 68.66 6B.31 s2.29

Bdible OilaValu Index 77.17 90.22 4.s7 111.96 147.26 125.00 148.91 184.78Volume index 77.30 91.49 70.92 96.48 12.91 200.71 212.77 2ss.69Unit Price Index 99.58 98.61 183.4 118.07 76.38 62.28 69.99 68.14

oi l1*"*Value Inde 45.45 45.45 16.18 54.85 0.91 227.27 348.4S 854.55Volume index 43.77 57.24 18.18 67.34 1.38 390.57 s5o05. 505.08Unit Price Itnde 108.68 79.41 100.00 81.00 67.50 W8.19 68.40 70.20

Crude PetroleumValue Indes 97.21 108.86 67.61 68.77 51.81 36.67 39.88 38.09Volume nad 90e.29 110.60 76.98 78.49 7n.26 76.64 75.72 82.93Unit Price Inde 107.67 98. 1 88.12 87.12 66.68 47.85 52.27 43.S2

Petroleum PoducteValue Inds 133.28 51.94 76.34 63.22 103.25 68.01 85.10 81.97Volume indes 111.29 421.1 86.57 108.81 153.67 130.73 1U0.80 L83.66Unit Price ladex 119.76 124.2S 86.19 76.48 67.19 48.83 88.43 5S.28

Fert I i aspValue tldez 100.38 68.48 72.12 181.76 108.68 24.25 44.21 100.96Volum inde. 180.54 94.22 101.64 190.18 1U2.44 41.40 79.09 139.90Unit Price ande 76.90 67.36 70.es 69.2e se."2 s8.53 SS.3 72.17

Value Indes 94. S1 L4.18 112.00 79.27 173.78 198.12 182.93 284.76Volu_e ides 97.53 170.18 17.71 131.64 298.65 386.97 888.32 403.89unit Price tndes 96.90 78.6e 67.26 60.18 68.14 54.36 S4.89 W8.17

Rew CottonValue Inod 73.1S 51.68 118.74 98.18 47.78 41.67 76.88 83.33Volum index 73.05 75.78 181.86 119.14 70.70 80.06 97.66 117.19Unit Price Wades 100.14 68.42 76.37 828 67.6s 52.0 78.70 71.11

Total /aCurrent Price aes w9.66 88.67 9.69 104.50 9e.3s 103.4. 117.9 133.24Constant Price Inde. 99 .1 98.66 102.74 188.00 106.61 117.22 131.52 186.00Unit Price lde. 99.72 91.63 90.41 84.96 s7.54 68.24 69.66 97.97

- - - ----- - - - - - - - - - - - - - - - - - -I- - --- - - - --- - --- - - -

-185-Table 3.7 Continued

Siw0 AND EXPRT VOaLUE AND PRICE VOICES 40 T lOF TRAM6 l%91/s2-j19/69(190/8.0loo)

1981/82 1982/3 18/64 1O64/&$ j965/66 1988/67 1967//a 196/89- - - -- -- -- - -- - -- -- -- -- -- -- -- -- -- -- - -- - -- -- - -- - - - - - -- - -- - - - - - - - - - - -- -- -- -- -- - - - - - - - - -

Rev jutevalue tnd.. 85 .8 92.84 96.64 121.41 104.28 87.49 87.75 a8.esVolume ind.x 98.82 115.54 97.64 72.48 118.87 115.26 89.19 83.34

Unit Price Itde 87.01 80.10 100.77 178.7 8 e0.08 78.90 97.92 96.20

Jute CodeVolua Index 79.40 88.71 W4.14 100.19 62.43 78.74 74.22 6.u17

Volume index 107.16 101.81 101.81 64.9e 92.82 W5.83 92.78 86.88

Unit Priee tnde 74.10 84.43 92.92 117.96 a.lo 8o.84 8o.04 78.94

TeVolue oad x 93.28 113.10 169.40 1S8.02 ao.6o 72.92 98.40 97.98

Volume ;ndex 108.18 103.00 103.01 88.06 100.00 71.72 92.09 84.11

Unit Price nadga 68.73 109.80 184.48 174.29 80.80 101.86 103.59 116.4s

LeatherVa ue tnde. 111.29 102.85 180.42 186.14 107.14 267.85 2s9.64 241.88

Vo. uaa and. 10.28 118.46 1W2.87 101.42 a8.73 170.88 188.78 15.25

Unit Price Index 102.78 87.88 117.82 121.42 120.78 159.48 189.90 12.71

Shrimp. etcVol- IndWs 132.19 100.28 287.80 217.38 287.11 540.9e 849.88 888.89

Volume ind.n 124.29 188 08 282.87 261.05 284.92 275.37 291.9 278.02

Unit Pric tlade. 108.35 108.82 102.84 94.09 100.77 186.80 119.72 129.82

NapthaVolue Index 101.08 es.ee 87.12 89.26 48.61 84.81 27.07 40.01

Volume ind. 91.87 80.70 88.54 76.40 88./S eo.7r 85.78 86.99

Unit Price Iadex 109.99 125.56 100.87 90.56 67.79 81.80 48.56 67.81

Tota I /aValue Index 08.22 §9.85 115.88 131.48 115.24 151.09 173.24 180.94

Volume Wads. 104.02 106.99 114.14 110.26 182.8 180.1 5 160.99 171.80

Unit Price Index 04.81 68.57 101.86 119.25 94.06 100. 107.61 10U5.0

TOM OP' TRADE 1100Export Price Index 64.81 86.57 101.38 119.26 94.05 1oo.64 107.61 105.80

Ztarte Price Index 99.72 91.88 90.41 84.98 67.54 85.24 69.6 97.97 -

TOT /b 05.08 98.45 13*.07 140.87 107.44 114.85 120.01 107.69

Annual Change X -14.95 1U.40 i.20 25.24 -26.48 6.18 5.22 -10.27

- -- - -- _ - -- -- -- - -- -- -- - -------------------- - - - - -- - --- -- -- - -- -- --

/e Includes items not ehown abov../b Export Price Index divided by twort. Price Indes.

Note: Calculated from *eporte end importe dotail. eade availablo byExport Promotion Bureau. angladesh Bank and Planning Commieeion.

Tabl- 8.9TOTAL 1:0PORT FINANCING, 1972/78-1987/89(US$ million)

Special Loans A -

Year Cash Barter Trade WES /a Grant* Total

1972/78 a98.8 49.4 - - 541.0 986.71978/74 897.8 64.0 - - 892.9 064.21974/75 273.7 62.0 8.0 41.2 810.7 1190.61976/78 430.1 28.7 5.2 40.4 786.6 1265.91976/77 807.2 28.6 2.7 56.2 449.9 644.6

1977/78 497.8 46.6 2.6 88.1 794.? 1481.2:978/79 442.6 78.7 2.9 116.1 1005.6 1641.01979/80 901.7 75.4 8.5 177.4 1181.2 2889.21980/81 1056.8 96.6 2.7 884.3 1178.9 2608.81981/82 976.9 100.6 4.1 842.2 1262.9 2686.7

1982/83 489.9 49.9 10.6 479.2 1287.1 2316.71988/84 637.4 75.8 7.2 494.8 1186.1 2858.01984/86 785.2 68.9 6.8 696.8 1145.8 2647.61985/80 649.8 86.1 88.1 676.2 920.8 2864.01986/87 366.4 79.0 27.4 879.1 1268.5 2620.4

1987/88 448.9 84.7 48.0 1090.2 1826.4 2987.21988/89 422.7 90.9 90.9 1485.8 1160.2 8876.0

/a Wage Earners Schme.

Note: Data reflect payments rathor than commodity arrivals.Valustion for co modities financed under loans and grants is on amixed fob/cif basis, depending on the terms of the respective aidagreemnts; all other categorie Peflect cit valustion.

Source: Bangladesh Bank, Statistics Dopartment.

Table 8.9AI PIPS.D. 1011d/81-1/61(USS ; lI ;on)

1980/S1 1901/82 1982/U 1943/84 1964/46 1IM/86 14Ut4/87 1987/06 198/69

FM0 AMDOpenin pipe lie s0.00 18.8t0 48. t6 4. If 60.41 194.40 828.83 207.4 261.3

Comitmen 202.07 220.86 248.88 266.16 360.16 329.8? 106.98 364.0 187.0

01*ur.ea,t 194.07 280.50 288.48 276.88 244.80 22.78 22.41 800.S 22i6.9Closing pipeline S ii.0 4S.88 41.76 SO." 1981.07 828.68 207.st 2".8 281.7

COMOOrVY AtD

Opening pilineS.n 39 f.7 861.16 484.82 478.70 591.69 874.78 480.44 809.1 481.6

Comitment. 384.87 518.00 474.38 M26.17 281.77 406.98 882.06 281.2 601.3O;iburveent 892.4 419.86 452.01 489.19 431.87 89.39 402.52 5Oe.4 587.7

Closing pipelIns 561.18 454.82 476.70 588.67 382.81 480.44 619.98 451.5 499.6

PR0JWr AmOpening pipeline 2002.68 2444.23 3044.25 8874.1 36414.48 4061.80 4483.19 4390.1 4099.0

cinitaenta 1001.49 1169.29 799.60 MI.8" 1M83.86 922.94 93.2 914.5 1107.4oie&.emate 859.91 569.27 4619.98 552.02 59.91 709.79 957.23 st0.8 903.9Closing pipeline 2444.28 8044.25 8874.13 3702.96 4068.12 4588.10 4598.19 469.0 4580.1

TOTALOpening pipelIne 2481.43 264.22 34.44 369 2.88 4296.58 440.93 5417.46 820.6 5449.6Comitmate 1589.24 1928.65 1128.88 1694.99 1971.48 166.44 1608.25 1529.7 1665.7

Diahureesent lU46.48 129.68 1177.38 1266t.40 266.96 0i.93 598.16 1640.4 1668.6Closing pime ins 28t64.Z 3547.44 9362.58 4319.17 4528.00 5417.4t 525.86 5449.6 381-4

0ISLS.1iS afUATME TO sMI OF' T1L.E ,cen

Food oid (1006 0PL * m7 i 96.0 102.6 106.6 108.1 70.8 48.0 85.6 62.5 68.2CdIty 75OFL-1. * I NC] 98.8 111.7 9.6 94.0 78.2 102.6 68.8 98.0 66.6Projet aid EJ OI 189.8 120.8 77.2 81.9 81.1 87.4 104.4 94.6 90.4

Total 115.7 111.5 90.8 89.3 60.1 70.6 67.7 67.4 63.3

Note: OWLOpeino pipeline. NC0ie com;tente.C;omoditj aid itnludee cah aid, end project aid 'ncludes technical asisetance.Discrpeenciea be6ween closing pipel;ne in one year end opening pipeline in the nestyear rewlt frr_ adjustments for currency revluations. aid cancellation.. andre claificatictn.

Table 3.10cosrbeWs AND DIU S S OF ID M MwrE OF AID. 197M/77-19U/j6(Us i Il lI on)

1976 i'lff 1976/76 19709/0 190/6 19U/2 1592/U 1913//" 19U4/ StU/SC 19U6/7 1007/" 16/s9

Food Ali 14S.1 3116. 300.7 270.0 202.6 220.6 246.4 268.2 380.2 329.6 109.0 164.1 157.0Crmnt 90.5 106.9 259.8 255.0 171.4 163.7 246.4 271.0 380.2 329.6 109.0 34.1 1I7.0Loans U2.6 31.9 40.9 15.0 31.4 U.9 - 13.4 - - -

Coomadlty Aid 304.1 426.1 604.4 . 265.3 SIJ. 516.0 474.4 526.2 213.1 406.9 56.1 251.2 601.3Cront. 17.5 14S.2 35.6 106.3 1U6.7 263.9 266.1 240.4 162.6 225.9 206.1 136.5 166.1Lomna 146.6 279.9 24.6 177.0 169.2 249.1 206.3 217.6 100.8 168.0 556.0 112.7 413.2

Project Aid 279.7 82.9 S55.1 597.9 1001.5 116.2 799.0S 61.7 14.6 926.9 932.2 914.5 1107.4Grant, 132.5 160.1 310.6 21.8 192.9 367.9 320.2 548.3 347.5 609.9 56.1 376.5 316.0Lons 27.2 402.6 534.5 476.3 06.6 651.J 479.6 SU.4 097.1 31S.0 3U8.6 85.2 791.4

TOTAL 720.0 1147. 1760.2 1185.2 1559.2 192.6 12.6 1695.1 1977.9 1661.4 1605.3 1S9.6 1565.7

DIS.RSQ.BTSFoud Ald M.6 177.9 179.0 374.7 194.1 230.5 255.4 276.4 244.5 202. 225.4 300.5 226.9

Crunt. 77.1 116.9 162.1 316.6 162.6 230.5 221.0 265.0 242.0 202.8 22.4 300.5 226.9Lons 44.5 61.0 16.9 55.9 31.5 - 34.4 13.4 2.5 - - - -

Ceadity Aid 254.2 860.4 462.6 375.5 392.5 419.9 452.0 439.2 461.6 593.0 402.5 509.4 57.7Crant. 120.1 15. 204.5 161.6 179.6 213.0 244.5 244.4 246.9 285.0 176.0 170.7 164.0Loans 19. 265.9 276.1 216.9 212.9 206.9 207.5 194.0 17.7 117.0, 226.5 336.7 373.7

P.oject Ali 18.6 275.6 366.4 459.9 559.9 86V.2 469.9 552.6 590.9 709.6 957.2 ss0.5 905.9Orant, 62.9 121.5 115.3 170.2 251.5 210.5 121.9 226.4 214.9 505.6 255.5 382.6 2a2.0Lomas 106.7 184.1 233.1 299.7 306.4 S7.9 346.0 32.4 7.0 20.0 711.7 477.9 61.9

TOTAL 534.4 3.9 106.0 iJn.1 11416. 12S0.6 1177.3 1266.4 1267.0 105.6 135.1 1640.4 1615.5

meso ItemtGrunt.

comit_ato 400.5 485.2 936.0 4S4.9 550.0 o05.s5 s3.7 56.5 80.3 1165.4 9.7 680.9 561.1Oisburgseots 25.1 592.0 501.9 650.6 593.7 65.6 86.4 733.8 700.6 92.6 686.9 826.6 672.0

Loan.Co_mitmenta 326.4 n4.6 824.2 666.3 1009.2 1117.3 635.9 636.6 1097.6 49.0 709.6 64.9 1204.6oisbursements 279. 441.0 526.1 572.5 5 2. S 6. 59.9 134.6 866.2 54S.0 936.2 61.6 9.6

Source: Ministry of Finance Eaterual Rf euce. Division.

Tabe- i.11uB. 8.1 RAES. 8SM-3ee18s

(Forbed aw.rag; Ta per tB ea ar)

--- _-.-----------__-------_---_-_------__----_---_-------__---__---____-_----__---__--_----_--_------_-------.._---------___--_-_------

197M/77 1977/7S 198/7n 1079/SO 19661 1981/2 162/ 1963/64 194/65 1965/U 16/8 198 l7?/66 t1969

Ut.Y AVWV25

SOUICPAL RATE /aMIp-Septeub.r U.664 18.8l71 14.6966 1U.214 15.0408 1t.s764 22.416? 24.s89s 25.2203 26.6680 0.i110O 31.0000 L.OW2

Octobe.r-Ocember 15.6714 1S.01t 15.278 1.0615 16.1601 19.1922 23.60 24.972M 25.6510 30.1740 80.5250 31.0857 32.1570Jawwwrg4hrcha 15.I68 14.7225 15.891 18.412 14.861 2W.7046 24.5000 25.0627 26.2880 80.1500 30.6oco 31.8974 82.2700IerlS-.han 15.5817 15.3868 15.5187 15.20 17.8i0 21.5967 24.800 25.200O 2M.67O0 0.3000 3.9140 8I.SOW 32.27

s6r6Dft MATE Ade1y-SaptAdr - - 20.680 20.1000 19.4600 22.0500 22.60 26.8200 27n.co0 82.5900 38.0O 83.0000 82.9000O*tdbrateceber - - 19.8000 19.1000 19.8000 22.6o0 24.40A0 27.40< 25.000 38.4500 88.1800 82.900to 2.9100JmIuery-lhrcb - .000 20.07W0 16.7500 20.6000 22.4000 24.7900 2.4800 80.4500 3S.2000 18.0000 82.000 82.9100'AriS-.hme - 18."66 19.920 19.20 22.7300 22.40 26.220 2.9400 81 3000 .20 33.0000 2.9000 82.9100

FMsCaL EM A am/

principl Rteo 35.4857 15.1215 15.2tS 1s.7m 16.3447 20.0400 28.7629 24.90 26.6620 29.M1 80."47 31.2450 S2.146Secondary Rate - - 20.030 19.3o00 20.57s 22.8750 24.5728 27.2600 28.8625 3i.1100 38.0730 82.9250 82.9075

/O Sh*.lut*d auWraa. Of MOe.USd eaCtane rat4e a . The rates *to .r;od aevrea of the mek.t rate (F. line rf).wbhch are crown rate. booed an a fi xod relationship to the PFod Storl n aince .anoJevy 1972.

lb timmhted awago. of' end period motily data.le Weigited eaverage of quarterly emcbdang rates .

sm,rce: gatemetional Fomatry Fund ad Statistics ODprta"t. engledebA Bat.

Table 4.1

EXTERNAL PI*LIC DEBT OUTSTANDING INCLUOtNG UNDIStURSEO AS OF DEC 31. 1938

INCLUIWS ONLY OE6T COMrITTEC 000000 - oDC 31. 1966DEST REPAYABLE IN FORE IGN CURRENCY AtN GOOOS

41N THCUSANDS OF U.S. DOLLARS)

D c e t O U T S T A N OI N G A N A R A R s

....... .......... ... .. ......... ......... .............. .................................. .... ..OISMSURO IjUNIS6RSED TOTAL. PRINCIPAL :INTEREST

CREDITOR TYPE . SUPPLIERS CREDITSCREOITOR COLNTRY

AUSTRtA 171 I .CHINIA 0.79 -9.17

CZECHOSLOVAKtA 23304 2.304FRANCE 1.230 1.613 2.6424IMARty - -INDIA 4.027 4.927 -NETHERLAiS 5243 5.243PAKISTAN 4*907 4.00-ROAIA 0.5262- 86527SINGAPORE - - -

USSR t13 232 64.138 f71370 25 -YUGoSLAVIA 34313 * 3 413

;4 - --- ---- --- --- ---- --- ---- .... ... . ........ . .

TOTAL SUPPLIERS CREDITS 84F.206 70.677 218.603 62 -

CREDITOR TYPE : FINNCIAL INSTITUTIONScaROtTOR COUNTRY

FRANCE 1.123 f .23

TOTAL FINANCIAL INSTITUTIONS 1.t23 * 1.123 -

CREDITOR TYPE : PJLTILATERAL LOANSCREOITOR COLNTRY

ASIAN OEV. BANK 1.0 4.02 1.353.506 2.397.566 -EEC 42.69s - 42.695TERO 6s.606 338 61.0 -IDA 3.168.716 1.336.484 4.627.200 INTL FUNI ARG(IFAO? 107.624 70.3s 178. 193 -ISLAMIC DIV. Baw 40,1521 48.781 89.302 I.626 SOPEC SPECIAL FItW 89.132 28.263 117.395

TOTAL ULTILATtRAL LOANS 4.676.746 2.839.403 7.418.149 I.S26 55

CREOITOR TPE : ILATERAL LOANSCREOITOR COUTRY

BELsGoI 41.801 2.836 44.638BULGARIA 291 . 9 ICHNINA 48.381 31.760 80.-41 -

CZECHOSLOVAXIA 8.700 1.690 10.3s0 -DENMARK-FINLANSFRANCE 92.546 60.22 152.766 GtERMAN OEM. REP. 1.865? 1.8GERMANY. FEO.REP. OF - -HWAIGARY 3.234 *3 234 -INOIA 45.72? 7.0io 52.167 .34IRAN 10.628 * 10.626 -IR4O 13.667 68.74s 82.412 -4APAN 2.77n.629 619.128 3.205.027 1.84sKOREA. REPUBLIC OF 4.270 - 4.270KUWAIT 119.721 21.071 137.792 -NETHERLANOS 21.200 13.883 35. 143 127PAKISTAN - so.000 60.000 - -POLAND 2.04S - 2.045 9RORANIA 9.281 19.916 29. 195 026SAWI ARABIA 94.232 t11.954 213.246 -SWITZERLANOD 675S -. 196 - -TURKtYV .447 1.447 103 17UNITEO ARAB EMIRATES 70.6s9 E - 76.587UNITDO KIXMO - -UNITEO STATES - 1.122.413 52.610 1.t76.223USSR - 3s.624 - 38.624 3.179YUGOSLAVIA 25.280 1.269 26.549 271 5

TOTAL BILATERAL LOANS 4.080.618 969.409 5.630.027 6.364 22

CREDIToR TyPE EXPORT CREODTSCREDITOR COUNTRY

AUSTRIA 6.399 6.39 -FRANCE 15.979 - 1S.979 24INDIA s54 289 943NETHtRLASS 4.588 3.51* 6.100UNITEDO KI#ON 10.938 - 10.9318USSR 2.430 2.096 5.526

TOTAL iTP T CREDITS 40.980 6.896 47.68e 24

TOTAL EXTERAL DEOT 9.329.6e1 3.886.384 13.216.066 6.266 77

CREDITOR TYPESUPPLIERS CREMITS 4s.206 70.677 21.86s3 62FINANCIAL INSTITUTIONS 1.122 - I.22 -MNLTILATERAL LOANS 4.578.746 2.9239.403 7.418. 18S49 .26 55BILATERAL LOANS 4.660.616 0e9.408 5.530.027 6.384 22EXPORT CREDITS 40.989 6.606 47.885 24

TOTAL EXTERNAL OCET 9.3229.681 .388.384 13.216.066 8.286 77

NOTES: (1) Only debts With an original or extended Aturfty of OvOr Gn* year are included in this tablo.(2) Oebt outstfnding InCltd prlnCIpAI Itn arrearts but exoliUdel ntwet In trrare.

Table 4.2

SERVICE PAYMENTS. COIITMENTS. 0ISBtURS<uE1TS AND OUTSTANDING AMOUTS Of EXTERNAL PU8LIC DEBTPROJECTIONS BIASED ON DEBT OUTSTANDING INCLUDING UNDISSURSEO AS OF DEC 31. 1989

INCLUDES ONLY OEBT COMMITTED 00000 - DEC 31. 1988DEBT REPAYABLE IN FORE IoN CURRENCY AND GOODS

(IN THOUSANDS Of U.S. DOLLARS)* * * TABLE TOTAL * * ;

OATE DEST OUTSTANDING AT T RNSCTIONS R I PER O OTHIER CHANGES: END OF PERIOD

DISBURSED: INCLUDING : COMIT-: OISBURSE-: S E R V I C E P A Y Mf E N T S CANCEL- :ADJUST-ONLY UNDISSURSED MIENTS : ENTS :- -- ------ -- ----------- ----------- LTIONS ENT es

: : : : : PRINCIPAL INTERiST: TOTAL: {}(1) (2) : (3) (4) (5) (6) (7) : (6) (9)

198112 3.771.916 6.096.566 451.060 287.347 13.930 33.717 47.647 14.030168206 3.967.640 6.6S2.919 814.096 394.702 25.960 23.507 49.467 1.68S -230.099198212 4.299.994 7.028.744 334.678 287.172 37.221 36.566 73.787 0.617 86.986198306 4.531.803 7.348.889 451.440 316.147 35.226 24.091 59.316 9.192 -66.67£196312 4.738.242 7.739.976 441.401 226.960 27.720 42.989 70.709 5.504 -47.0t6198406 5.237.530 8.278.507 434.103 332.625 28.935 30.411 59.346 30.400 163.760198412 S.012.181 3.14S.610 394.716 209.849 56.894 44.323 101,218 4.036 -466.479196506 5.337.867 8.662.716 622.052 343.057 48.498 3I.563 80.061 129.398 72.750198512 5.879.831 9.437.434 303.642 234.922 59.751 56.699 l16.450 49.649 580.477t98906 6.767.096 10.537.655 576.379 S03.tO0 65.954 41.600 107.S54 47.316 637.113196612 7.201.694 10.759.997 201.606 45t.032 64.997 63.450 128.446 62.572 148.304198706 7.815.376 11.439.855 482.382 477.921 74.356 54.057 128.413 99.662 361.495I9892 8.803.585 12.844.766 608.929 441.148 84.*56 78.*2S 1*2.281 83.702 963.840 F'198806 8.772.313 12.284.770 237.901 438.806 63.5t2 60.277 143.788 61.010 -653.384198812 9.329.682 t3.216.068 762.073 462.561 94.446 79.949 174.395 24.245 287.917

* * * THE FOLLOWING FIGURES ARE PROJECTED * * 0

t98906 10.216.9t9 12.991.928 1.011.16t 11S.761 67.608 1t3.366 100.21S -8.162193912 10.099.223 12.874.232 - - 117.S73 6S.948 203.S21 - - 122199006 10.910.233 12.7.64.943 - 926.301 115.291 72.610 197.900 - 1199012 10.771.366 12.620.078 * - 138.865 89.563 228.428 -199106 11.375.356 12.492.017 - 731.249 127.261 73.803 201.064 -t99112 11.231.922 12.349.383 - - 143.435 89.999 233.433 -199206 .11.591.861. 12.228.502 - 480.822 t20.883 73.103 193.986 - 21992t2 It.445.612 12.082.253 - 146.249 89.578 235.827 -199306 11.611.729 11.950.047 - 298.327 152.211 72.357 204.56899312 11.455.172 11.793.490 - 156.557 97.606 244.164 -

i9406 11.466.839 1,6S4.431 170.733 139.066 70.043 209.109 - 7199412 11.307.629 11.48S.221 - - 169.210 84.534 253.744 - -

199S16 I 1.268.566 I1.333.917 102.26S 151.308 67.348 216.65S - S199512 11.086.654 11.151.986 - - 101.932 61.145 263.076199606 10.971.432 10.987.659 - 49.116 164.336 64.299 223.639 - 12199612 10.776.293 10.792.21 - - 195.136 77.611 272.749 - -199706 10.619.316 10.621.635 - 13.916 170.693 61.447 232.240199712 10.416.316 10.420.635 - - 201.001 74.027 27S.027199806 10.241.129 10.241.993 - 1.415 178.642 58.SS 237.211 -199812 10.032.298 10.033.163 - - 208.630 70546 279.378 -199906 9.641.207 9.842.072 - 191.091 55.609 246.700 - -099912 9.617.933 9.618.797 - - 223.275 66.977 290.252

Includes Writeoffs; Projected amounts In this column arm amounts excludd f rom projections OJ to uviinown t.

so This column shows the amount of alrtthetle tabaanc. in the amount outstanding Including.undleburod from one period tothe next. The most cammori causos of malances ar. changes In exchange ratoe and transfers of debts from one categoryto another In the table.

_ S _|l _ *~~~~~li|

Table 5.1 -192-CONVENTIONAL BW SU9ARY. 1980/81-1989/90(Tk crops)

1980/a1 1981/82 1982/8S 1983/84 1984/85 1965/86 1966/67 1987/88 1987/88 1988/89 1988/89 1989/90Revised Revised Revised Revised Revised Revied Reviseud Revi sed Rev iszedBudget Budget Oudget Budget Budget Budget Budget Budget Budget Budget Budget Budget

----------------------- -_- .. ----- -__ _________________________________________________ _____ -------------__________ - ---------------------------

A-REVUEE BDOETReceipts 2843 2554 2711 3033 8477 4078 4717 580 /a 5146 6172 5822 7904Expendi tues -1482 -1850 -2147 -2503 -2930 -3421 -a988 -4481 -4780 -5250 -6170 -6900

Roe.nue Surplus 6g1 704 564 S 847 882 781 622 416 922 -348 1004

i & C-Foreign Creants A Loans 1841 2264 3040 3483 8307 4016 4372 8003 5606 50i8 4885 8956

O-DOMESTIC CAPITAL NETDomestic Loans 8 Advances -26 -42 -214 -109 -248 -262 -178 -36 -626 -839 -521 -679Non-Denelopment Capital Expr. 226Net Public Accounts 0 0 79 167 148 160 160 178 183 202 223 198

T otal Net Doemetic Capital -26 -42 -135 s8 -100 -92 -18 -165 -217 -337 -298 -481

Total Budgetary Reources 2676 2926 3489 4071 3784 4579 6120 5640 5288 W673 42s9 6478

Extra-Budgetary Resources ADeficit Financing 57 68 88 106 203 254 210 175 355 189 955 10

Net Food Borrowing 209 0 0 1 276 -249 -S6 -11 24 -56 128 -88

TOTAL RESOURCES AVAILABLE 2942 2994 3S58 4178 4233 454 4954 6t04 8664 5806 S322 6543

E-USE OF RESOURCES

ADP 2369 2715 2977 3433 8508 4096 4513 5018 4651 8318 4595 5803Non-ADP Projects 0 0 34 210 207 144 92 128 70 115 98 205Food Budget 872 16d 844 535 618 344 349 658 943 876 629 535

Food-for-Vork 105 160 148 198 216 34e 326 348 400 339 826 384Not Food Outlay 467 8 396 837 302 -4 23 313 843 37 103 151

/a Including effect of new mewaures (T7 416 crore) but reduced on account of subsequentwithdrawal of soma of these measures (estimated at Tk 28 crore).

Source: Ministry of Finance.

-193-Table o.2

(Tk crore)

1290/81 1081/82 1982/83 1980/84 1084/85 1985/66 1988/87 107/88 1987/68 198l/29 1988/89Actuea Actual Actual Actual Actual Actual Revised Budget Actual Budget Actual

Estimate Estiete Estimte

To. Revenue 1620 1966 2115 2348 2891 8267 3804 419 4315 8218 4763Production, consumption

and distribution tanes 1i64 1654 1761 1966 2446 2728 8184 3852 368 41169 s3l1(Custom duties) 748 783 870 934 1138 1889 1542 1701 1654 l854 1845(Sale. taxes) 882 825 g98 850 446 468 iS9 se6 848 651 504(Excise duties) 886 484 49 898 692 772 014 114 1172 1447 1388(Stamp twxes) 78 87 e8 77 114 148 147 162 150 176 160(motor vehicle taxee) 8 a 8 7 11 11 12 20 14 32 10

Ta.,s& on income 227 280 826 8a8 38e 462 857 700 664 881 706L.tn rovenue tax /a 20 20 20 SO 42 5S 66 87 82 95 98Othe- taxes nd dutie /b 9 12 a 10 17 22 27 so 88 so 48

Non-Tax Revenue 435 s8o a86 448 648 862 910 884 937 957 1017

Nationalized ector 160 1S1 118 122 280 848 848 275 250 288 195(Industries) 86 23 27 28 67 7: 88 90 so 78 S8(Financial Institutions) 74 108 88 94 213 268 287 185 170 168 137

Interest receipts 182 48 19 117 124 281 192 210 227 2'0 227Registration fee 21 28 27 S2 40 4d. e6 67 67 67 60Forest 28 82 80 84 4S 81 5 so 5 s8 81 SORa lway -19 -8 -8 -23 -49 -116 -109 -88 -108 -142 -139Post Office *ndTT (net) -2 7 a 6 10 70 a8 11 64 95 106Other /c 98 142 165 168 184 228 824 a84 884 418 518

Total Current Revenue 2285 2346 2471 2790 a6e 4129 4714 5803 6252 6172 5780

i801MITUES

Adm.nistrative Servicte 708.6 670.6 786.8 942.6 1087.4 1825.3 1839.0 1754.8 2000.7- Adain. A comn *ervices 806.7 168.2 124.8 216.0 238.1 889.0 858.6 397.0 416.6- Justice and lea enforcement 120.7 167.5 147.1 177.4 210.6 262.9 804.7 851.3 878.2- Oefense 256.1 822.4 478.6 811.0 570.8 668.8 814.9 933.7 1139.8- Foreign affairs 22.1 27.6 8.S S8.2 88.0 54.8 60.8 72.3 66.6

Economic Services 68.2 78.8 96.0 120.8 168.9 194.6 202.0 216.7 342.4- Agriculture A water 47.9 55.2 72.6 89.0 118.0 138.9 128.6 131.1 249.0- Induotry 8.1 4.1 4.7 4.4 6.5 9.6 18.4 18.7 22.1- Hiicellaneou- *rviceo 7.2 19.5 18.7 26.9 84.4 45.9 66.0 66.9 71.3

Infrastructure 17.3 126.8 91.4 90.1 123.7 92.8 12.8 165.9 217.6- Transport 4.4 98.1 59.4 46.8 62.8 42.6 76.5 35.3 97.6- Energy - 0.8 0.8 0.3 0.7 1.0 1.1 1.1 1.2- Communications 12.9 22.8 21.8 27.8 23.6 81.8 86.0 49.3 52.5- Physical plenning - 9.9 10.0 15.5 86.2 17.4 19.2 80.2 66.3

Social Services 821.4 881.8 414.1 8S3.8 888.7 941.2 1082.5 1326.6 1840.6- Educeation 211.5 287.8 284.6 871.9 498.2 607.6 741.8 818.9 959.9- Health a papulstion 88.6 93.2 103.2 127.9 189.8 192.0 149.2 149.0 821.1- Relief 11.0 7.8 9.1 18.2 204.2 116.7 160.0 322.7 S07.1- N scellneou as ervces 15.8 15.0 15.2 20.8 27.0 24.9 81.8 38.9 52.5

Other 228.7 425.7 512.3 862.1 713.8 1180.8 979.2 1178.9 1768.7- Local government - 4.0 44.7 71.6 90.4 881.6 876.7 412.8 185.9- Subsidies 111.1 182.9 199.2 211.9 289.2 189.0 69.2 SS.9 708.7- Pension 18.5 19.8 40.2 41.2 60.7 75.3 90.0 137.0 144.2- Oebt service 99.1 180.8 228.4 287.4 328.5 694.7 448.8 575.2 732.9

Total Current Expenditures 1326.2 1658.2 1899.8 2288.9 2944.5 9874.8 8988.8 4642.8 617C.0

/a Tan levied on lend holdings./b Include- oectiricity duties, estate duty on agricultural land, taxes on Immovable property,

gift taxes, capital gains tat, toll taxes, bettermnt tax on commercial establishments, andother levies.

Tali. 5.5 -194-ANNAAL iDaMrXBlT PRORMAE. 1978/79-109/90(7k co.ro)

1978/79 1979/80 1980/81 IWo/eI 1081/82 1981/02 1982/OS 1982/63 1983/84 1983/84Revised Rev sed Reoised IRED Rovised 116D Rovised IME Rev;.d I5M

Budget Budget Budget Estimate Budget E tioato Budget Estimate Budgot Estimate

Agriculture, Rural Dovelopmnt 468.8 665.8 7n4.6 78e.3 682.0 788.4 956.5 638.2 1051.1 939.3and Water Re.ources

(Agriculture) 234.4 293.8 822.7 282.3 889.8 314.5 472.1 415.4 475.8 476.4(Rurat Developaent) 61.9 74.0 74.9 98.1 112.7 100.0 116.0 103.9 105.7 73.6(Wator *nd Flood Control) 172.5 297.2 857.2 408.9 399.5 868.9 368.4 318.9 469.6 389.3

Indv-.try 804.0 882.7 838.7 277.6 857.7 270.0 314.5 t47.0 332.5 233.6Poass- Scientific Research

and Natural Reaoure. 252.6 598.9 877.8 875.9 434.7 511.4 629.5 578.8 621.0 697.1

Transport 218.5 404.0 875.1 465.9 880.2 870.3 489.3 394.7 285.9 244.8Comeunications 43.1 80.2 71.8 e6.9 60.8 78.9 76.0 99.0 54.8 50.3Physical Planning and Housing 96.6 144.8 146.7 155.9 177.4 146.5 149.6 130.0 147.2 163.6

Education ard Training 64.1 64.9 97.0 97.0 107.1 86.1 100.6 105.2 133.4 128.4dasIth 47.6 70.0 65.8 61.2 74.2 69.2 80.8 73.9 80.0 70.8Family Planning 46.7 59.8 69.6 48.8 86.8 40.0 85.7 71.2 106.9 85.7Social Welfare 6.5 21.6 24.2 19.1 29.6 20.5 18.8 12.1 15.5 14.2Manpower and Employment 6.9 9.7 10.8 9.1 19.8 6.9 20.8 24.6 25.0 24.2Cyclone Reconstruction 16.2 5.0 0.0 0.0 7.3 343.2 319.6Other 96.0 7.9 201.4 105.7 188.2 34.4

Tot I ADP 16Q2.6 2S30.0 2359.0 2864.5 2715.3 2391.1 3126.2 2687.7 S584.7 3006.029.6 /a

1984/85 1984/85 1988/88 1985/86 1986/87 1986/87 1987/88 1987/88 1988/89 1988/89 1989/90Rovieed IFD Revised D41D 'evled IDM Revised IMED Revised IEIDBudget Estimte Budget satiante Budget Eatlmate BuJget Estimato Budgat Estimate Budget

Agriculture, RuFral Developmnt 989.0 771.4 783.2 717.2 888.0 759.8 130S.5 798.4 11S6.0 1016.0 1499.2and Water Resources

(Agriculture) 814.1 287.8 193.0 204.4 262.0 198.9 888.2 258.7 363.4 280.0 490.3(Rural Development) 110.2 91.5 1S.1.7 99.4 143.9 108.3 187.6 91.0 130.8 99.9 265.3(Water and Flood Control) 514.7 892.6 477.2 418.4 442.1 460.6 839.7 448.7 661.8 636.1 743.6

Industry 239.8 249.1 690.8 838.0 667.1 696.9 419.9 430.7 286.1 479.4 406.0Pooer. Scientific Reserch

and Natural Reouress 845.8 865.6 948.3 948.7 1048.3 1153.0 1028.7 977.1 815.9 985.0 939.0

Transport 227.1 269.0 266.0 256.1 435.1 441.1 468.6 466.3 604.5 664.2 598.2Cosmuni.:etiona 60.6 70.7 49.8 44.1 48.6 37.0 95.8 96.7 127.7 164.8 126.6Physical Planning and Housing 108.2 114.0 102.9 114.0 158.5 139.0 198.0 167.5 179.4 161.5 270.3

Education and Training 128.8 125.2 181.7 128.1 214.6 197.6 251.5 213.3 257.6 209.5 344.8Health 99.2 93.0 72.5 66.3 80.4 73.3 87.0 83.3 183.0 85.1 154.9Family Planning 111.0 101.8 127.7 87.9 142.4 104.8 170.4 140.9 214.1 168.6 303.0Sociol Welfare 18.3 15.5 14.7 18.5 21.9 20.1 19.9 15.9 41.5 36.6 42.0Manpower and Employmnt 20.1 13.5 11.4 6.9 9.0 7.4 5.5 2.6 4.0 2.9 4.3Upsailes 423.0 395.9 425.0 126.0 /b 885.0 322.1 370.0 379.6 200.0 204.4 230.0Other 287.5 88.4 524.6 984.7 519.6 487.0 509.8 374.1 525.5 417.0 684.7

Total ADP 3508.4 8168.1 4095.5 3429.4 4513.4 4439.1 4650.6 4146.4 4595.3 4615.0 S803.0

/a Self-financing by autonemous agenctes./b Excluding upao il development assistance of Tk 200 crore which is included In *ectoral expenditures.

Note: Reported actual expenditures are: Tk 267.4 crorp for 1972/73, Tk 305.0 crore for 1973/74 and Tk 393.2 crorefor 1974/75. It is believed that thes totals my understate the level of expenditure due tc the provisional natureof eose entries and the posibility of incomplte recordIng.

Source: Ministry of Finance and Planning Comission.

Table 8.4PWCIAL P HWINWE OF lqBLIC SeT09 oTRzUL cgTlAIONS. iooos1-i989l/9

(Tn crop.)

-- -------Auditud ,eI----------------------- P.iie"@i Ow#"t . s..t

10W/61 1981/62 1982/68 1J93/64 164/8 1985/00 1986/67 1987/68 ilerni 196l/9

MET PWOF?T /a

aledea Jutse illt Corporation (OM ALl NIl /b 81.0 48.8 -' -- -- - -- -- -- --

Sanfl.e4eh Jute Wills Corporation (OMe) le 25.8 -42.6 23.9 -29.s -146.2 -186.3 -41.9 -148.1 145.0 197.4

Ing"WeA Teuti ls Wll. C.rporatio. (OC All Nll /- 4-.2 -4.. -- - - -- -- -- __ __

1 1Imdesh Tastisl Ill Corporation (URIC) /l -18.4 -41.0 8.3 18.4 4.2 -81.9 -22.7 -88.6 6.0 *.e1agladoI Sugar an Food Induetries Corporation (FIC) 3J.S 46.4 48.? 48.6 -21.5 -30.7 -27.8 12.4 1.9 3.0

S^anmdh Steal mad Einearig Corpworatin (OSM 12.4 -12.0 -22. -18.4 -8.9 0.5 1.5 2.7 0.6 1.2

ftedladesh ,emical Inetrie. Corporatio (UCIC) 8. 7.1 39.6 26.8 15.8 e 18.S -5.5 28.7 30.0 83.0

flumelSdah Foret Induetries 0.v.lopint Corporation (IF 1.0 0.6 8.3 3.4 4.6 5.8 1.4 -1.2 6.7 7.4

Sagladeh P,troleus Corpoation -9.2 -276.9 89.7 200.0 206.4 261.0 839.5 227.6 264.3 112.6

Total 47.0 -480.8 154.7 241.7 89.6 41.9 244.8 88.5 4s6.4 384.8

Bnl.dagh Jose i ill. Corepation (SiC) Atl M I e/ 8 408 6.0 - -- -- -- -- -- - --

Mmgldgel Jett Mll. Corporation CDOlC) lc 488.2 447.0 849.6 814.9 638.7 s84.7 681.6 S2.8 604.2 66.6

"f1ada TeW ITal lHiltoCorporation( SC)A ll +Iile-/b 87.s 2O4.0 - - - -- -- -- -- --

finladesh T.tilo "III Corporation (URIC) /c 16.2 201.1 266.0 299.2 296.8 294.1 269.8 840.6 416.1 512.0hldeeb Sugar and Food Induetries Corporation (IC) 20.1 8 S00.8 16.6 368.2 148.6 252.8 409.4 818. 286.5 410.9

Bangladesh Steal an Eglnaring Corporation (O) SS1.7 276.9 218.5 870.1 407.6 400.S 4287 484.1 448.0 808.8Dneladesh Cemical LedAetrign Coporatio (SCtC) 881.3 aoO.s 498.6 671.0 091.2 771.2 1.l? 93.8 11.9 1260.8

elodauli Fore" LIAtrie. Oevelopmeat Corporation (FC) 17.6 21.6 80.4 ss.7 40.2 40.2 52.0 40.7 70.s 77.1

Sanlade Patroleu Corporation 118.2 18.8 1891.6 1161.8 126.7 181.S M17.7 1264.0 1407.0 1406.0

Teotl 04.7 85.0 U2s7.? 8420.6 8481.8 3676.e6 8W9.4 8920.4 4386.8 484.4

FMITSALU RATIO (I)

Total 1.8 -18.9 4.7 7.1 1.7 1.1 6.8 2.3 10.4 7.9

-- a no available.

/a Pro-tee prof to or loaa". Ngtlve Sig C-) der ea, net lI/b Then are te accounts of a1l 2toh wi. iinelting the mee that were tranafrred to the private sactor in 1962/88.

/c Thee are teh acomnts of' the *illo that are stil In the public sactor as of 1962/8.

Source: Obnitoring Cell. Mini"t of Fiance.

I~~ ~ Of1

Table 6.1EV rLv MO AMaUc L SQIDZTmY l9S-19

(TI b l Ion)

hit. 50. Jaun 80. JSOa, 80. Jun. 80, We 31. Jn. 80, 0. 81. Jun ,0. Ce. 81. june 2e ,10a6 1014 105 1066 106 1W 1967 Igo 1* 8 lu9

1. Credl% (net) to oerfimot 10.6 24.A 25.4 25.8 2s. 22.4 25.1 21.7 19.0 17.3

(of which Special Trowsry onde) -) (1.0) (1.0) (0.6) (0.6) (0.6) (e.) (-) (-) (-)2. C.edit to Other Phblic Sector 24.6 26.8 32.8 6.7 41.6 41.6 42.2 48.6 45.2 40.3J. Cred t to Private Sectr 31.0 40.1 66.9 63.6 il.$ se.6 90.6 109.8 119.6 1S3.64. Total Oometic Credit (1.2*3) 75.4 96.7 124.S 148.6 148.0 1.4.6 164.0 174.8 165.6 197.25, Net Forets" Aet. , -8.0 1.8 -0.1 0.7 0.2 8.0 8.6 6.7 12.7 10.1

6. Olthe Liabi I ltle (not) -12.5 -16.3 -10.2 -26.0 -.4.8 -18.9 -U4.0 -18.0 -17.4 -16.5

7. Total Li4qidity (1@) 5e9.0 3.0 106.8 A.4 1t2. 1I6.6 157.6 164.1 179.1 190.6

S. Currency Outside Banks 11.4 16.6 17.2 19.5 10.0 20.7 223. 24.1 25.2 26.2

9. O_emd Deposits 14.0 10.9 25.1 29.6 81.0 22.6 23.5 24.7 27.9 2.S

10. Currency aod Deand COi eits (i01) 26.8 85.8 42.3 49.8 60.0 48.5 1.0 48.6 8.1 54.7

1t. Tim Deoets 32.7 48.4 63.0 74.1 13.8 90.1 106.6 118.8 126.0 136.1

hangee 'or efJcr Co_onent ) h/

1. Credit (net) to Oovernmntond Public Sector 1.2 11.7 ? 2.3 16.7 0.9 -2.4 2.0 0.0 -1.7 -4.9

covernuent 1.4 21.7 -2.9 6.1 -8.9 -5.0 8.1 -6. 1 -12.4 -0.9

Other Public Sector 1.1 8.7 26.7 22.9 5.8 -0.8 1.4 8.8 8.7 2.4

2. Credit to Private Sctor 31.0 56.4 40.8 21.8 -0.4 7.6 11.2 9.4 9.7 11.7

3. Total omeotic Credit (1.2) 11.6 30.0 26.2 19.8 0.2 8.2 7.4 s.7 5.5 7.8

4. Total Liquidity (l@) 29.7 42.2 25.8 17.2 7.6 4.4 18.7 4.1 9.1 6.5

/a Percent change over precdiog period.

Source: Bangladesh ank. Statistics Departeent.

Table 6.2ACICULTtAL CRIDST ISeD BY MAJOR CEDT tNSTIUTICNs. 1977/78-1988/89

(Tb cro,s)

1977/78 1978/70 1079/80 1980/81 1981/82 1982/83 1983/84 1984/85 1965/86 1986/87 1987/88 1818/89

Corearcial Senks /aShoet-term *gic.Itural loen 76.7 64.8 87.4 103.8 95.0 148.0 288.1 349.0 184.2 156.3 227.20 199.65

Other agricultural financing /b 0.5 0.5 1.0 5.7 11.4 45.0 77.1 103.6 50.8 20.0 13.34 10.U

Fisheri_e finaneing 1.1 8.8 2.7 1.1 1.1 1.2 3.4 4.4 18.2 5.2 3.78 6.39

Tea production and developant financing 3.5 6.3 6.7 2.8 3.6 2.4 2.7 6.7 6.3 6.0 5.23 5.48

Cold storage facilities for agricultureal 2.6 2.3 3.6 3.6 6.2 4.4 10.8 25.0 13.2 20.8 1S.57 17.68

producteTotal 84.5 77.7 101.3 117.0 117.3 200.9 38I.S 488./ 252.7 208.3 263.1 301.99 d/

eangledesh Kriehi BankShort-tere agricultural loans 18.7 17.3 25.5 73.0 110.0 216.1 329.8 192.8 101.8 143.3 144.43 126.39

Other agricultural financing /b 16.0 25.8 68.9 66.7 92.7 I20.3 108.3 312.2 137.6 106.6 114.46 172.47

Fisherioe financing 1.4 4.0 4.8 7.4 7.0 12.1 24.2 15.5 10.4 5.2 6.23 4.79T

ea production and deveopant financing 17.9 24.8 41.2 S8.0 88.3 45.9 33.3 81.4 100.6 92.7 99.3S 110.61

Cold storage facilities for agricultural 0.2 1.3 1.7 4.7 6.1 6.5 6.9 13.0 14.5 18.1 14.72 25.89

productsTotal 84.2 73.2 142.0 209.7 271.0 400.8 592.4 614.7 35.1 364.9 /c 379.2 440.35

Bangladesh Sm_bays SankShort-tere agricultural loae 13.1 16.6 22.5 20.7 13.7 19.0 18.0 28.0 9.6 12.9 11.4 13.32

Other agricultural financing /b 2.7 3.8 3.1 8.0 3.7 3.a 8.3 5.3 4.4 4.2 2.51 4.13

Total 13.8 20.1 25.6 25.7 17.4 22.5 21.8 20.3 14.0 17.1 14.0 17.65

Total by loan typeShort-tare agricultural loae 108.5 98.7 I35.4 197.6 21I.7 388.1 683.9 564.6 275.8 $12.6 363.1 840.0

Other agricultural financing /b 19.3 29.9 72.9 77.4 107.7 168.7 276.7 421.1 122.8 12.6 130.31 135.73

Flaherie financing 2.5 7.7 7.5 8.S 8.0 13.4 2V.I 19.6 28.6 10.4 10.01 11.18

Tea production and dveloeant financing 21.4 81.1 47.8 60.7 59.9 46.0 36.0 88.1 107.1 08.7 104.61 116.09

Cold storage tfallltlee for agricultural 2.9 8.6 5.2 0.8 11.4 10.8 17.2 38.0 27.7 38.9 20.29 43.77

productsTotal 154.6 171.0 268.9 382.3 40S.7 624.2 996.3 1131.7 681.6 890.3 /c 656.31 610.49 */

Of whih: Choannelled throuh Cooperatives Under

8angledeh Rural Development BoardPaddy 10.2 11.8 19.1 23.8 24.0 89.2 289.5 130.2 57.1 48.6 65.71 41.19

T. Amn 3.3 8.4 3.1 7.1 7.3 86.4 9.6 S120.2 18.5 10.0 20.60 5.53

So.o 4.8 4.5 8.8 11.5 13.2 168.9 96.5 0.0 3S.1 31.2 36.S1 32.28

Aua/B. Amn 2.1 S.3 5.5 5.1 4.0 168.9 96.5 0.0 5.5 6.4 6.80 3.38

Wheat 0.2 0.4 0.8 1. 0.9 0.6 33.2 0.0 0.7 0.4 0.27 0.20

Potato 0.4 0.6 0.6 0.8 0.4 8.7 0.0 0.0 1.6 1.1 0.63 1.20

Total 10.9 12.2 20.5 25.6 28.8 406.5 322.8 120.2 89.6 48.1 65.61 42.59

(p) a Provisional.

/a Includes refinancing provided by Sonali Bank to TCCA&/KSS. through the IRP/RD8.

/b Includes agricultural tare crodit as .all as financing for arketing. trnaport and agro-industrias.

/c Include T7k 54.28 crore under 8NK and Tb 22.67 crore under Rejahahi Kriehi Unnyan Bank for which breakdown by typ of loan is not available.

/d Including Tk 82.26 crore didbured by 8O,. for which breakdown is not available.

/* Including Tk. 46.50 crora disbursed by RAKJO for which braakdoen is not available.

Sources: Bangladesh Bank, Agricultural Credit Dapartant: Bangladesh Kriohi Bank; Bangladesh SaabDya Bank. Ltd.;

and coaercial banks.

-198-Table 6.3L.OAN SA,CrtZM ST O&Gvg.Me PDwa5 P6UTvrTo. lp7psalgs/gCi" 0rora)

1977I's 1676/7 1679/60 iWO/SI 1901/69 1909/ 19115/84 1554/6 190/se15 H66/ 1967/6 1go/s,

A.- eSJAIO.J SIILPA 6M6 (NM5

Loan* sanctWioedFood and allied puroducte 9.2 6.3 26.6 46.5 20.8 0.5 0.4 1.0 0.5 0.1 0.2 1.4Spacialiced tentilea end handlgee aneetr /a 13.1 10.6 28.4 43.1 41.51 2.5 15.5 45.61 66.I 15.9 35.6 65.5Paver, board. spinting and sub$ taking /b 4.5 4.0 10.5 10.5 4.0 0.0 1.0 0.4 0.6 0.5 2.5 1.6Tann.ery, leather and rubber int6aarioae 0.0 2.8 5.5 10.6 1.2 1.2 1.2 4.0 15.2 1.4 2.1 1.6

Chamicala. share. and allied induaitrie. 3.5 1.4 10.4 10.4 6.0 0.1 12.2 0.2 5.5 6.6 0.0 7.6Engineer'ing lndlumsrele 1.1 '.5 18.0 18.6 U0.S 2.6 2.1 6.6 2.4 3.8 3.3 al1

Non-Natallis ainerlst /a 0.2 0.0 1.1 2.5 0.0 1.8 0.1 2.5 1.1 0.2 8.7 0.1M.acehla.now induatrlae . 0.0 0.0 0.0 0.0 0.6 0.1 0.5 0.0 0.6 0.2 0.4 16.6Sub-total 81.3 32.6 97. 1 142.0 97.1I 6.2 21.6 611.0 97F.0 72.5 45.9 117.6

Service induatrisa /4 6.4 17.6 12.1 16.6 12.1 0.7 0.8 0.5 2.1 2.0 3.1 2.6

Total UAnctiona 39.0 50.2 106.2 156.9 106.3 6.0 22.4 4U.3 96.1 78.8 62.0 120.2Private "aetor 34.5 46.4 102.6 156.9 106.3 6.0 22.4 40.3 66.1 75.8 52.0 120.2

PubIi c aector 5.3 0.6 6.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Total Dioburaeeete 11.8 26.1 35.2 82.4 64.64 62.2 86.6 U.0 12.2 27. 30.6 45.6

Fpd-fi aca .ear Rataurce Poeation

Po'fign CUrrency ftAaeurOa (U116 Milln)

Reaouirc*a available frow aid asreewete 30.6 56.6 60.4 104.6 94.4 U96. 65.3 46.7 75.6 65.5 U6.. 56.8(. 0;ab,,raaaEte 4.1 11.1 12.0 15.0 17.6 U.S 11.6 7.7 2.5 7.0 7.0 9.4

Resources available for diaburaeeet 26.5 47.5 48.4 66.6 76.7 72.9 65.83 41.0 71.3 WS. 59.7 46.9(. Funda Comitted but not yet, disbursed 11.0 18.1 17.1 321.5 40.6 8W.1 62.6 16.9 321.7 18.8 27.3 12.0Resourceseavailable for comltant 18.5 32.5 5.8 533 7.5 85.7 85.5 30.6 2.1 15.6 40.0 32.4 87.6

()Canceillation A wiltdrmaels 0.0 0.6 1.9 8.5 2.6 2.1 2.5 0.6 .8.--)Aegrovala not yet comitted 6.1 9.3 32.0 47.9 64.1 81.0 12.1 24.6 Oa.& 20.1 6.6 25.5

Ftoregn Currenc" reajurca avail, for, approval 9.4 22.6 0.9 14.0 -25.7 0.6 21.0 1.2 11.6 19.6 22.6 12.4

Locsl Cuprornc.e auncee" (Tb Ciror.)

Cash an hand/in banba 15.1 18.7 27.5 19.2 11.1 891.7 87.6 74.2 90.6 104.8 180.6 191.5W. Nwanc as call 37.0 27.2 14.8 7.6 11.0 0.0 I16. /0 0.0/ 6.0 /a 4.5/a 8.0

()Reserves ON dasceit 10.1 10.6 18.0 14.2 8.0 4.8 8.7 6.8 6.7 a.5 8.5 9.5C.)cmeitenta& A 0r1ova,la 110 yef dieb. ". 16.9 2. W-.5 'I'S 30.1 65.1 32.0 27.1 32.0 27.0 15.3

Local currency rometenuc avail, for diet. 65.4 18.1 2,4 .25.7 -10.9 5.2 518. 45.7 U.S 66.7 104.1 163.7

e. eAMAJCM SIILPA RMD $0114STWA (MO6) /f

Loana sanctioned1Food end alled oradugAte 9.7 6.6 26.1 10.0 5.4 0.9 2.7 0.3 1.0 0.2 11.7

Soeelal la" teAtllIeseand bandies. aeafr /a 18.5 11.2 12.5 16.0 0.5 1.1 80.6 0.6 10.3 0.0 67.6Pager, board, printing end gubllelling /b 0.6 0.4 0.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 16.5Tannery, leather and rubber Industrisa 0.0 0.1 1.6 0.0 0.4 0.0 0.9 0.0 0.0 0.0O,e.icale, share. end allied lnduatrie. 2.0 1.1 17.51 7.6 1.9 5.2 1.9 0.6 0.9 0.0 75.7Engineerins induatrlee 1.0 6.1 2.2 10. 0.6 8.5 0.0 0.1 0.0 0.3 5.6Nan-Metfallic cinrala /e 0.0 0.0 2.2 10.8 0.0 0.0 4.5 0.0 0.6 0.0 36.5Miscellaneous Industries 4.8 0.8 0.9 1.8 0.0 1.5 1.0 1.0 0.0 0.2 4.1Sub-total 85.9 26.2 62.7 65.2 5.7 6.6 62.5 2.5 12.8 0.7 240.9

Service industries Id 0.0 10.4 20.0 4.6 0.0 4.4 0.2 1.6 0.4 0.0

Total Sanction 1504 89.6 52.7 66.6 6.7 18.9 61.7? 4.4 12.7 0.7 240.0Private "actor 85.6 86.? 52.7 67.8 6.7 6.6 60.1 2.6 12.7 0.7 240.9Public aector 1.0 0.6 0.0 2.8 0.0 4.1. 1.6 1.6 0.0 0.0

Trotal Oisburseaiwu 11.0 21.6 45.8 15.2 35.7 45.6 42.4 19.7 5.9 5.2 S.0 85.5

/a Includes jute and alled fibere./b Includea foreetry and wood producta./c Includee Olson and ceramica./d Includee Inland eater and read tAranagot. cinaeaa. hotal., and clinica./. Include emountb inveetd in the Cloverneman aecuritica./f Nat of subeasuentb Cancellations ed adjuawteot.

c.. es aa

Table .4tWO0l. DVmt JtAS ON SEU1:T SAVDIN0S DWMIN fS. Aul 1977 - Aulwel 1968(percent per _ana.)

Aug. 197 Oct. 16. 1960 . 1965 Sept. 1965 July 19 Set. 1987 Augt 196

Scheduled Books, ogpmmt Note.:Special Itbtte Account. 4.0D 4.60 4.S0 4.S0 4.50 4.50 4.60

Saviag Accaunt. with Checking 4.50 8.0 8.6D0 6.60 8.50 9.00 /a 9.00Riead Oggosit.:

Thmre ethl to uner sIn anthe 7.00 12.00 12.00 12.00 12.00 12.00 12.00SI intke to nder e. peer 7.60 15.00 13.00 13.00 13.00 12.50 /b 12.501e peer to uner two years 0.25 14.00 14.00 14.00 14.00 13.25 /b 1t.25Too wper. to nder 11rw. years 9.26 14.50 14.60 14.60 14.50 13.75 /b 13.75

Three Jeer. and over 10.25 15.00 15.00 1.00 18.60 14.25 /b 14.25

Pbet Oftice Saving bedI Deposit Rate:Otdinary Deposit. 8.60 11 .S0 11.60 11.60 1l.S 11.60 11.50

Floed spomit.bte yeer to undr two year. 9.20 15.00 16.00 15.00 15.00 15.00 15.00

Teo eJer. to under three peera 10.20 15.60 16.60 15.60 1t.60 1b.60 1S.60Three pee. mad ever 11.20 16.00 16.00 16.00 10.00 16.00 16.00

SDve neon brroswingTrem_ry ills 6.00 6.60 6.6D0 9.00 9.00 8.00 6.00

Too Tra*ury 1t I1* /g 7.00 9.60 9.60 - - -

Wyas n N"ns. Adc 7.00 9.60 10.60 10.75 10.75 10.25 10.25

Tmo-yer Spcwel Traurj nd /dlaws" at diecoat - 15.70 1ts.70 IS.70 lt.70 15.70 - l-A

leaved at par - 14.20 14.20 14.20 14.20 14.20 -

Savinr Certfictee:Eith"per Defenee Savinr. Certifleate 15.00 21.00 21.00 21.00 21.00 21.00 21.00

Sti-peer SwAn SeA i. Certificate. 16.50 22.00 22.00 22.00 22.00 22.00 22.00

Fivepea Va Earera eveblopment Band / - 2s.00 2t.00 25.00 2.00 2S.00 2t.00

Fivte-r Saving. teoits 12.20 22.20 12.20 16.00 16.00 18.00 16.00

/a 10.06 for rurel erase./b Effective frm Janurpy 17, 197.

/c Sine, roeaid by Aigust 1965.id vWth. effet f4 -February S. 1984 and repaid by Jun 1966./e With effect frm February 24, 1961.

Source: Sglodesh Bank. Reaerch Depertmnt.

T*bl 6.6momL Dlt w1e2 amS D N, Amt 197 - Augt 19ow

(Ct n er pp )

Amg. 197 Oet. IS, 16o Jan. 1965 Set. 1965 Jilp. 1IS6 Sot. s1w A". 196N

BOe at e (eas,lodeeb Seek. leediug WA digmmst rate) 8.00 10.50 11.00 11.25 10 75 10.71 10.75

eduSe Seeks Inters ate. an Loes md Advances-- _ot aedi4 for traditiosal item /a 10.S0 12.00 12.00 12.00 12.00 12.00 12.00

- ort credit - ser-traditlml ites lb 10.S0 0.00 9.00 0.00 0.00 9.00 e.00

-tmo credit an three Nos-troditl 8oelsie, /c 10.80 0.00 7.00 7.O 7.00 7.00 7.00

- Agriculture (tredtles) lsciedise foriestr md f isery la - 10.00 16.00 16.00 16.00 16.00 1u.00

-Iedsarp 11.00-2.00 14.00 14.50 12.90-14.150 4~.0014.00 9.00-14.00 0.00-14.00

- Insry In em deeloped erie. 11.60 18.00 18.00 18.00 10.00-13.50 1O.00-1.50 10.00-18.60

Lamm foee cmtrmtlmn of houe.:- s rnrel *rgg 5.00 8.00 5.00 5.00 5.00 5.00 5.00

- i urban seem 16.00 16.00 16.00 16.00 16.00 16.00 16.00

- Special cedit.: - _.. ives vn teo spanel ciC Zone of

Chi tag.a Hill1 Tr7cto region 11.00 8.00 5.00 5.00 5.00 5.00 5.00

- m1l los m. speciael relt foermlt groer. *elf-esploysint. etc. /* - 15.00 13.00 18.00 13.00 15.00 15.00

- Advs for Internial trading pu e - 15.0 1.00 16.00 1.00 16.00 16.00

Ilud"e Jte. Jut. good. ad loe. tee.hb Inclue pact too and jute cer*t.it Nearly I tIGt "gtiering mad electric good. hendicraft. and hndloeo product.Id Iscude. service charge. The rate a 12 ri up to Septister 30, 196. Thoreafter service chorge at 4T over the rte of 123 on short tire

lows snd * rice crelap at 35 over the rate of U18 on other term lose. are sopl Ied with offect froe October 1. 1983.

/a Serice chonrg t St ever the rate of 13 are applied with effect from April 1. 1964.

Source: Bangladesh Seek.

Tble 7.1 -201-LA W E11 5f AMPA. 1981116?9(thousand Nectaedr)

.__________________________--_-------_ ----------- _-- -------------.- - - - --- .------------------ ----- __..___________-

..-. .Land area and claseifiatio..n.. ... ..--.-- . - Lnd Iusn-----------------------_Total MD% Cdti- Forgetl Cultivable CuSin-s 1 Current Not Cftersd Single ouble Triple Q,ac Crossed

Distr.it Arp. ea.bl /a Area /b bbe Weset* falimne Ares IG CrO.ppd Croped Crosed Ar.. /d- -_ __ -- - - ---------- -- --------- -- -- - - ------ - -- - --------- ----------

Dinsipur 666 114 11 540 1S 20 S07 4t 140 21 seeet 228 73S tO 12 711 206 42 i 77 12S

sogr* S el 0 2e6 0 4 24 67 161 u 567Rejohahi sOU 216 a 730 9 1s 7oo am 149 2S 932Punas 491 1O 0 S7x i 3U 857 1 173 St S62

Kua t;a 549 so a 291 0 2s 265 t10 lS 17 43leawrn, en 143 0 513 4 5 604 an 159 20 703Khminu 19 161 575 443 1 A 430 321 97 20 575ea;ail 7r 20 17 497 13 S 041 26 154 41 717

Patuablsi *75 131 17 327 6 S 316 19 115 14 457

Jamlpr Ss7 so 7 271 6 4 261 s0 170 41 S1SMyesngh 410 64 1S 331 1 1 329 47 242 40 851T ngeil 542 41 43 256 2 2 254 11 40 40Dhaba 721 10 26 535 4 25 S06 to0 265 62 696Fer;idur 691 179 0 512 0 5 No 240 199 46 6s5KAortsnj SSS 155 1 481 11 52 SS 16O 250 25 644

5ylket L'0? 512 91 04 to 89 747 435 60 S2 1091COaMltM see 120 1 54 2 21 152 211 a S asPbeble Ii s5 65 as 420 3 32 35s 17n I 43 nojChittcswe 7" 17U 215 56 17 46 295 152 10s 33 476ewadrbak HT. 43 6o 273 95 St I so 2 9 a e WegrXcasi 14.!. 270 es 9 so 9 1s 34 24 a it 4uItAnge H.T. a1 60 d2 49 9 6 t4 24 S 2 46

Total 14796 3294 1too? 951 217 394 665 45343 5719 7 m 14117

_______ ............................................................. . ................................. ......

. .AreS Irigate-----.

-- Croppins ntensity-.- Pumps and other Total tIeigationA/e I/f C/o Yubaewl I NetNode/ Pe c "t/i

Dlnejure 1.56 1.31 1.25 70.0 12.0 t2.0 16.2Rangpvc. 1.32 1.79 1.76 141.0 69.0 210.0 20.6oer 1.1114 1.t4 1.U 4 102.0 12.0 136.0 4S.0bajdhafI 1.2? 1.25 1.24 149.0 47.0 196.0 26.6Pabsn .7 1.71 1.70 66.0 9.0 76.0 20.2

Kuoctia 1.64 1.51 1.51 71.0 411.0 119.0 40.94.eore 1.69 1.36 1.37 69.0 n 2.0 U116.0 2S.0hlals 1.511 1.60 1.30 16.0 15.0 61.0 7.0

Beletl 1.49 1.46 1.44 15.0 2.0 47.0 9.5Petus hall 1.45 1.42 1.40 7.0 5.0 10.0 3.1

Jl.s.pt 1.97 1.94 1.49 76.0 5.0 66.0 s0.6lwruesalng 1..96 1.97 1.97 68.0 7.0 90.0 27.2Tangpi 1.7 1.76 1.74 6.0 6.0 U.0 56.1Oeb. 1.77 1.66 1.67 122.0 16.0 1116.0 25.6PerldgUr I1.16 1.SS 1.65 46.0 5.0 60.0 9.6Kieleore j 1.6 1.5t5 1.49 127 S 172.0 e.

hIs t1. I46 1.61 1.21 1.0 102.0 L95.0 21.3Caomlle I.41 1.62 1.61 11.0 32.0 170.0 61.0Ple btll 1.62 1.49 1.36 30.0 6.0 36.0 6.6oltt t"one 1.61 1.39 1.32 93.0 51.0 144.0 40.0Sanderban H.T. 1.59 1.10 0.5O 1.0 3.0 4.0 4.2

Khgretearl H.T. 1.56 0.94 0.79 - 4.0 4.0 6.9Rangeat N.Y. 1.&S 1.1S 0.94 2.0 3.0 5.0 10.2

Total 1.5s 1.53 1.4S 1641.0 536.0 2199.0 26.1.... __ ............. . ..................................... . . ..................

Is Ri.ers, tidal craes, 1she. onda. road*. buildings, hoeseteds, etc.lb Total or" eaet of not cultivable ares end foroats./c Arearoped at leto once during the jSer./d Sum of sindl* ar"oped area vivo 2 a double-crossed a.,re.l 3 * tr.Oipl.croppsd ares.e Ratio of froe opped ees to not cropped area.fRtio of of croped ares to ne crossed r*te* pi e& c.rent follows.

Ratio of gre" crossed *?ar to cultivbl*e srea./N Ares irrigated by gravity apten. canals and traditional _etbods (such as onei-a baSets, dome. tc.)./1 percenta a of cultiveble see irrissted.

SOUrcesw B SglaSdea bureau of statstics and stef OetWeatee.

Table 7.2FPM St= PAYT4 Ale ULeLUS. 19110-191511101

19160 1977 I96/84

lurcentage of form by fare also (ha)

up to 0.40 24.0 15.9 40.00.41-1.01 27.3 33.6 26.01.02-0.04 37.7 40.0 24.7

above 3.04 10.7 9.4 4.e

PorcentFg of lend operatse by form siz. (be)

up to 0.40 3.2 2.7 7.00-41-3.01 12.9 16.S 21.21.02-3.04 48.7 48.4 48.1

above 0.04 00.1 82.7 26.9

Rural IlminaMoIde Clow) -

Tote! 629 10671 13616

Far. III" a"5 10046 Non-Farm 2100 4814 a7

Landles 210O 4t14 0770Ner Landlo /a S40 042 2417

Subtto l 2900 498 61u7

/. Owning le" than 0.2 he.

Source.: Agraoultur.l Ce" Reports. IMo and1977. and preliminary *timat af1966/0.

-203-Table 7.8AREA E MAIN CPS, 1980/81-1988/9(000 hectares)

1980/81 1981/82 1982/6S 198//4 1984/85 1985/66 1986/87 1987/88 198/89

Focdgraine 11144 11240 11:56 1156i 11307 11094 11325 11035 10785- Rice 1040 1069S 10823 10784 104S2 1O899 10609 10323 10225

(Au*) 8181 m216 3229 8209 S004 284S 2904 2789 2684(Amon) 6172 6146 6126 6142 5eS9 6020 6058 5591 5102(Boro) 1188 1lSS 1465 1483 1610 1684 1652 1948 2489

- Wheat 604 a6 581 58 691 540 Ws 697 564)- Other Cereals /a 18S 168 1SS 11 115

Pulses /a 808 784 744 717 738

- Crew Ilt 109 104 104 lOS- Kheari 242 244 232 222 2S1

- fMhknlai 84 75 69 66 70- 4sour 240 233 223 213 217

- Hatar 24 2S 21 21 20

-Mung 60 60 59 57 B8

Oileeeds /a 607 597 S59 564 546- Rape and aatard 864 365 S70 843 318- Ti 1 102 a8 92 65 82

Croundint 82 28 30 80 89-Lin.e.d 77 68 6 74 75-Coconut S1 81 81 82 S2 32

Fibroo 657 601 610 612 705 1075 785 124 60- Jute 649 S84 90 594 691 loss 772 612 54S w- Cotton a 17 20 18 13 17 13 12 17

Druge & Narcotica 147 151 149 148 147 145 139 142 141- Tea 45 46 46 46 46 45 46 47 47- Tobacco 58 56 5S Ss S8 54 46 47 46- Betelnuts 87 86 aS SS 86 84 84 aS aS- Btl leaves 12 18 is 13 13 12 1S 1S 13

Spuice 127 138 18 182 131 125 122 124 125- Rabi chilleie 69 71 71 71 68 63 60 61 62- Onie 81 84 34 54 35 84 83 34 34- Garlic 1S 13 13 13 is 13 18 IS 13- Turmeric 14 1S 14 14 1S 1S 16 16 16

Tubers 174 176 18O 179 177 165 157 174 163- Potato 104 108 1l1 118 114 109 106 123 111- Sweet potato 70 68 67 67 6S 86 51 51 U2

Sugar Plants 168 176 181 182 178 170 175 182 181- Sugarcane 152 165 170 170 167 160 18S 173 172- Date pal 11 Li 11 11 11 10 10 9 9

Fruits 121 126 17 125 124 2 124 129- Banana 41 48 44 48 41 40 41 41 38- Nango 45 46 47 46 46 46 47 49 n.e.- Pineapple 1S 1S 1S 14 14 18 13 14 1S- Jackfruit 21 21 22 22 2S 29 28 25 25

Vegetables- Orinjol 28 29 29 29 27 2b 26 27 18

Total, *1I crops /b 14755 1417 14446 14S26 138

of which: crops hown /b 14S28 14178 14257 14134 13621a IIother& 0 a 0 432 242 191 192 267

/a FP84-88 data for other cereals, pulse and ol lada have been revied. Co.paable data forearlier years are not currently avai lable.

/b Due to roviloie noted above date for P781-83 ore not shon.

Note: Crops with la" than 10.000 he average not shown sparately.

_ _-^ of

Table 7.4IMIOATION S"ARY, 1980/81-1987/88('000 hectare.)

------------------------------- _.-_-------------------_-------__-_-__---------__----------------------------

1980/81 1981/82 1982/83 198S/84 1984/5 19685/86 1980/87 1987/88

9V METH0D

Nodarn sthod- 1033 1130 140 1334 1560 1572 1642 2390Tubewells 227 277 421 6S? 879 963 982 1467Low-lift pups 681 720 763 667 68l 609 So 527

0WDB gravity scheme 125 1S3 166 172 14S 149 199 896

Traditional methlad, 64 634 U49 586 513 526 S57 85mSwing-ba*ket 85 88 87 84 79 64 94 n.a.Doons 377 364 300 2S8 184 170 179 n. P.Canals 28 34 8 134 147 163 155 1tSOther 158 148 154 1SO 108 109 129 n.a.

Total, not 1676 178 1889 1920 2073 2098 2199 2743of oh i ch:

modern (S) 61.6 64.1 71.0 69.5 75.8 M4.S 74.7 87.1traditional (v) 38.4 85.9 29.0 30.5 24.7 25.1 26.8 1S.9

BY CROP

Am& 122 116 i 28 145 141 145 164 119

Amon 144 1tlY 19 ISO 6 190 190 160 -Sore 1025 10s5 1165 198 12S 1259 1363 1678

Wheat 19" 194 18 214 283 267 264 196Other coreal 4 5 4 6 3 a 3 a/

.Alee 6 S 2 2 3 4 3 a/Oilseeds 5 4 5 7 11 12 it 18Potato 78 79 78 74 70 68 68 57Vegetables 44 48 51 44 49 Ul 57 34Sugarcane 10 10 7 8 8 11 11 7Cotton 2 2 8 7 4 3 4 -

Other 47 s0 5S 86 60 es 61 79

Tota l gross 1676 1764 1889 1920 2073 SiO3 2199 2S48

Error- and oaimisons 0 0 0 -39 1 0 0

IRRCATE AREA AS PCRCE4T OF TOTAL AUA UDER PARIOAAR CFOP

Au- 8.8 8.6 4.0 4.6 4.5 5.8 5.6 4 8Amn 2.8 3.1 3.2 2.8 2.7 3.2 8.1 2.9Obro 96.1 60.0 79.5 88.5 81.6 82.1 82.5 86.4Wheat 82.9 85.5 37.3 40.7 41.9 49.4 45.1 32.8Other cereals 5.9 7.2 27.3 3.9 1.8 1.9 2.3

Pulses 1.4 0.8 0.6 0.2 0.4 0.5 0.4 n.a.OilIe*ds 1.6 1.4 1.6 1.1 1.8 2.0 1.9 3.3Potato 70.0 72.5 66.4 67.8 63.1 62.4 U4.2 46.3Vegetables 86.9 36.1 52.0 32.4 85.6 87.6 39.3 n.m.Sugarcane 6.8 6.1 8.9 4.8 4.9 6.9 6.7 4.0Cotton 22.7 14.0 16.8 41.2 38.4 17.6 30.8 -

Source: Bangladesh Bureau of Statistics.*/ Included under eothereg

Notes Irrigated area and percentae of total ares under a particular crophas been changed due to the Agriculture cenu. 1983-84.

Table 7.5FUELIC SECTIR IMICATION PRD0aw6. 1980/81-1989/89

1960/61 1981/82 1982/83 1983/84 1984/85 1985/86 1988/87 1987/SS 1988/89

AREA IRICATED 012 MM SOOE ['000 5 TARE;JCravity Schemes 182.7 130.2 152.8 172.5 149.7 172.4 198.6 395.9 /a 406.7Oa" Tube W 11- IaIWaTW 4.7 8.4 10.7 10.4 6.3 4.5 8.3 3.4 3.8tow Lift Pumps E.Pu] 3.9 4.8 8.7 8.2 5.9 2.8 1.9 2.1 2.7

Total 131.3 136.4 170.2 191.1 161.9 179.2 209.8 401.4 413.1

BAOC IRMATION PRWWS

LOW LIFT RIWS ILLPaJNumber fielded 36049 41884 4809 4861S 50681 51242 55897 58832 72684Avg. CuGsa per pup 1.80 1.71 1.82 1.65 1.85 1.65 1.65 1.65 A.SAvg. area irrigated per cusec the] 6.7 8.2 7.1 9.6 9.1 9.7 9.7 9.7 0.7Total or" Irrigated ['000 ha] 565.7 S75.9 552.8 417.4 489.6 497.8 6Y8.2 68S.8 70S.1

S4LLW TUI we AS iblwo II a unli 10900 20666 17988 6929 7678 964 118O 6281 2465Vol Is cat-misoned 16091 20617 1902 6919 7500 964 1776 6281 12465Vollo in operation 2091 42148 6450S 71427 78927 79891 81667 67203 9658Total area irrigated [low ha] 101.4 206.7 805.4 321.4 823.6 311.6 818.5 340.1 988.7Avg. area irrigsted per eil (bea 4.8 4.8 4.7 4.5 4.1 8.9 3.9 3.9 3.9

OEEP TtiE W.LS pW1Y.wel win 12 9 2085 2691 2406 1527 1295 1487 1253 38 96Well- cemloisoned 668 1310 2S2 2U8 1987 1410 1471 1S1 2171Wells in operatIon 10131 114b6 18794 11 169 17888 1744 216C8 23640Total area rrigatedJ r000 ha] 265.2 311.5 413.7 415.5 441.2 466.7 868.0 421.4 472.8Avg. area Irrigated per well I N 26.2 27.1 80 0 26.8 26.1 26.1 20.7 Me4 C 0.0

b WMAES KRIM OMZST`. fielded 5714 4510 6116 11762 86S 4062 A2M 16" 282

HAD TIU WIL QGlJCooerative. tl1CA involved JD 21 131 261 78 159 ) 23696 n.a. .&.PUSTI distributed 4187 2145 SOO00 6980 48480 S801S I

/a Includine a totel of 225.s00 heture irrigation of F.C.D.I. 1m aces and ater cotrol structures.

Note: Coeparieon with 1S data uggt that date for tube vil and ILP acreas irrigated my be overreportedby Iapleanting gencies.

Source: Bangladesh Bureau of Statistics. Bangladesh Water Development &ard. Bangladeah AgriculturalDevelpment Corporation, eangladesh Kriahi Bunk. nd Integrated Rural Developmnt Program..

-206-Table 7.6

CW4MECIA1 FERTILIZER OXSThIIBUTIN SY TYPE SM RECION. 1980/81-1988/69(OO metriec tans)

1980/81 1981/89 1982/83 1983/84 1984/65 1985/86 1986/87 1987/88 1988/89

By TYPE

Urea 560.6 518.8 629.1 708.1 831.8 794.9 916.1 1028.5 1135.1

Triple sup.r-plosphat. [TSP] 218,4 208.5 206.0 260.7 345.7 297.4 335.7 389.8 416.0

Oi-anonium phosphate [DAP] 41.3 48.5 73.2 98.8 0.4 0.1 65.9 0.0

Nuriate of potash ENP] 45.8 44.8 50.4 68.2 69.8 59.9 0.0 86.0 94.2

Hyper-phosphate HP] 2.8 0.4 0.1 1.0 0.3 0.2 0.0 ) 0.0

Super phosphate ESP] 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1 0.0Assniu.m eulfte [AS] 0.0 0.0 0.0 0.0 0.0 0.0 0.0 c 6.4 C/Potassium sulfate [PS) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 ) 61.6

NitroPhoaKa [NPKJ 10.5 7.5 8.8 0.2 10.2 0.0 0.0 ) 0.0

Tripl phosphate (TP] 0.1 0.0 0.0 0.0 0.0 0.0 0.0 c/Zinc sulfate and owy-sulfate 0.2 0.8 o.s 6.7 1.2 0.7 1.4 1.8 2.8

Gypsum 0.0 0.0 0.4 1.3 1.4 8.3 2.8 1.4 C/

Total 6s8.? 82t.3 068.4 1129.0 1260.2 1166.4 1320.9 1513.9 1709.7

BY REGION

Rajahahi 268.7 252.1 304.3 390.8 404.1 390.0 454.4 510.6 S44.S

Oinejpur 45.9 40.0 52.1 a8.7 79.2 57.4 6e.3 89.3 102.1 r

Rangpur 57.0 5. 63.4 W 85S . 4.1 ;a 98.8 92.6 97.1

Boors * 70.8 71.1 74.2 91.4 4.3 93.1 113.3 100.3 118.4

RaO;shi 59.6 5S.2 65.9 87.2 94.0 80.4 96.2 93.6 106.9

Pabna 35.3 33.4 48.7 58.0 1.8t 75.8 80.8 134.8 120.0

Khulns 132.3 116.6 127.2 186.3 188.9 1i8.8 200.3 258.7 314.3

Kuahtis 43.3 37.1 38.3 51.7 60.6 55.4 60.8 78.6 88.8

jes"ore 41.3 39.6 41.2 55.2 66.6 52.9 68.8 79.8 64.0

Khuins 16.9 15.0 17.5 19.8 27.8 28.1 29.4 51.0 109.1

Barisal 24.6 20.0 25.2 24.6 27.7 25.3 33.5 38.9 43.1

Patuakhal 6.3 4.9 7.0 5.1 6.2 4.9 8.3 10.4 9.3

Dhaka 241.2 236.5 274.5 313.5 365.3 512.8 360.6 407.1 419.5

Jsmalpur /a 24.8 29.9 38.3 42.1 43.0 47.S 53.2 56.6

tym.nsingh /a 108.8 70.7 87.2 93.7 118.3 100.4 122.2 131.4 111.4

Tangail 35.8 37.7 46.2 40.5 50.5 41.2 51.9 44.2 56.8

Ohaka 82.0 87.6 91.3 108.1 113.9 139.0 107.9 141.6 155.1

Feridpur 14.7 15.7 20.0 24.9 30.5 29.2 31.1 36.7 39.6

Chittagong 247.0 224.1 262.4 268.5 311.9 247.0 305.6 337.4 270.7

SyIhet 26.9 25.8 29.7 37.9 48.6 35.3 43.3 S4.5 45.9

Comilla 121.7 111.2 125.0 121.5 127.? 10S.4 1U4.6 147.4 110.6

Notkhsli 33.2 29.0 28.5 26.7 39.4 34.7 44.9 57.1 48.0

Chittagong 60.7 58.1 75.5 74.7 85.2 68.0 71.8 65.4 50.6

Chitt5geng HT 4.5 5.0 3.6 7.7 13.1 1.6 11.0 13.0 15.6

Total 889.2 S29.8 968.4 1129.1 1260.2 1158.4 1320.9 1513.8 1709.7

/s Jamaapur included in Mymensingh through 1980/81.b/ Including PS. TP and other types of frtilixer.c/ Included under PSd/ Including 160.7 thousand Kr sold directly by sCIC.

for which district-wis. breakdown ;i not available.

Table 7.7

PROOWTION OF MAIN CROPS. 1970/75-19680/80(thousand metric tons except as noted)

FIVE-YEAR AVERACESi ----------------------------- ANUAL DAT----

70/75 75/80 l 1980/81 1981/62 1982/83 1983/84 19'd4/85 198S/66 1986687 1987/68/b 1988/89

Foodgrsine 11055 13101 15026 14648 15321 16SS5 16210 16189 l6590 16547 16566- Rico 10872 12615 l 13882 13630 14216 14508 14623 15039 15406 15413 15544

(Aus) 2670 3138 l 3289 3270 308 3S222 2?e 268 3129 2993 28MS(Aan) 6075 7337 l 7963 7209 7603 7953 7931 6540 8267 7689 6857(Soro) 2128 2140 l 2631 3152 3548 3350 3909 3671 4010 4731 5831

- Vheat 109 429 1 1092 967 1095 1211 1468 1043 1091 1048 1022- Other cereals /b 146 124 10? 93 as

Pules /b 1 527 534 496 467 515-OCrm l 86 81 77 82 75

- Khsori 1 170 183 167 164 182-Mashkslai I 60 aS 48 43 52- M, 1. 162 6es 160 149 159-Mator I 14 1S 14 lA 14

Rung- 8 9 35 e3 33 35 33

Oitl .ede lb I 4S§ 484 469 430 440- Rape and mustard I 254 26o 261 229 222

rir l ; 5 47 54 4* 49- cround4ut 33 31 34 34 40-Lini ed I 41 87 S7 43 43-Coconut I 63 33 W. ea as 84

F bree

- Jute (000 balae) 5371 5302 1 4943 4646 4881 5216 51l 8488 66et 4603 4436- Csteon ('000 bales) 7 5 1 10 54 56 48 29 26 22 39

Drugs 4 narcotics

- Tea 25 35 40 39 41 43 38 44 38 41 44- Tobacco 39 48 1 48 51 S1 48 50 47 40 42 39- Betelnut. 22 25 l 25 24 24 24 22 2S 22 22 22- Bet l leaves 54 55 I 60 61 72 61 62 61 62 6S 63

Saicas 336 303 1 241 293 251 248 251 246 240 256 256- Rabi chillie 50 46 l 87 43 43 42 42 41 39 41 43- Onion 158 142 1 96 132 140 136 140 136 130 141 139- Carlic 46 40 38 42 43 43 40 38 36 39 38- Turmeric 22 23 25 25 26 26 29 31 35 35 36

Tubers 1522 1648 l 1703 1776 1893 1879 1642 1715 1617 1834 1633- Potato 797 866 l 999 1064 1167 116 1159 1103 1069 1276 1089- Set Potato 725 782 704 692 725 713 683 612 48 58 544

Sugar plant.

- Sugarcane /a 6417 6575 l 6599 7136 7477 7169 6676 6640 6 78 7207 6707- Date palo (juice) 472 376 1 378 379 343 343 312 279 268 221 201

Fruits 1426 1376 1 1405 1431 1260 1161 1207 1207 1226 1243 609

- Banana 56s 5941 652 664 710 671 690 691 703 664 na.- Mango 343 243 l 203 184 199 159 168 1S9 185 160 137- Pineapple 104 141 i 153 1SS 159 136 132 126 135 148 25S- Jackfruit 196 200 l 204 207 212 211 222 229 235 254

Vegetableo

- Brinjal 205 179 1 178 18 187 182 171 167 162 164 116

/a Based on total area and mill fare yield estimates; probably substantially overeatisted.

/b Revised data for 1984-84 period. Comparable figures for earlier years not available.

Source: Bangladesh Bureeu of Statitices.

Tablo 7.6eMU FMRADO DSTRrfU SYS anINs

('000 setrie ton)

--- FVE-YEM ------------------------ DATA---- -------------------------70/75 75/80 0/65 I 1980/61 1961/82 1902863 1983/84 1904/W 2111/66 1996/87 1S1786I 106/9

Opening Stock 256 5§ 09 a 791 40 616 *11 W00 1017 9761 75 1496Omatic Procur ant 100 60 421 1083 102 19 270 34 649 190 376 416Imports 1961 1564 1757 I 1076 256 164 2026 250 1202 1787 22 2137

Total Availability 2538 2510 2991 I 2900 2507 2651 29o9 374 I56 206 4048 4051

stStutorW ratioing 366 419 3061 349 &L2 30m 205 262 IS0 210 169 203Priority cagrOfise la 312 710 451 611 6 648 641 712 467 66 8S5 724tidfied rationing 919 367 379 | 162 491 363 399 465 103 25? 307 354Realif 215 55 1in | 5 75 166 120 452 206 246 6O 615Food-for-Work A Catnl Diglnti 0 239 42? 1 349 370 3S6 441 4Sl 468 4l 468 6itMa.kting Operation/b I 19 471 0 110 0 6I 6 6 40 0 0open mrklt Solo a 0 31 011 0 48 tS1 107 201 129 217 a" 2S5

Total Distribution 1632 1659 2021 I 1i4s 2069 193S 2062 2676 S140 21S20 2495 294

Lbe 12 117 107 106 102 104 5? 159 80 4s 05 146Eaxporte A tp£ y_st In kind 0 0 Si 0 20 0 0 0 0 0 0 0

Cloeing Stocks 472 am so 1249 616 6St 600 1Qa7 97 751 1406 062

/a Includes, e ;.etiul priorities; othsr priorities; large epfoyaers; end direct "toe to flout 0;1i./b lrating operatoic involvo diret sals of gain. to dealers -t eAldiged prices./c OHS in padd ;n rice were Initi.ted during 1961162; sheat 018 bea in 1976/79.

Source: Food Planning and lmnitoring Wit. Ninistry of Food.

1 U EEE* _LII.,.

Table 7.9SEASAL e POF .C FOOtAIN DISTRIWTIN SVST84 OFFTAIE, 197F/81"8/69('OCO mtric toafl)

1LTI-EtR AY889I --------------------------- AMJAL ODTA---- - --------------------mtb 78/S0 80/U8 I 180/81 1981/82 1482/83 1908/64 19U/US 18/81 1986/87 198l/88 1986/89

July 18 1241 107 90 116 7 216 64 92 lI 112AuAust 157 1S8 107 69 181 9 2U4 93 109 219 148Syptg_er 17m 190 I 184 168 198 171 28 1in 151 298 248Oct&ecr 200 28IS 148 249 291 214 286 14 VW0 292 27Novemer 154 18 125 190 17 1 2178 82 18 19" 253 265Decembr 1it 148 1 90 188 12 129 284 118 121 217 238

tamuarp 14t 171 110 18 176 1a 251. 148 197 204 Si$Pabrusri 160 1971 140 914 191 21U 912 16i 220 94 84SItbrch 16o b 961 161 214 Ls7 28 196 1s$ INS 249 829Arl1 118 12 I 160 5 140 277 ISZ ll 243 ;8? 80"Rif 140 8 1 144 182 12 202 122 I8 171 121 288Jiun 141 110 I 121 196 93 183 77 6S 18 76 140

1o.l i6 284 18 9066 L9b 261 22 8W 21 2449 g24

(*9,ithly Average) 18 170 1SO 172 161 1n 214 128 177 208 243

Saurce: Mlnistry of Food and World Food Prorame , Choike

Trble 7.10 -210-AM AM ANAN FPROOICTION BY 0ISTRICT. 170r/756-1989/90(000 metrIc tone rice equivalent)

flVPCrE- AVUA05 ---- - ---- ---- AM" DA ----------- ----------------- T -----------------

70/75 78/60 I 1i8/61 1961/U2 19.2/68 196/U4 1984/68 198/66 19s6/87 1987/86 186t/89 1989/90

Raaihahl 768.6 904.7 1 866.2 930.6 622.7 695.e 627.9 808.2 748.1 611.6 605.0 471.1

OIntjgur 143.3 164.8 1 190.7 163.6 168.4 196.0 196.8 169.9 148.7 14S.9 133.0 82.1Ranepur 301.1 327.9 1 295.9 830.8 820.9 27.5 261.1 290.8 245.3 247.7 217 0 158.7

Boogs 84.1 108.4 136. 1 120.8 116.1 112.7 65.7 64.8 90.9 39.4 31.0 21.0

Rajhlahi 152.6 167.6 1 115.6 164.6 119.6 200.0 178.9 154.6 168.8 103.4 162 0 156.0

Pabno 87.9 11U.8 I 129.6 140.0 100.6 107.7 105.8 108.9 97.4 75.2 62.0 s5.3

1Khuln W62.4 662.8 I 756.0 891.6 878.2 66.6 616.5 601.6 75s.4 669.6 787.0 639.2

Kueht;s 113.6 126.6 I 143.8 127.7 96.9 166.8 159.8 170.8 197.6 209.6 194.0 150.0

je.sors 219.9 25s.4 I 27.9 206.7 178.7 168.0 141.7 166.7 240.4 227.0 230.0 172.1Khuln. 37.9 48.0 j 81.7 46.9 86.4 S8.0 80.2 32.2 37.4 80.3 59.0 46.0Bars al /a 157.3 162.6 1 220.i 148.4 178.0 192.1 139.3 172.0 193.6 263.9 213.0 202.8PatukIs lhiI /b 33.4 45.2 1 76.0 60.0 60.2 62.2 48.0 70.6 88.2 118.6 91.0 66.3

1Dhaka 701.8 650.1 s 697.6 930.6 946.0 986.0 878.7 812.9 673.9 852.4 728.0 680.7

Jlaeapur /c I 137.1 120.2 140.1 180.0 :.14. 119.6 107.5 67.0 70.0 60.6

Fty_nein_h fd 337.2 435.0 I 586.2 878.4 361.6 876.0 430.6 343.5 331.7 366.6 253.0 254.2Tsngail /9 76.0 118.1 I 118. 107.0 111.8 93.6 71.6 75.0 79.1 64.9 64.0 49.6Dhaks 140.8 186.2 166.3 182.0 164.4 19S.6 1u4.6 123.7 143.9 109.0 108.0 109.5Fao.dpur 147.9 143.7 1 123.7 143.0 148.5 160.3 J 07.0 149.8 211.7 224.9 233.0 206.8

Chittagong 637.0 720.4 780.7 771.4 698.9 730.9 6S2.2 609.2 748.0 659.5 736.0 696.7

Sylhet 145.7 167.8 209.4 254.6 203.0 176.4 147.5 168.1 230.2 177.4 227.0 263.2Comlla 179.1 218.1 1 220.7 232.9 237.2 239.6 197.4 160.6 202.3 206.6 209.0 162.0NoakhliI; 147.0 176.1 160.4 145.8 142.1 16.2 148.5 149.6 204.5 157.9 225.0 172.7

ChittegonO 125.6 127.4 1 120.2 136.4 116.6 11e.1 116.8 103.6 80.6 87.9 U4.0 73.2Chittagong H. Tract- 0.4 11.6 21.6 17.2 14.2 11.0 10.9

Ganderban /f 6.9 10.8 13.3 13.3 10.0 14.7

Total 2670.0 6136.0 3 8254.6 3233.4 S804.7 8221.5 2651.3 2827.1 3129.4 2993.1 2856.0 2487.5

AHAN I

R*jahohi 2046.1 2221.1 2491.8 2594.3 2437.7 2594.9 2666.1 2692.2 2513.7 2245.2 2353.0

Oinajpue 405.3 437.7 1 s0. 430.0 461.0 806.2 529.1 846.8 528.1 504.6 624.0

R.ngpur 727.9 787.9 868.6 634.7 866.4 865.9 926.1 930.0 887.8 s68.4 844.0

ogr 319.0 629.6 0 395.4 3ss6.6 862.0 395.6 425.7 445.6 410.1 351.5 326.0

Rajehah; 448.8 402.9 I 524.1 621.9 516.4 560.6 525.4 867.3 810.1 420.2 450.0P-bns 148.2 233.0 I 201.2 230.9 231.9 246.7 167.7 212.6 203.6 100.S 109.0

IKhuln 1067.6 1611.0 tI16. 1544.4 1629.5 1776.0 1697.1 2087.8 1917.5 1942.6 1711.0

Kusht;s 66.7 76.6 1 76.6 69.7 68.2 81.6 107.1 119.0 114.1 128.1 141.0Jeesore 227.7 303.1 I 297.8 271.9 296.8 882.0 322.4 412.6 380.7 361.3 344.0

Khulns 305.2 489.6 816.6 472.8 861.1 628.8 622.7 607.9 497.0 524.0 461.0

Bari"al /a 302.1 428.0 1 462.7 411.8 480.8 483.2 481.0 331.5 546.5 U8.6 4s3.0Patualkhali /b 195.8 318.7 I 342.3 181.1 883.8 371.3 68.9 396.3 379.2 410.6 312.0

Ohaka 1380.4 1686..8 1754.6 1765.7 1692.2 16u9.0 1867.0 1763.5 1760.4 1551.3 1062.0J8selpur 249.0 1 271.4 251.6 249.9 240.5 242.5 263.5 263.1 228.1 175.0

ymeneingh /d 646.7 742.4 629.2 687.6 634.8 698.5 786.7 709.5 693.9 524.0Tanga;l /a 142.8 195.9 1 201.0 187.6 204.2 205.1 168.9 177.9 193.5 160.5 40.0

DhIsk 265.0 347.8 I 343.0 523.4 819.9 817.1 801.8 309.7 335.5 257.1 148.0Foridpur 166.6 241.9 19W.8 213.7 230.7 241.5 165.9 *85.7 278.8 211.7 175.0

Chittagong 1560.6 1818.0 2020.0 1667.2 1844.1 1914.1 1.60.6 2019.2 2062.2 1951.2 1730.0

Sylhat 523.4 490.2 1 677.6 817.2 5U.2 878.5 805.6 563.7 552.6 878.8 375.0

Camille 416.1 484.0 1 181.6 449.0 602.6 501.7 482.5 533.4 624.5 496.5 424.0NoasIhli 269.0 396.6 I 422.6 820.1 330.6 365.1 423.1 416.6 418.9 316.7 372.0Ch:tt.gong 319.5 308.6 I 446.5 S68.0 410.2 415.1 422.6 430.3 509.5 514.4 514.0

Ch;tt.gong H. Tracts 30.6 S.? 1 69.4 42.9 46.3 88.6 48.6 63.2 46.9 44.8 45.0

Total 6074.6 7836.9 I 7962.7 7411.6 7603.5 7925.9 7980.8 8542.2 8266.8 7600.3 6858.0

/9 From 1967/68 to 1969/70. including Patuakhali./b From 1967/66 to 1969/70, Included In Brimal./c From 1967/68 to 1°78/ P* included in Nbysafian-h.

/d From 1967/68 to 1969j70. including Jaslpur and Tangai;; fro 1970/71 to 1975/76. ln=ludinp Jamalpur.

/* From 1067/68 to 1969/70. included in Fb_n;singh./f 8andarban ua. a subdivision of Chittagong Hill Tracts until 1982.

Source: angladesh Bureu of Statistice.

-211-Tabl. 7.11

nRT2NO m e0 17 my oismwt. l970/76-190A9( 000 astiec up*. rice e*mwivlet)

. _ __--- . __ ........... _._.__. .... _. ..... _ .. _ .... .... .... .... _ _........

P-Vtr AVtA0 ------ ^---~ ~ ~ .~ ISTA -----.--- . . .....................TOpS 75/60 B19IQO/OI 1061/U 196/6 1066 16/65 1065/6 1066/67 1067/r 1966/6

... ____..................-_-______.....-.- .---.._-__............._._

aimhi 1I3.1 225.8 1 307.0 461.2 S50.7 666.4 .4 1022.4 1113.9 13164.0 102.7Ciajpwr 9. 1.6 M2.0 26.0 31.7 U.2 2.4 52.6 711.3 7.2 142.9Rsnegew 34.4 42.4 I 76. 107.N 16.. 12.2 164.5 260.7 U40.9 8.6 439.3scope 3o.7 41.5 1 71.l 110.1 129.6 13.0 2O.1 270.S 249.7 376.0 426.6Rajdea l 6S.3 94.6 I 97.5 115.2 132.2 160.6 1N.1 227.9 269.2 319.6 34".1Pabn 35.0 41.2 4 41.5 102.4 130.3 140.3 161.3 0.7 12.0 219.2 245.

bOsulna 227.6 1O.1 I 169.0 225.7 264.0 218.9 3s6.4 234.1 246.6 368.0 609.2KuaMtia 4.0 3.9 1 4.1 7.3 9.0 6.9 10.2 19.4 21.1 26.9 43.6JOleor 23.6 24.8 1 21.4 63.1 79.5 76.1 161.2 J1.0 11.J 210.3 401.3KOm,n. 16.4 29.7 1 39.6 41.2 44.9 42.4 60.0 74.0 59.6 75.4 90.5OSerii 120.4 93.2 1 66.1 97.9 112.5 75.1 94.6 50.0 48.3 44.1 67.7rtM,abhali 31.3 27.0 1 10.6 16.0 16.2 13.4 9.5 .6 5.3 4. 4.

Iak. 79.9 7M.5 I 1001.0 1321.3 145U.3 16.6 12.3 1276.9 1472.2 1717.3 2061.4

.laslgu' 0.0 9.1 B 62.6 115.1 31.5 117.9 172.4 140.6 19.8 2. 226.2l4ftensigh, 260.4 ".S 1 450.9 59.4 51J.2 52.7 647.4 503.0 60.0 731.1 1.1Tanel 49.9 67.1 132.6 209.7 266.4 22.9 25.1 229.5 2".6 217.8 237.4Chka 169.6 214.0 1 26.1 t 20.9 360.4 301.2 2".6 266.0 309.9 S30.6 410.9F tidour 53.2 55.9 i 6.4 106.1 12. 90.6 171.6 142.6 160.0 218.7 260.6

ChUtageng 666.4 910.7 112.5 1143.4 127.1 1204.6 120.0 1132.6 1177.5 1UU4.5 1.0Sy1h.t 415.5 841.0 1 500.2 396.0 41.2 40.0 464.0 379.2 3.9 361.0 410.1Comila 175.2 203.5 I 246.3 306.7 336.2 227.5 317.7 303.1 304.0 416.7 677.1Fhabhali 67.5 13.3 S 1tS.2 182.4 193.4 161.4 16.6 11.I 170.6 179.7 246.2Chittgmen 167.1 203.2 1 271.1 266.4 299.1 S0.4 292.2 293.1 26.4 2". 267.0Chi tt.gmg H. Tract 21.2 19.7 1 20.6 22.4 22.3 27.2 29.5 22.1 31.4 22.5 16.6

Total: 20C7.2 2103.9 1 2610.2 3152.0 3U46.2 33e4.5 390. 1 1671.0 4010.2 4730.6 5631.3

Rajahahi 49.0 117.6 1 609.5 453.s 54.5 59.1I 66.6 464.0 53a.2 43S.3 443.0Oineje"r 2.9 19.2 1 146.6 1o.e9 116.0 143.1 119.2 66.6 114.6 95.6 110.0Raeegkr 5.6 21.2 195.9 127.4 16.9 173.6 190.2 109.4 165.8 11s. 1 11.3-wore 5.3 19.4 B 59.5 46.3 52.2 61.7 79.6 61.1 49.3 44.4 39.2Rjsahahl 14.4 22.5 B 116.9 72.3 109.3 512.8 134.4, 10.4 109.6 93.2 67.2Poll" 22.6 10.3 I 36.6 75.0 99. 107.4 156.7 36.5 96.0 71.1 73.3

1Kh,ana 19.2 74.9 1 196.7 199.7 196.2 197.6 246.7 170.2 167.6 222.6 208.9

Kuaitis 14.4 51.1 B 117.7 1N. 132.1 11.9 116.1 94.3 73.2 97.4 93.2.gs,. 4.5 19.3 B 67.6 73.2 36.3 59.3 100.5 2S.6 70.6 104.6 91.2

KhI no 0.2 4.2 1 6.3 13.3 5.1 4.7 5.6 10.4 0.7 6.6 7.3* Brisal o0.1 0.3 l 2.S 2.9 4.5 1.6 4.4 6.7 4.0 13.9 9.0Pat.jkhaIll 0.0 0.0 B 0.1 0.0 0.2 0.0 0.1 0.2 0.1 0.2 0.2

1Ohake 27.3 47.4 153.4 163.6 220.9 261.6 359.1 268.6 242.5 255.0 250.0

Jemlsur 1.0 2.9 1 6.5 10.5 17.8 30.6 46.5 31.9 39.7 37.4 36.6plymonsineh 1.1 6.0 1 20.6 22.0 32.1 40.2 47.6 43.2 41.2 39.3 42.2Tangail 2.4 1.5 I 41.5 U.7 20.2 39.6 46.6 49.5 47.1 39.7 37.0Dhaka 5.1 9.3 I 31.6 20.2 47.2 60.5 76.0 78.5 51.6 64.1 1.6FPidour 17.7 17.7 B 60.7 76.4 94.1 100.5 140.3 U5.? 62.9 74.6 52.4

ICh itaowne 11.3 4?.2 B 133.0 110.0 U24.o 164.0 173.8 152.9 15.6 134.9 12.1

SyliwO 0.2 1.7 1 7.9 6.s 13.0 6.6 11.5 9.3 11.6 10.5 11.2CosiuI 10.9 44.4 I 122.9 120.6 10.8 14U.7 164.7 140.9 141.7 122.3 112.6Noakhali 0.2 1.0 I 1.5 0.5 1.4 1.8 3.0 o .4 2.1 2.0 1.3Chittegang 0.0 0.1 B 0.4 0.3 0.2 0.2 0.2 0.2 0.3 0.1 -

Chitt eeme o. Tracte 0.0 0.0 1 0.2 0.0 0.0 0.0 0.0 .1 o0.0 0.0Oandabsn /a 0.0 0.0 I 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -

ITotal: 106.7 257.2 1 1092 S 967.4 1095.4 1211.4 1483.9 1042.9 1091.1 1045.0 1022.0

/a Fro. 1967/68 to 1962/83. inclusdd in Chittagong H.1l rtects.

Source-: eangeldese Iur.u af Statistics.

Table 7.12

JUTE PR0UCTION BY DISTRICT. 1970/75-1989/90

FIVE-YEAR AVA I ----------------------------- ANAL DATA----------------------------------------------

70/78 75/80 1I 1980/81 19812 182/88 1988/84 1984/88 1985/86 1986/87 1987/88 1988/89 1989/90

( 000 bales of 400 lb.)

Rajehuji 1600.2 1705.6 1784.0 1501.8 1614.5 1625.8 1773.4 3067.2 2384.8 1616.7 1687.0 1578.7

Dinajpur 179.2 179.7 1 182.4 165.8 150.8 142.2 177.0 2.5.6 242.9 250.5 179.0 126.6

Rangpur 926.2 1008.4 1 1012.3 937.0 975.4 1014.7 1097.7 1634.8 1447.5 917.6 897.0 877.9

Boors 118.2 136.0 1 168.3 177.1 266.9 121.1 119.6 356.8 176.8 96.3 165.0 171.9

Rajahuhi 178.9 162.0 i 165.1 99.5 142.0 181.4 188.7 481.4 343.2 182.6 190.0 166.7Pabna 202.7 219.5 I 255.9 122.2 179.4 186.4 190.5 379.6 174.4 169.7 256.0 235.6

1Khulne 798.4 838.4 I 854.6 783.0 927.5 922.5 1061.1 1571.0 1052.5 933.4 895.0 957.3

Kuahtie 172.5 180.1 1 202.8 191.6 25S.5 289.4 378.6 474.9 299.9 2s7.9 299.0 347.5

Jleore 454.6 517.9 I 511.1 504.3 560.6 567.0 S01.4 O88.1 584.3 605.4 459.0 487.4

Khulna 98.6 110.1 i 102.8 70.8 100.1 m2.8 169.8 198.1 150.0 74.6 111.0 107.5

ears,al 69.9 28.3 3 36.7 14.5 11.6 12.5 10.4 8.2 16.3 13.4 25.0 13.5

Potuakhall 2.8 2.0 1 1.2 1 8 1.7 1.8 1.5 1.7 2.0 2.1 1.0 1.4

Dhaka 2453.7 2392.8 I 1929.2 2025.9 2038.8 2281.6 1968.7 3427.4 2674.0 1911.2 1668.0 l185.3

Jamaipur 0.0 192.2 I 226.2 256.9 253.3 263.7 211.8 292.6 222.4 209.7 258.0 294.9

PMymnsingh 1013.8 m.8 I 566.6 708.0 672.9 73.1 614.9 1207.0 893.1 55.3 377.0 377.3

Tongail 327.4 3S7.1 272.9 188.5 206.8 277.7 194.7 340.5 289.7 259.6 237.0 313.2

Dhaka 546.5 525.9 1 438.1 447.1 419.4 419.7 431.3 811.2 583.5 379.6 346.0 328.2Fardpur 568.0 527.9 1 425.4 425.4 481.4 582.4 516.8 776.1 685.3 527.0 450.0 541.7

Chittagong 516.2 364.8 I 374.7 335.2 305.6 315.8 307.1 594.4 642.2 239.7 186.0 252.9

Sy Ihot 55.5 18.2 1 l8.8 28.9 16.7 11.5 10.1 46.7 23.8 8.7 3.0 8.1

Comilla 399.7 301.8 I 289.5 285.4 275.4 292.7 286.3 S30.5 610.7 223.9 175.0 227.1

Noakhali 58.4 42.9 I 65.1 19.4 12.7 10.7 10.0 16.1 7.4 6.8 8.0 11.1Chittagong 1.0 0.7 1 0.6 0.6 0.4 0.3 0.2 0.0 0.0 - - -

Chittacgong H. Tract* 1.5 1.2 1 0.7 0.9 0.5 0.5 0.5 1.1 0.3 0.3 - 6.6

Total: 5370.6 5301.6 I 4942.5 4645.7 4881.4 5145.7 5110.9 8660.0 6753.5 4701.0 4436.0 4639.2

('000 metric tons)

Rajohaji 290.3 309.5 1 825.7 272.4 292.9 295.0 321.8 ss6.s 432.7 293.3 306.1 286.4

Dinajpur 32.5 32.6 1 83.1 30.1 27.4 25.8 32.1 39.1 44.1 46.4 32.5 23.0

RanCpur 168.1 188.0 183.7 170.0 177.0 184.1 199.2 296.5 262.6 166.5 162.7 159.3

sagra 21.4 24.7 I 30.5 32.1 48.4 22.0 21.7 64.6 32.1 17.5 29.9 31.2

Rajahahi 31.5 29.4 I 30.0 18.0 25.8 29.8 34.2 87.3 62.3 33.1 34.S 30.2Pabna 36.8 39.8 1 46.4 22.2 82.6 83.6 34.6 68.9 31.6 30.8 46.4 42.7

1Khulno 144.9 152.1 I 1S5.1 142.1 168.8 167.4 192.6 285.0 191.0 169.4 162.4 173.7

Kuoht;a 81.3 32.7 36.8 34.8 46.0 52.5 68.7 86.2 54.4 *8.2 54.2 63.0

Jesore 82.5 94.0 I 92.7 91.5 101.7 102.9 91.0 161.1 106.0 109.8 83.3 88.4

Khulna 17.9 20.0 1 18.6 12.8 18.2 22.1 30.8 35.9 27.2 13.5 20.1 19.5BArisal 12.7 5.1 I 6.7 2.6 2.1 2.8 1.9 1.5 3.0 2.4 4.5 2.4

Patu.kheli 0.5 0.4 1 0.2 0.3 0.3 0.3 0.8 0.8 0.4 0.4 0.2 0.3

Dhaka 445.6 434.1 1 350.0 367.6 869.0 414.0 357.2 621.9 485.2 346.8 302.6 335.7

Jamalpur 0.0 84.9 I 41.0 4S.6 46.0 47.8 3S.4 53.1 40.4 38.0 46.8 53.5

Hyenainegh 183.9 141.5 I 102.8 128.5 122.1 133.9 111.6 219.0 162.0 97.1 66.4 68.5

Tengeil 59.4 66.6 1 49.5 84.2 87.5 50.4 35.3 61.8 52.6 47.1 43.0 56.8

Dh.ak 99.2 95.4 I 79.5 81.1 78.1 76.1 78.8 147.2 105.9 68.9 62.8 58.6

Faridpur 103.0 95.8 I 77.2 77.2 87.8 105.7 93.7 140.8 124.3 95.6 81.6 98.3

Chitt.eonW 93.7 66.2 i 68.0 60.8 55.4 57.3 55.7 107.8 116.5 43.S 33.7 45.9

Sylhet 10.1 3.3 3 3.4 5.2 3.0 2.1 1.8 8.5 4.3 1.6 o.s 1.5

Cmi Ill 72.5 54.8 I 52.5 51.8 50.0 63.1 51.9 96.3 110.8 40.6 31.8 41.2

Nookha Ii 10.6 7.8 I 11.8 3.5 2.3 1.9 1.8 2.9 1.3 1.2 1.S 2.0

Chittegong 0.2 0.1 I 0.1 0.1 0.1 0.1 0.0 0.0 0.0 0.0 0.0 0.0

Chittagong H. Tracts 0.3 0.2 | 0.1 0.2 0.1 0.1 0.1 0.2 0.1 0.1 0.0 1.2

Total: 974.4 961.9 | 896.8 842.9 885.7 988.6 927.3 1671.2 1225.3 852.9 804.9 841.7

------- ---------------------- - --------------------------------------------------- ------- --- - ---------- ------------- - -----------

-213-Table 7.13SfJLY AND DIUOSITION OF RAW AITE, FY79-FY89(o000 bales)

FY79 FY60 FY FYM2 FY68 FY4 FY6s FY86 FYs7 FY6s FY89

Opening etocks 692 2831 4219 8252 6so 0 1339 944 828 4268 5231 4984Production. total e830 60o8 4988 4U86 4920 S2U 8160 7649 e792 4728 4477

- Jutes 8442 5896 4948 4646 4881 8216 Sll 7601 6783 4700 4438- Meta 8s 72 42 40 89 40 89 48 s3 28 36

Adjusteent /a 191 1208 -202 -369 894 -612

Market errlvalo 6721 7238 4788 4817 8814 28 4686 7849

Total supply 7418 9589 9002 7869 7864 698 8482 7974 11057 9989 9406M1ll consuaption 2809 2962 8366 688 6329 3369 8370 3400 3386 3220 8170- 8JNC mills 2809 2864 8281 8191 8180 lw 1888 1900 l8e8 n. . n. .- Private ml . 118 108 158 179 1489 1488 1800 1490 n.o. n. a.Other cnsumption 300 300 400 400 400 360 811 400 200 400 400Losse 8 100 80 62 80 0o 16 30 29 60 120

Total dowstic usa 3114 3382 88W 8808 8779 8749 3697 3830 3858 3880 3390

Registered exports 198 1968 1944 1911 2248 1902 1460 2000 2241 l148 1617

Total disposition S062 SS60 8780 8719 6M28 8s S167 6830 8828 S828 8307

Closing stock. 2631 4219 3282 1880 1389 944 825 2144 82S1 4934 4099

Total supply * market rrivals opening stock..Total doseetic usee - mill consumption * other consumption * lo*es.Total diapositlon a total domestic us- registered exports.

/a Difference between etimated crop size and Astimated market arrivals.

Source: Ministry of Jutea Be4c.

Table 7.14PULIC FDIPAIN Pi TRMW NV DiSIIC?. x97s/b0-1 h/b('000 mtric tions. *ice eqiualont)

S-YEAR AVEIUCESi--- ANNUAL CAT A _-_WO;seon/io;-t;ec 75/60 SO/ I /1 14141/12 190/63 1913/W 19W/IS 1966/66 1913/0? 1967/U 1eot/se

RuJdahi 196.6 253.1 I 4J2.0 174.1 121.3 2V7.3 260.7 20.4 189.9 803.1 886.2

Dinsjgut 74.2 102.7 I 190.5 07.1 54.6 96.1 61.6 96.7 42.2 68.e 90.4Rangpue W6. 5.1 602.8 24.6 26.8 67.0 U.3 61.1 84.0 62.6 S2.0

Segit 24.8 34.4 | 50.5 15.6 20.8 85.0 51.6 87.8 81.0 1.O9 181.7

Rajdah;s 58.0 48.0 121.6 41.6 14.4 14. 6. 44.9 22.7 88.2 41.8

Pubes 6.1 16.61 86.0 7.0 5.4 We.6 25.0 20.4 9.1 17.8 20.0

Xhulno 65.7 84.9 106.0 7.6 12.0 18.9 82.9 28.5 4.- 27.8 46.4Kudt;i 5.8 4.2 I 10.8 1.1 0.8 1.4 6.0 6.4 1.2 4.2 10.0

joefe @ o.0 7.5 I 6.1 0.1 2.7 5.1 21.8 6.9 2.5 20.6 81.0KhulOn 11.8 6.5 I 25.9 2.0 1.0 1.0 2.6 1.7 0.1 2.1 5.2

Be,aua 15.4 6.5 27.0 O.S 2.0 2.4 0.6 4.1 0.8 0.4 0.2PatuabhmlalI 25.7 10.1 I 36.7 8.9 6.0 8.9 v.1 6.4 0.0 0.0 0.0

Ohaka 52.6 58.6 I 201.1 54.8 81.4 16.4 29.6 20.4 6.9 20.1 19.1Jaulpur /a 2.5 11.5 I 5. 1 7.7 5.8 5.1 4.8 0.6 0.1 1.6 1.0:qunfiangh 50.4 82.9 1 96.6 29.1 17.9 6.4 9.7 8.7 7.6 18.8 16.8

Tangail 2.2 5.3 i 22.9 8.6 2.2 1.4 9.4 7.7 0.1 1.6 0.5Ohlaka 5.0 18.7 1 38.2 21.6 8.8 1.8 1.6 2.2 0.4 0.6 0.0Faridpur 1.7 8.2 5 5.4 5.4 0.3 0.2 4.4 6.0 0.5 0.6 1.2

Ch I tt ag 71.4 6.o0 I 225.6 52.4 27. 9.1 2S.6 15.2 18.4 25.6 18.2SyIhot 80.0 2t.8 I 92.3 27.2 12.2 8.1 6.8 2.2 9.8 17.0 9.8

CmiIIs 16.1 15.8 I 41.7 18.4 0.2 8.0 1u.9 6.9 4.5 2.9 2.4Nakhgli 11.1 10.6 48.6 1.t 8.4 1.6 0.9 1.1 0.1 0.1 0.0

Chltte.gn 11.7 7.0 I 29.6 3.3 1.6 0.8 0.1 1.4 0.7 0.9 0.4Cuittegong Hill Tracts 2.5 5.5 I 15.1 7.8 1.9 1.2 2.4 1.6 0.5 2.9 3.1

Total 896.5 424.6 1 101.7 2eo.2 192.1 2164.7 349.0 850.0 186.5 874.5 416.9

_------ - - ------- -- -_---------------_- _ -- _- - --------

-- * not uevilhble.

/a Jaosipur as- a subdivision of Nme.neinah until Decembe 26. 1976.

Note: 1.0 ton rice equivalent a 1.0 Ion shiet a 1.5 tan paddy.

Source: Ministry of Foo.

eqinC ao.In OF MA 00 '. mICa P, goIScr,. 1psiso-i111e1(a_itrG t"o. vie oaim..lowb)

- - - ------ ---------.--- _- -_ -

76/0 60/S I 19603, 196/6 1911111/64 194/6 1446/61 19104/,7 1967/6 IGM/se._ . _ . __ ................ _____._______ |.. . .... __-_.......... _.__ .... ___

RjIrn#bil 67S 4165 I SO. A 12 am 14 0 0 0 0Oiejwr. 1130 702311 16616 a" O8 94 0 0 0 0Rar.e 429 6 I 1804 I 1a" 0 0 0 0 0asra 931 UI I 41 a 841 0 0 0 0 0Rrjdhahi "1 4* 9 1741 17 106 s0 0 0 0 0Pobke 196 176J I a 649 0 0 0 0 0

1MIwles 2026 3497 1 1M a 20 0 0 0 0 0

Kuahi; 874 *1 1 4316 0 0 0 0 0 0 0Jrcer. 1228 64a 1 Zl1 0 260 0 0 0 0 0KRlin* 110 6041 2687 0 0 0 0 0 0 0gsinal 6 996 1 4966 6 0 0 0 0 0

stua hb.li 0o 432 1 212 0 0 0 0 0 0 0

06sks 28. 4179 166 a8 1666 0 0 0 0 0jsilpue/a 27 5241 2416 0 10 0 0 0 0 0wom_aimsh 26 22801 697 GO 14t1 0 0 0 0 0Trneil 9 3r 1 1t1 0 U 0 0 0 0 0chok 1 10941 3GM 2 11 0 0 0 0 0Faridpur 7 267 1 1I2 0 0 0 0 0 0 0

uiteting 8014 791I I 33610 8 l06 1480 0 0 0 0SlJ4 I67 37 8192 1 1804 0 98 99 0 0 0 0Cori llI 22 480 1 176 0 I 0 0 0 a 0Nihali 140 29311 1 14060 8 9 0 0 0 0 0Chustegoe 713 497 2146 0 0 0 0 0 0 0Chiattos Hi 1. Yltrct 264 06 1 2198 0 0 4= 0 0 0 0

Total 11009 23se6 1 M6 9 1 8754 W 0 0 0 0

Raij-aUi 1401 114620 1 266 6010 7119 7161 1U241 21179 48862 SntOinsjpur 6814 61747 1 127U 8687 48646 44602 62419 1614 2U488 266

_asege 827" 208 1 4841 1864? 11278 94 27o1 7777 se11 94oerg 16773 7817 1 16891 4422 629 424 17108 874 7U17 126

Rijbhmhi 48972 231S6 I 7226 39 7812 12170 14277 37 6aW 2102Pebae 3843 184 I 69 104 719 19 1418 87 26 10

lOwing 87176 1968 77246O 6U1 7874 397 10694 aS 472 819ICahtls 2069 229I 1006 aS s6 25 111 1 87 17Jewre 8791 761 358 6S 40 46 882 0 266 229

Idla. 1o00i 4?78 2m64 m 980 16 91 1 34 a

ihei.l 14748 4860 I 1766 1*4 2414 240 3i11 U 4 t07 6Pstuskhsll 26646 96120 1 346 6U0 812 81 6181 19 6 4

DhUk 4182 16476 1 676 1112 164 13 12 23 462 16Ja".pur /a 1186 3425 S 14s 18062 822 44 Su6 0 10 0bqasninoh 2110 10865 iO 414 a2 778 1087 61 6 868 1

Tsegi 982 6811 8102 61 27 a3 21 1 1S 0eak. 162 1878 I 7304 249 170 124 0 4 60 0

ParidJpu I12 263 1 700 323 14 97 29 12 12 0

Cli age" 496 28197 1 91t6 1u49 3367 2440 3496 i22 2148 2967Sylh.t 1498 7106 I 29886 a68 246 33 264 2 22 2Camlle 72m 225 I U6 2092 319 200 42 19 74 0.. hli low60 692 296 6406 1862 601 1074 11 18 26c;ttaeo 926 3701 17068 1222 110 67 68 720 2 387Ch. ttageg "i II Treat 1s" 3204 1 10232 146 1070 184 1440 810 2037 26"

1Total 80878 174160 0 6029 980 86 78678 12688 2219 46644 64704

/a Jsaale *eoas a Adivieloe of Vew46,eIe vnt,I Decemelr 26, 1976.

Neta 1.0 ton ePic ela * 1.0 ton wheat * 1.5 toen paddy.

Source: Ministry Uof pFo.

'rb1. 7.U4'*C eP of OP 66610 u0I"S 121 RIc M1 PI &w T. 197/01961 uPYWrE lll fte amm ian m W m UT U/ws(metric %mma, ties 0911velales)

6-76*6 £..I -......------------- _ L 0 ----- ------ -----.----

0 0/6 I 196/6l 2961/6 1962/n 19/64 1964/U 16/6 1961/6? 101117/011 1966/69

gm AND amI

Rajeiwhi 6762 47997 I 6976 47061 447U 27WO 41249 700 9486 196243 262610inajpuw 411 1 | 17 1211t 11070 1t9 1166 1918 179 47517 865

276 1641 M 6o 6 5 10o 421 117 1M 20119 3026_.575 6*e 11725 s 560 9661 13664 7696t g 1*788 207.8 44175 71; 13 1 r2 11

R,j,hl 96 201291 20147 175 102 200 4110 13446 i7in *911 S 8649abos 5 496* I 914 am 4047 a7 2649 34 8a6 10611 9o

KhOwIAS 7 2160 | 642t Om U 7 9021 20 929 am76 79T0KuahtM. a 4it 1 1670 S2 U 0 i6 a 24? 147 40iora ti 2t1 me 0 0 0 2t 6 Si1 21S0 7765lhwina 40 T7O | 20" 474 57 7 76 0 110 67 u6

sei6l 4" 67 4U220 0 6 0 106l 20 14 831 107'.tuakkl.i 4 52 256 0 0 0 O La 40 0

Oh 6 ISM 3724 I 91T0 57t 1790I 0744 91 44 4680 9O0 1i6 1767IT5jamip /l 520 4m 1 1056 U197 52m 1at 61 45 f52 95O2tjmniagh 1U7211 iM I 47*T 2t 766 6170 62US 2755 7610 14767 .6251

Tangail 870 4316 I 120U1 8479 1110 725 2020 142 6 67 5T90h6 1*0 968 I 19O7 1986O sm 101 672 49 1!1 412 6iPfridgat 3S IY71 189 4t 1 0 17 175 U7 243 t 0

Ch ttang 1546 29061 _ 2 20 Oil0 2740 5" 3691 1056 206 11962$jih.9 1on97 1T711 47666 2541 6 244 26 1i6 6M 16972 9330Cc.I lo 267 661 I mu 11s1 249 106 440 o30 2160 2i54 1994No.bha I i 29 en 211 0 1o I an2 0 11a 104 7ChiftAaWP 1660 2748 I 102 2no 43* 12U 2t n7 a ti 69ChitSnamg MlIII Ttsta 42 1774 356 43 406 112 45 164 260 672 s6

-Toml 1166 I 2277 149317 74110 506 62M 79411 114506 2 9 #600487

RsjShsi 2267 62118 I 1 677 7671 11416 lOW107 147442 67162 "418 5929 121U6Oinsijpw 4596 21448i I D2ti 2002 626W S5451 25217 14464 1280 14647 5117RAfgle 89 2ge7m I 2n7 2o29 am 444 51"66 , 1426 24611 2627amps 6234 144 1 267 *75 240 104I 27o59 173Si 7Sl 64 1272Rej4h.i 4161 921 n I 16w 221 72 417 20427 17176 t 4i5 7114 2302P.b.s SUp 10047 96 an7 121 t014 22501 15 5364 5o50 820

Khind 510o 9276 I 5o 445 3015 6270 311su 14463 2139 23S66 32812

tabila 2540 265 tI 8W 45 2 1970 7T2W ti1t 9U 403t2 997Jont, 2906 61i" I 20 0 259t 4646 21427 6t1i 2169 16418 23050KhNla 2t7 "a in 0 16t 52 t1e1 157n 0 1486 51346ea..l 9 Oii *t 0 4 0 416 257 202 0 0PItq.hmli 0 01 0 0 0 0 2 0 1 0

Ohaha 4494 10456 I 2594 2tit 1I2 5i 19105 12597 427 2579 1245Jol6U /l f76 0190 I 7931 #T 720 2U72 4193 10 58 1242 62Mvenitiagh 16 1075I 18i9 U10 14 1i 274 290 1 70 0Tangail 70T 2101 I 7S96 iU8 2t #iT 7357 6e22 10 650 3Oh16 240 16o2 I 7ri6 d 246 16 1040 170i 45 79 9rriwr M51 120I 1771 1I6 1U2 141 4141 8167 276 352 177

ChiAgmm 6O 7T61 I 145 2W 391 1921 16m *017 38n7 1Ot 4i 4S,166 1a 6Ui 10 1 178 10i ISU S24 15f 71 1196 0 0C11ila "t1 6916 I1246 lo5 2641i 16Ot 1i2 7917 2tii 0 d3uhNhm I i 21 1i21 109 U07 0 0 0 9 0 0 0Ch; tago" 0 19 92 0 0 4 0 0 0 647 0C0 i %%womnei II Tr"" 4 01 1 0 0 0 0 0 0 186 0

Total 26d4t 109919 I 175bO6 13229 23592 12120 21iS16T 12259 81485 66762 51931

/s Jaipue wsa a uubdivieloi af Vaaaisb vat- Oec6tea 26. 19711.

ote: 1.0 tom rice .illot * 1.0 Om hee% * 1.5 o pady .

50sSew Niejialr of rugi.

1ANI.AOMM SAU Of STATISTICS DurIAL PRO09CtIN Iuetc. 1O/81-196/8

1973/74 * 1001

(Wed0 .n4l 10.1 1nd*4) 13,BS IM1742 1o" 142 106118104 4,4 1/1 / r "/"

FodPredueu *0.43 W .sr 41 tr4 I" 142 lW s113 tl too 17 128

Fish p.ocaesing 0.40 0.39 2 o 60 147 233 209 251 29Flour milling 0.48 0.42 87 87 84 40 6 6 116 &si Lao

Saberie. 0.59 0.75 19 211 I " . 47 170 50 162 1it

Sugar a mola.... 4.9 4.62 too 2ZI 198 In e7 G 201 1" 109

Edble .l Is A fate 0.40 0. 4 149 177 190 131 49 I6 167 216 168

Vegtable shop 1.04 1.01 98 12 160 117 108 107 U4 114 77

. 2.655 2.48 i8? 1n 12 126 143 133 12 137 130

t-ege" O.6 0.87 1in 1o7 148 241 202 1" 213 216 302

Oi.til ing airpit 0.47 0.46 197 230 1U2 840 1ei 16o 126 175 62

Non-Slecoholi b. 0.42 0.41 U1 140 to 131 172 238 269 260 54

?ObScco Products 18.65 18.2 12 183 its 124 1l 121 1 II 125

T .tilaa 47.81 45.11 114 10o .15 ill ill 1oo 11s 113 108

cotton tee lth 22157 21.96 I 106 114 114 117 110 120 12O 109

Jut. Maufactucine 24.27 28.61 114 114 114 109 105 91 109 10o 9o

fejon & othe agnthetbic teati lea 0.58 0.54 71 41 168 r7 161 117 210 *1 85

Paper and Paper Produet 0.95 0.92 124 136 100 114 160 170 172 171 168

Paper 0.52 0.51 142 137 112 116 168 1o IN6 161 179

Newapaint 0.29 0.23 115 146 100 11 174 160 177 188 163

Pertigle board A laa4board 0.14 0.14 76 1oo 58 II Ill i1s 97 102 108

Cheical. and Chemical PodmactW 10.46 10.16 I66 162 175 287 264 252 2t7 890 392

Cheical fert.liasre 4.87 4.74 14 148 187 234 200 329 839 487 853

5sac induatrial chemical 0.1 7 0.17 93 71 61 95 108 I1 149 l9 121Paints. Ornis;es4 lacuer. 0.22 0.21 11 11 107 140 187 142 6t1 IS1 1t5

medicen. * phlrf_ceuti.al. 2.64 2.76 191 244 208 70 264 265 247 267 29

ODainfectants & inegatlcidee 0.26 0.2? 378 2t84 1o JO 474 306 852 276 148

Ntch.. 2.06 2.02 162 191 198 Me 211 219 237 m 211

Petroleu Products 1.42 1.36 38 313 247 284 268 252 2t4 247 276

Non-HOtllic Hin.rale 0.74 0.72 534 51 492 452 410 462 802 50O SSSOle,. 0.16 0.16 114 168 1aO 220 - .39 216 214 206

Ce~nt 0.56 O. e680 815 579 514 460 581 568 SW 649

Iron end st l 12.09 11.76 198 167 as 125 154 164 147 123 128

oni-Electi r;e hineyr 0.46 0.45 861 304 1990 720 1062 409 26S 53 241

Electric techinery 0.59 0.87 29 821 29S 349 so0 65 72 60 6

El ctric otor. 0.12 0.12 74 62 11 21 161 107 46 74 1U

Electric fan 0.37 0.86 247 291 290 320 Ja 40 449 4" 354

Lea" A bulb. 0.02 0.02 31l 379 890 47 87 6S 614 628 866

Coamunicatione umipent 0.27 0.26 82 525 40 49 669 1348 151 1177 1580

Cable. Ae ir.. 0.11 0.11 142 205 223 271 363 894 897 826 509

Tr4r4aprt EWuAp.nt 0.25 0.27 US 118 48 as 74 2 73 91 107

Shipbuilding 0.04 0.04 177 178 132 110 12 61 44 10t I

Notecw hicles 0.15 0.15 96 71 12 62 So a6 74 75 75

Bieyeles A rlckshaw 0.09 0.09 147 t6O 74 117 a1 78 aS 109 213

Other 0.33 0.52 of 56 81 00 6t 128 96 as 70

tutt baling A premlng 0.30 0.29 67 5e 64 8S 6 131 103 85 70

RIubbe producte 0.01 0.01 62 5U 40 187 109 107 91 u 234

IS. metIng 0.02 0.02 S1 72 27 2 18 11 19

Woem of Ntnutmaturin Production /a 100.00 97.29 148 143 186 142 147 144 IS 160 IShubl 1imactor 77.S0 75 40 t A "A MA tA MA Nt NA MA NA

PriVate .actor 22.50 21.69 NA NA NA MA NA Nhl A NA NA

Index of M;inig Production /b 0 29 144 IT 166 220 248 28 301 374 373

Ind. of I-lectricitj Produetion /b 2 42 210 240 271 2S0 360 377 407 517 44

Inde, of Industrial Production 1oo 00 145 14t 139 146 152 149 162 162 1e6

/a Weighta haVe in m"cd Columa asply to the o.eralI .-de. of induetr.l production

/b Entirely in the publs postor.

Note: The index of maufsc. |Ing production cooere e6ro.-ately 9e of slue added f. %aGe *id medium-ecel manufacturing. Ebluded eOr.

g others, til manufacturing of footwear. lether, furniture and non-ferroag estal mroducte. printing and publishing. so .*ll se

sll _nl1 mad cottage inOduetris (which include oepnning. dyeing and handle weaving).

Soures: fSledeah bSremw af Statistics.

Table 8.2jurE A0g COrN mILLPO SYAAISTI6S. lWO /1-19n/w

___________- ....................... -- . .. ...---- __ ......... .- --..----.-- - -- ,. -........... -_ ---- -.......... .______________ . ...................

i.ao/ai 131/62 12/66 1 6 1iSM/8 low/s6 19"I/67 1.7/60 tM/6

S.HC AJUE li. rATSi PICS

Number of mills 77 77 40 so 36 8I a S6 80Labor force. perinent / 175UIU 16700 1141 10 tw0o 10441 lt01 W19 IO 100tO0

4umber of loome (annual average)Imetal led 25ff701 25S791 16269 130 160 fi60 31860 18l0 1860

Operating (Normel Shift) 2375 24167 16340 ISM 1W 133 1414 1460 1405

esasian production('000 metera) 711601 6151 500? 86941 49764 367 401191 40S2f f 21(metric tons) 205641 191446 1601196 160M 140660 1006 187077 11884 10i

Sacking production('000 motors) 669 04 76476 8661916 2572 07276 27072 306117 291213 336924(metric tons) 309681 329277 157583 106042 1275 130615 17272 1326 146766

Carpet backing (CDC) production 71M 524 66 664 53814 48697 8431 387 44661

Other production 8701 8708 6330 8214 S12s 1291 21eet SW 36

Total productt;n (metric tone) 590123 660 300415 87930 827308 275i =615 66 4" 3816916

Raw jute consumption. ;Illion- of bales 3.35 8.29 2.29 1.66 1.60 1.84 1.l4 1.68 179

Baets per ton f production 5.67 5.61 5.73 8.65 S.6" 5.6t 5.56 5.62 5.68

COrTON MANFACTXiRO CAPACrTY 4A0 PR. LCTiaG /b

Number of mill- 6 as 31 S2 88 8 S6 83 SInstalld captacity

Sil ndee 105746 1032236 60681 60f60 6611011 71236 72456 7195 7305Loosn 7592 6046 8187 8106 s5ll 116 8106 3104 812

Capacity in operationSpindle 868112 763119 521474 51264 827o 47416 5813 8274490 57 S08Los 520i 4851 2273 2819 2400 26 234 266 2S5

Yarn Productionmetric tone 46245 4322 2900 29426 29s 252 2748 27071 2675?

32-count equivalent 580 49649 a3994 861t0 8U581 81485 85692 84886 36207Cloth Production

l000 etera 76615 6629 38590 84820 87274 8867 34575 3764 4100'54-pick equivelent 86189 71706 89689 87667 39609 8559l 8773f 41806 4Ut

Raw Cotton Consumption (metric tone) 46409 44821 80611 2 275 2fJOO 2600 27678 8162

/a In addition to the porsanent labor force, the -il-s hinre esonal workers (badli)during harveet tim. The number of badl is is around 25,00O oeah yeer.

/b Data shown for 192/6 mad byond are not directly comrable with thse for earlieryears. as OI dieinveibtd iteelf of a number of its mills during 1962/08 mnd 1986/6.

Notess - Capacity data are annual averages.

- At tho end of Juno 1909, UK0 had 4 enterprio under its cntrol:24 spinning mull 12 c_om itt spinning & aseving mills, 4 *pecialisemills. I engineering unit, and S enterpriee without any phyeical m*nts.

- Two (2) eapansion units (one in spinning and one in weaving)of evicting teatile silll hava com ihto operation during 1900-80and another two (2) espansion units (one in spinning and one in weaving)are espected to co_ into operation in 1900-50.

Source: Sngladesh Teatile IilIls Corporation. Bangladesh Jute HiIlle Corporation.

Tkle 81s.a -219-SUaAR AN PULP AND PAPE HILL STATISTICS, 1980/81-1928/89(metric tons. unml. apecified otheroit-)

DIVISION Start-up Capacity /aDistrict Hi ll Dt. Int. i led Achieveble/r; 1980/81 1981U82 1962/83 1983/84 1984/85 1985/88 1986/87 1987/88 1988/89

sumW4AXA 32515 83483 24913 88OOS 31888 24913 149M9 18164 26359 31369 18205Dhakn

Deahbandhu Sugar Mill. /c 1934 2032 SO0 * s63 878 369 194 39 0 678 1185 295FaridpurParidpur Sugar HiilIa T977 10161 10161 9197 13382 12980 lU61 6294 8780 10100 12880 6719b.ilpur

Zeal Bangle Suger Hills 1959 10161 10161 10080 18166 11262 8203 6420 7917 11248 12521 6959Mymensi ngh

kellachapre Sugar Mill- 1971 10161 10181 8272 7964 7277 4655 2246 2467 4883 4818 1232

National Sugar Mi ll-/d 1933 8048 1016 0 0 0 0 0 0 0 0 0

KLNA a5861 35561 34226 40n2 48560 4189 224sa 17731 89747 45682 34202 I,lessors HMoarakgonj Sugar Mills 196J 10161 10161 11216 162S6 14787 13882 7678 3610 11062 18647 10708

Kuahti aKughtia Sugar Hills 1966 18240 18240 11700 19921 16348 15063 8a94 7871 16037 17482 10031Carew A Co. Ltd. /c 1938 10160 10160 1120 17868 12428 1*198 6S66 6250 126418 14553 13463

RAJSHAI 128007 124024 8606 113081 108907 64601 50417 48I70S 11519 101209 605S3SograJaipurhat Sugar Hill. 1968 20320 20320 18040 2211 21224 1888 9096 5938 14786 13222 11147

DinajpurPanchagarh Sugar Mills 1969 10161 10161 6819 8926 10379 9287 6896 6160 9942 10867 7876Thakurgeaon Sugar Hills 1989 1S240 1S240 11114 16692 10310 8826 6018 4178 7806 9780 5486Setabganj Sugar Nill /I 1933/1932 12500 12500 0 0 5116 515 2S20 2710 6028 6031 4764

Nator-Nator. Sugar Hi Ila 1984 15000 is000 0 0 0 0 818 6437 17981 1288 8827RajahahiRijbhahi Sugar Hill- 1966 1S240 15240 16188 22212 200 15717 9099 6510 20761 13023 10245North ong*al S. Mill- /e 1938 14225 12192 12995 16843 20118 16864 9719 10178 19174 17268 4966

RangpurShaapur Sugar Miilla 1988 10161 10161 9880 12826 8836 642 4020 3802 10003 10237 6180Rangpur Sugar Hills 19E8 IE240 18210 11078 18841 9910 6740 3431 8798 10111 7883 S080

Total 196168 193068 14;218 202168 1811n'5 lSll? 87849 82898 181925 178260 109940

meao It...:

Can. crushed, total (000 metric tons) 1827 2478 2217 1900 1177 1018 2287 2199 1338

Sugar recovery in S of cane crushed 8.1 8.8 8 8 8.1 7.5 8.1 8.0 8.1 8.8Holase" produced ('000 trie tons) 68 92 81 70 44 8as a 8S 49Begags produced ('000 aetric tons) 679 9l* 821 701 424 867 833 791 467

PULP A PAPER

Karnaphuli Paper Hills (paper) 24802 24744 21*40 1481 288176 81131 8Z0 82552 82697

Khulra Newsprint Mill*(Nawaprint) 30412 a8682 280 28670 45972 48414 46518 47811 47762(Mechanical printing paper) 3748 8881 468S2 9094 4388 6686 8878 2047 3874

North Bengal Paper Mill. (paper) 7517 7628 4798 9806 9974 10906 11020 9838 9101Sylhet Pulp A Papor Miilla (pulp) 14028 91*1 12128 1622 W 12190 14054 15084 17818 20812

Total 80002 8M80 69465 76548 10192 111191 1070M 110066 113946

a Fro 1986/87 onwards. fol loing roplacemant, the capacity ha. been incres.d to 8o00 W.

/a Based on 120 days of crushing./b In 1982/83: bened on technie l feasibility./c Nationalized in 1965./d Tho mill Is cloo.d freo 1975/76 and its capecity ha. not been included In the total./. Shut down In 1978; rehabilitated and reopenni in 1982/83. 4 s

Mote: All mill. eatbli hed after 1947 were In the publiec actor.

Sources: 6angladah Sugar and Food Industrles Corporation. Bancladesh ChiecalIndustriem Corporation and Bangladesh Bureau of Statistics.

?kI-.l 6.4PR@0UCTI4OF S3.CTO 11@ ?RIAL PROOZIS BY WUBC SE50 CWATIOI /a(unts *- eha)

______ ~~___ ___ ........................ -. - - -- __-----_- ---- - ------------------ _-__-_______

--- AOAG1- |- - - - - - - LOT----_-_________

72/78 78/00 19 io/s1 i91i 1.992/ 19s6/64 196468 1965/66 19S 6/67 1967/66 1ml/go___ _----~~~~~~~~~~~~~~~~~~~-- ---- ----- - ~------------ ----------------------------

I (.)Juts Teati l* '000 mtric tn 510.4 499.6 1 590.0 ms. 569.9 600. 65t.4 456.7 539.7 s5.2 509.7

Hessian, 166.0 167.6 205.4 197.4 223.2 236.9 206.4 162.5 206.5 219.9 166.3Sacking 242.0 236.4 I 300.6 322.6 241.6 2U6.6 223.5 217.0 248.0 226.6 240.4Carpet Sacing 51.7 67.7 1 71.3 56.3 94.0 96.4 60.9 66.6 6.8 6.4 70.4Others 27.9 25.7 I 3.7 .S 6.1 6.0 6.2 4.6 7.9 12.4 10.6

Cotton esethles,Cl"th AIl. yde 68.6 79.0 1 66.0 72.8 65.8 66.2 ".6 64.6 0o 67.1 70.6Yorm mill. ls 92.5 60. 6 102.0 95.3 9c.7 102.0 106.2 94.7 n.s 102.8 107.9

Paper and BoardNewsprint '000 meteri tons 30.0 24.9 I 30.9 39.3 26.7 26.7 46.0 48.4 48.6 49.7 43.9Paper 26.7 27.6 1 33.2 32.: 26.1 27.7 36.7 42.0 43.2 42.4 41.6Rayon Yara 2.2 1.5 I 1.5 0.@ 1.8 1.2 1.5 0.6 1.1 1.3Herdbosrd mill. eq.ft. 12.3 17.0 1 19.9 11.1 16.4 14.4 17.2 17.4 15.5 16.7 17.3Partiale sard '000 tone 3.0 2.0 1 1.2 2.5 0.8 2.4 2.5 2.3 2.6 1.0 1.3

Steel lngoe '000 metric tans 64.3 103.6 139.8 106.6 47.4 72.2 101.4 95.8 82.1 70.0 08.8

Engin"erin Products 0.0 0.0 ;ieel engine. '000 1.3 1.4 6.8 1.8 4.7 4.7 7.9 4.6 2.6 - 1.3

Pumps 1.1 4.0 16.1 19.2 25.7 21.2 15.2 6.1 3.6 2.1 8.4Commercial and Heavy Vehicles 1.8 1.2 I 2.4 1.6 0.4 1.9 1.0 1.8 1.3 1.4 1.7Rdioes 13.6 102.2 I 196.0 166.6 112.0 102.6 211.9 166.9 146.3 77.3 114.8Television seta 0.5 4.9 26.7 27.6 3S.6 S0.0 54.2 1. 75.1 73.0 79.6

Petroleum Produts '000 tons 650.7 947.4 1207.7 11.5.0 919.0 1004.2 92s.2 934.4 9s.e9 985.1 1031.9

frrti Ie;srs '000 mtri tons IUrfa 191.9 224.7 I 541.7 348.4 371.0 727.9 741.8 6ss.0 645.5 1295.9 1446.8-SP 0.0 44.5 71.2 5s.9 70.9 81.2 57.6 100.6 125.7 116.9 142.6Amonium SUlphAt 8.6 6.81 9.2 11.6 12.8 11.0 9.6 10.0 9.8 5.9 9.1

Glas Eneets miII. feet 6.7 6.6 S 6.7 9.4 16.1 12.6 12.9 7.9 12.0 12.2 11.2

Mftches mill. Groes hzes 6.4 7.6 S 10.1 11.6 11.6 12.1 13.4 13.6 14.9 13.8 13.1

Food and Allied ProductSoyebn Oil D000 etric tons 5 2 10.7 I 5.8 1.4 21.8 16.9 9.1 8.2 16.5 22.6 19.2Filh Proees in mill. lbs 3.0 6.6 1 2.5 2.6 2.4 1.1 0.9 7.1 6.4 7.6 10.4Soft beworas D000 case 294.0 297.2 I 366.0 401.0 561.0 731.0 995.0 1345.0 145J.0 1646. S 3s8.0Cigarettes millaIion 1487.7 11897.4 14906.0 17S.0 15776.0 14843.0 14395.0 14365.0 14762.0 14031.0 14408.0?iecuite sn Ured '000 metric tons 4.9 4.9 8 6.4 9.2 8.7 .. 2.0 0.8 S.2 6.6 7.6Sugar 66.6 126.2 9 146.2 202.2 177.6 157.2 68.5 62.5 161.9 176.8 109.7

ol 2.5 56.6 I 68.4 91.3 79.2 69.7 42.2 36.5 68.2 81.9 49.7Slt '00 m_trlc tons 417.7 698.4 269.0 570.0 241.0 684. 645.6 ... ...

Cemt 'e000 etri to 45.4 250.5 I 344.6 326.2 306.7 266.S 240.2 292.1 309.7 310.0 344.0

1Limetoe '000 mvric to 87.0 53.1 I 3.5 44.6 32.1 3S. 40.S 22.1 44.7 32.9 29.5

Sulphuric Acid '000 Moetri tcwo 6.2 8.9 I 5. 2.1 3.1 4.3 4.5 6.0 7.9 8.4 5.5caustic god 5.7 4.9 1 6.0 6.1 5.7 6.1 6.6 6.6 6.0 8.2 7.9lydrochloric Acid 1.0 1.7 1 2.5 1.1 1.4 1.6 1.4 1.6 L.1 2.8 2.8

Chlorine 2.6 3.4 1 4.1 4.2 4.0 4.2 4.6 4.6 5.7 8.5 4.9

Natural ae mill. culbic feot 041.3 30250.4 1 49966.0 64761.0 72104.0 63090.0 94560.0 106652.0 125S18.0 147484.0 156075.0

Electricity s;ll. IbWh 11.4 1656.8 I 2581.6 8034.6 3432.9 3960.2 4892.0 4900.3 5819.6 6348.9 7214.8

___.__~~~~ ~~~ --_ ----------------- -----: ----- I------ -4-- ------ q-- ------

/a 'nclude, private sector preodtion of tea. cgare ttee. and matches. jute and cotton tacti t,plastic bsrd, redo ed TV, fsh proces"ing eft be.erage and bread and biscuit.

Sources: ministry of ndustry, corporations. Planning Comission. end Onnaledesh Bureau oa Statistics.

ToblO S 5NATUtAL 048 STATISTICS. 197/6 0/I

(million 'SC?)

WOO/Do l0o/l 1Ol/62 Igo/as 1043/64 1114/1418 1968/S 19026 1967/U 19/69

PROcUTIti4SJ I hot 700 7039 7101 69* ? 101 8m 86 484 3486Chh1ak low 2078 1U6 197 S7" 116 0 1 0 0Raahi,dsur 0 0 0 0 00 0 0 0 0Time 381 83410 42644 48478 87267 45496 86 6016 70241KaHatila 0 0 a 0 2O 87 496 s911 6T 70m1Nab;genj 4978 7418 13410 14718 16762 11o8 874 741 84114 8264Oakhr,bad a 0 0 0 8m 665 lI26 2410 8679 400MSeauenn 0 0 0 0 0 0 0 0 0 0Kutubdieo/b 0 0 0 0 0 0 0 0 0 0Bagagej o 0 0 0 0 0 0 0 O 0

seni 0 0 0 0 0 0 0 0 0 0Seanibhazr 0 0 0 0 0 0 0 a 0 0Keat 0 0 0 0 0 3134 5141 468 84 1637

Total W6 40e37 648U6 72108 818 948 10665 IEI2 147484 186078

CONSUOT1ON BY SE"T0Power 18s9 1681 22246 27706 3808 87694 8977 1 sums s69 sFertil;are I6s8 17610 26111 25192 8164 8181 88262 871I 800"6 886Industrial 6688 7774 6738 9490 1018 18146 168s 1976l 17s88 1sC0.rc;al losw 1408 1644 2162 2841 246 2467 2782 282 3118hougholda 2811 8478 4377 a6 86 68 67" 67 7lS 9e20

Total 4470 486167 68818 69988 60886 9098 1o13 19l8 4000 146424

Year of Eatimated Recoverble saO Rearaee Condensate "obme calorificOie- (In Tril I ion Cubic Feet) Reoe.ry Content Volvo Groce

Field coVeey Proven Prohable Foomible Total (11C?) (vol 1) (SU/Cr)

Sylhet 1988 0.44 0.24 - O." 98.8.6 994.4Chhatah 1080 0.05 0.11 0.23 0.89 0.004 97.eo 1000.24Reaiidpur 1960 0.49 0.28 0.10 1.06 2.8-4.0 06.9 1028.36Tita. 1962 0.64 1.10 1.04 2.08 1.5-1.7 00.02-97.38 1089.81Kailt atila 1962 0.38 0.18 0.07 0.60 10.9-13 98.37-O.9. 1040."Mobigenj 1963 0.41 0.70 1.01 2.12 0.03.05 07.l-97.4 999.12Oakhrabmd 1969 0.74 0.74 1.30 2.7t 2.0 94.8.1 1047.87Seutang 1969 0.06 0.1 8 - 0.28 N/A 96.94 N/AKut.Adie /a 197 0.06 0.72 - 0.76 N/A 94.49 N/AeIuman 19077 0.01 0.0 0.00 0.18 0.3e 9.22-94.4 1048.61Ftne 161 0.00 0.27 - 0.38 1.7l8t. 91.8.97.9 1049.64Kas" 102 0.02 0.11 - 0.1 4.27 98.86 1048.188aanibxear 1ol 0.10 C 06 0.07 0.24 1-20 0s.82 1061.18Fenchugani 1n67 0.01 0.25 - 0.3 O.6-4.45

Total 3.75 5.06 4.00 12.64 40.2458.9

9NL a barrel.MU * OtPle h Thermal Unite a 0.2S2 k- localor.cFr * cubic fet.

NNW * million (standard) cubic f*et.

ta Offhaor field.

Source: Petrabnglea.

Table 8.6EBTqICITY PRWXCCN ANO D IEIFrCN. 1675/40-1966/86(t8H IEXCCT AS NOTED

FIVE-YEAR AVEAGEI ------------------------------ AAL DATA--------------------------------------75/80 80/85 I 1680/81 1601/82 1982/88 1683/84 168 /65 16185/88 1688/67 187/88 188/89

Inut_l led capacity 8 768.7 970.8 818.2 687.0 919.2 1121.0 1141.0 1171.2 1607.2 2148.2 28e5.8

Oross Generation 1662.6 8524.9 2881.6 3806.4 8482.7 8666.2 4527.8 4800.8 6586.6 6840.0 7114.8Not Generation 173.1 81.8 2 286.8 289t.1 82s4.2 880o.2 4325.9 4872.0 501.9 6138.6 6717.1

Final conau Wtion 1194.1 2313.1 1 1894.5 2028.8 2366.6 2703.4 2840.7 8306.8 8485.8 3772.7 4665.0Billed consumption [million Take] 417.7 2618.2 1835.6 2041.1 8281.7 8616.5 4052.8 5771.6 8278.4 7661.8 6674.0

CONSU.TI0N BY Srr0R I

Domestic 185.2 44U.4 I 262.1 836.1 438.6 520.2 657.2 71s. 89S.4 e50.0 1096.8Coe-ercil 152.2 267.4 5 s26.2 270.8 235.9 251.4 249.9 278.1 Es.7 391.1 531.4Industrial 769.7 1480.7 I 1021.7 1856.1 1473.7 1712.0 1608.7 1562.S 1729.1 1648.2 2380.5Agriculture 81.6 42.9 36.0 29.6 87.4 58.4 s6.2 51.1 s6.2 62.9 6s.8Others 50.5 146.4 I 58.5 46.7 212.6 140.5 270.6 696.3 461.5 525.5 638.0

Totsl 1187.4 2386.9 1789.5 2028.8 2e8.6 t2677.8 2840.6 8306.8 3485.3 3772.7 469s.0

Loas" (Utility only)/a 70S.2 1188.0 M 6ss.8 1008.1 1034.1 1288.8 1887.0 1463.5 2101.6 2787.3 2416.6as I at gross generation 87.8 83.7 I 84.8 83.2 80.1 82.S 37.3 81.1 87.6 42.3 84.0

/a Includes station auxiliary use.

Source: Bangladesh Power Development Board.

Table P.7RAILWAY STATSTICS. 1972/78-1966/89

72/75 75/80 80/85 1980/81 1901/82 1982/85 1988/64 1484/85 1985/86 1986/67 1987/88 1988/89

Rout. length [km] /a 2874 2876 2888 I 2884 2884 2887 2s92 2s92 2918 2792 2748 274Broad gauge o9 988 976 974 974 974 978 978 980 970 924 924Motor gouge 1910 1910 1912 1910 1910 1914 1914 1914 1988 1622 1822 822Narrow egauge 0 0 0 0 0 0 0 0 0 0 0 0

Locomotives. total 603 423 S86 1 410 417 410 386 806 290 291 307 airDlesel, total 171 178 276 240 2s3 802 299 268 290 291 807 307

Broad gauge 84 84 691 82 64 76 78 78 78 78 75 75Moter gauge 138 143 208 I 18 l8 226 225 218 215 216 282 232

Sten, total /b 331 247 1091 170 164 1O8 87 18 0 0 0 0Broad guge 118 81 321 84 80 22 18 is 0 0 0 0

setergauge 216 188 771 11 114 8s S9 0 0 0 0 0

Broad gouge 4221 4450 4182 1 4149 4302 4292 4088 4080 4078 4073 4073 4078Moetr gauge 11718 12204 12898 1 12588 12705 12684 12697 12484 123S7 128 11884 164Total unite 1693 16784 18779 I 16717 17007 16976 18683 18814 184O 18388 18957 18957Total 4-wheol- unit. 18327 18734 19814 1 19686 19898 20196 19892 19720 19629 19848 1909 19096

Freight Carried E'ooo metric tonsl 2877 32e9 8o29 I 2984 a2s0 2998 2939 299 2841 1984 2518 2494Rico 127 275 248 191 278 249 241 262 208 132 188 189Paddy 87 196 3130 141 238 94 104 78 81 47 47 87Wheat 699 sis 688 I 478 873 s8o 704 874 427 378 643 603

Raw jute 8ss 30 222 218 218 224 228 226 171 16 143 182Jute gooda 18 28 281 26 80 22 18 30 12 14 21 1SSugarcane 141 388 820 a80 364 29 ss8 21 218 284 807 148Sugar 8S 70 54 31 80 78 ss aS 37 26 81 33Salt 8a 117 941 102 70 eS 11 l18 82 62 61 s8

Frti l izer 64 297 349 a aas 387 828 296 419 404 317 882 s8sCement 89 109 126 I 1SS 8S as 178 10 116 77 as 73coa I l1 167 871 8S 8l 49 40 29 59 34 72 70Petroleum products /c 119 147 12 I 84 179 l1 99 84 100 7s 117 97

Total ton-km 881108 7877s8 809814 1 788668 84448 s176 775 822917 612225 8254 678267 858668

Fuel Consumption [.tr;c tons) Coal 18961 19818 3 236s8 23400 16278 168 16886 14768 1767 - -Dieel oil 12810 40982 I 3ssss 40395 898s0 44886 44e99 44696 80417 so844 41423Furnace oil 24772 22646 49418 3702S 18679 8919 2191 1122 889

--- -- -- - -- - - -- - -- -- -- - - -_-- - - - - --------------_ _

/a Total track mileage in 1978/79 was 48S0 km./b Including 6 narrow gauge eteam locomotives./c Eacluding fuel for the railways *-d for the military.

Source: Ministry of Communications.

Table 6.6TRADOPOR STAT1STIC. 1974/76-lIS?/6S1

eit s rc FleetTotal t o.) 708 m 91o Sol gm am a"44 8 824 4e 4 480

Self-propelled bsrge is 9 6 a a 6 8 6 a a a

InlandAriver bers s/ 412 818 26 267 288 no 232 24 289 246 195Inland tugs 3 26 26 2g 25 29 6 24 28 22Mainlandtugs s1 261 24 28 26 26 2 19 t1 19 19Coetere /a 25 24 28 23 23 2 21 21 20 20 20

Country BoatsCargo ('000) a? 92 92 4 go 1oo00 102 104 106 106Pasenger (o000) 161 170 1,1 177 160 1in U 0l 1t9 192 195 200

ROD TRAAOW STATISTCS

Road Hileage, totl /a (miles) 2698 2927 8002 886 4098 481t 4969 6SW 68 n.m. a 3*

high (e 1s) 2458 2838 260 26dt2 2s66 2966 31611 62 4041 n.e. n.m.low (Siles) an2 894 894 674 140 1680 1761 28B4 299 n.. n.e.

Bu"e operating, privaet c No.) s2 5195 574? 6or 62 686 70 7523 781 7940 6152 039mTruck operating. private ( No.) 947 11069 1147 11413 16 14286 14420 1499 1 1 16064Bullock cart (est.) ('CO0) 67 13 I8 18 189 141 142 144 14 147 149

A Oats cover only road construed and maintained by the Road- nd Highway y ssartent. Highs rds arrads with cesant. concret. Wtuainoe concrete or bituelnou eurface: glass roads are roads with

stong. reavel. brick, or arh surface, but which are properly *ligned and have drainage Otructures.

/b Including Jute boate and flats./a Can travel up the min river re7tes.

Sourc: Bngladesh Bureau of Statistic..

Table 9.1C8NWER PRICE INIDI1CE, 1980/1-19881/89

M180/1 1981/82 1982/83 1983/84 1984/85 1985/86 1988/87 1987/88 1k!8/89

0144JA MIWL DOCCI (1973/74 * 100]Food 244.69 288.15 312.77 350.47 387.89 429.48 483.42 535.42 565.88

Fuel A Lighting 293.08 376.71 461.27 466.39 502.64 539.30 542.20 S62.09 621.16

Housing 348.64 374.66 402.19 416.81 45S3.74 506.62 550.78 647.71 723.31

Clothing 176.78 194.87 200.46 224.98 255.15 274.23 202.59 319.08 347.98

Niscellneous 232.89 264.59 299.09 335.36 392.25 419.38 459.52 524.37 597.62

overall 254.97 296.50 325.94 357.47 396.58 436.03 481.18 536.02 5s8.a9

P.rcent incres" 12.5 16.3 9.9 9.7 10.9 9.9 10.4 11.4 8.0

OIAKA CVENENT MOYuS (1969/70 100]Food 603.64 607.43 725.47 824.25 933.53 1024.32 1169.71 1255.52 n.m.

Fuel A Lighting 657;47 817.75 883.19 894.14 1057.34 1210.31 1263.71 1329.65 n.m.Housing 879.59 933.17 1040.85 1057.00 1113.86 1268.60 1415.86 1689.98 n.m.Clothing 653.56 724.55 792.56 837.0S 925.93 967.90 1034.27 1132.91 n.m.Miscellaneous 531.48 578 27 634.93 712.58 795.78 817.98 677.t5 977.32 n.m.

Overall 628.28 708.84 757.96 832.94 931.47 1014.33 1129.69 1241.17 n.m.

Percent increama 12.0 12.8 6.9 9.9 11.8 8.9 11.4 9.9 n.e.

C 0mA88 ICUSTRIAL WORKERS t1969/70 100)Food 5U3.12 646.36 679.33 801.25 907.99 980.11 1116.S5 1187.93 1242.69Clothing 574.83 687.01 766.32 929.86 1037.50 1082.19 1122.97 1139.85 1189.20

Houming 783.94 897.52 1023.79 947.63 1060.91 1264.60 1409.37 1487.63 1542.33

Miscellaneous 501.56 533.67 SS3.73 606.47 695.44 718.19 741.51 759.28 811.26

Oveal1 578.55 662.25 707.56 807.03 913.98 989.60 1105.20 1165.95 1219-85Percant increaee 7.3 14.5 6.8 14.1 13.3 8.3 11.7 5.5 4.6

KHU:NA INXUSTRIAL WORKERS (1969/70 100]Food 524.81 617.30 U0.63 712.87 789.09 878.96 1029.00 1081 26 1183.39

Clothing 53S.06 582.48 626.05 736.45 867.51 942.56 998.42 1012.56 1081.80

Housing 720.40 781.28 734.74 781.90 862.94 1057.42 1269.65 1397.02 1550.49;iscellanetou 467.51 511.78 526.05 562.34 600.82 669.23 737.89 736.33 820.24

o0erall 538.16 617.88 635.88 708.01 784.37 882.33 1017.75 1067.43 1169.04

Percent incressm 8.1 14.8 2.9 11.0 11.1 12.56 15.3 4.9 9.5

NARAYANOANJ INDUSTRIAL WORKES (1969/70 1003Food 562.41 65s.52 681.79 774.72 562.97 930.58 1052.18 1159.12 1229.2s

Clothing 653.95 816.36 769.49 809.e8 913.53 1035.11 1131.55 1179.78 1259.72

Hou;ing 774.s2 932.00 955.46 891.11 1078.96 12S7.59 1371.20 1S35.97 1681.96

Hiecellaneous 515.27 585.85 593.29 604.44 674.08 725.19 757.69 789.78 866.74

Overall S87.29 689.37 707.13 770.96 868.73 950.4s 1059.36 1157.76 1236.66

Percent Increase 9.0 17.4 2.6 9.0 12.7 9.4 11.5 9.3 6.8

RLEAL CGNSUM PRICE INDtCES FOR SELETED DISTRICTS (1973/74 * 1003Dhak. 218.0 261.0 282.0 315.0 S38.0 369.0 420.0 454.0 479.60Chittagong 217.0 265.0 286.0 344.0 380.0 391.0 456.0 489.0 507.80

Raijhahi 219.0 267.0 274.0 295.0 340.0 364.0 408.0 439.0 467.40

Khulna 204.0 252.0 260.0 284.0 320.0 333.0 391.0 415.0 446.40

Sylhet 224.0 275.0 290.0 329.0 354.0 375.0 437.0 477.0 n.a.

Rangpur 208.0 250.0 276.0 305.0 368.0 381.0 430.0 465.0 n.m.

eangledesh (rutell 214.0 262.0 278.0 312.0 SS3.0 369.0 424.0 436.0 475.00

Notes: Dhak. middle income indem ref*se to families with 1973/74 incosm of Tk 300 to Tk 999.Dhaka government employees index reofer to non-gazetted mployee with monthly salaries of

Tk 100 to Tk 400 in 1969/70.

Source: angladesh BureSu of Statistics.

-* ~~~~~~~~~~~~~~~- - 0

T.bl. 0.2NATtQRAL Cn AND PLROLEI FRiJCUCT PRICES. Io9-1966

Effect;i. Oet.NAT-RAL 015TITAS S71TE9 JI.. 7, Ju. T. July 1. Aune 30, Jun. 27. Jun. 30. QIJu 7. Ju.. 18. July 1. JQI 1.I1jNCP 1980 1961 19t2 1963 19s4 1965 3046 1967 19ee 1966

SLK WcRSCost of C0s/lCF (O-field). 5.9s 7.53 9.50 10.00 11.45 13.60 16.85 21.72 24.97 28.16nclud;in ose. MYty /0 4.50 6.00 0.00 0.60 0.e0 12.60 15.72 20.30 23.28 25.9e

II4STR14LCoct of C .IPCF (.u-f .4)C - - - - 22.65 21.13 37.06 37.06 43.79 51.02Including Gseev. duty /V- - 21.65 28.13 3S.73 35.73 41. 9 46.01

flFER -JuSm

Cost of CsICPF C.u-fl.td). 6.46 15.46 16.00 22.65 - -nIncluding .c ;s, duty /v 6.00 14.00 17.50 21.65

END -US PRCES/MCIF lNUWSNO EXCISE OIQUESSup& Cunsuser

Power aunefetion 7.76 9.S0 10.60 11.0 1D.05 IS.6 19.09 24.02 28.s54, .00FPrtilies. Product;on 7,75 9.30 10.60 11.60 14.05 16.66 19.09 24.62 21.5 26.54

Industrial crnsus... 16.00 27.75 31.00 36.00 38.00 43.20 52.14 62.14 N." 30.00Coae.eele Census., 19.00 26.00 51.00 86.00 45.20 56.24 65.ss 65.00 *7.75 110.00

Wmeehold Con,"'.pit..sd 16.00 20.00 27.00 34.00 34.00 40.e0 44.88 66.10 86.0 65.00)lt red/J nth

- Stews (on. bw.e.) 22.00 25.00 35.00 45.00 45.00 e0.00 66.00 60.00 92.00 100.00- Sto". (t.e burn..*) 40.00 45.00 63.00 o.o00 60.00 100.00 110.00 IS.M 160.00 170.00- Additiens beun.r (sh) 14.00 16.00 27.00 34.00 34.00 41.00 45.00 66.00 64.00 74.00- O." (s.eh) 34.00 35.00 1s.00o 74.00 74.00 89.00 97.00 121.00 33.00 161.010- Additimol "en (soeh) 17.00 19.00 29.00 37 00 37 00 5.00 49.00 61.00 70.03 61.00- C0 II (ueh) 34.00 38.00 s6.00 74.00 74.00 39.00 97.00 122.00 136.01 161.00Addi;tionl grill (oack) 17.00 £9.00 20.00 37.00 37.00 45.00 49.01 61.00 70.00 1.001- Vet., rests, Up to 20 gel e8.00 7e.00 117.00 347.00 147.00 177.00 104.00 242.00 71.00 S2.00- Veto- hIst. sbo 20 Gel 64.00 03.00 145.00 164.00 164.00 231.00 242.00 303.00 346.00 463.00- Oy.' (*s") 101.00 112.00 175.00 220.00 220.00 265.00 291.00 364.00 410.00 405.00- ReOfie'ator (.,ch) 64.00 Z.00 117.00 147.00 147.00 17.OO 194.00 242.00 270.00 322.00- coo I ilt, gdn/0.ts-st U 45.00 56.00 64.00 74 00- C. I ,ght. nt- 05 23.00 2e.00 2.00 37.00WMis. Choe,ipeaInth

Doeslic (unssts.ed) 18.00 20.00 27 00 34.00 J4.00 41 00 83 00 64.00/c 97.001cCobe.rciel 95.00 140.00 155.00 ISO 00 ISO 00 272 00 327 00 5S0 of SO ofsenction toed *enction load

PETROLEUM PRWUlrS July 1960 Ny 3961 Septembe 1963 July 1182 Nsrch 1983 July 1964 Jun. 196 1967 Jun. 19TAKA/lPRIAL CALLON E-.Rst Eu-dpot E-Wf E-depot E.-Ref E--dopot E.-R4f E-depot Eu-Ref Eu-depot E.-deot E4-Rsf Eu-doot Eu-Rof Eu-depot E.4s Eu-dpot

P,ssl;e COsolue (e;tlh 1HDC) 42.07 48.66 45.85 62.52 48.14 54.as 62.s8 60.30 66.64 75.S6 76.15 54.42 61.51 54.42 61.51 U4.42 61.51Rg"uI, Coeoli" (I) 40.40 45.37 42.16 48.36 44.27 sO.52 57.55 63.60 60.43 6. 66 67.19 52.32 s8.ss 52.32 se.55 52.32 se.55Jot FueI (JP-I) 2e.72 28.31 29.43 31 25 30.90 32.75 40.17 42.02 40.17 42.02 42.84 36.14 39.14 36.14 39.14 66.14 39.14x ros.n (S20) 16.00 17.65 20.73 22.50 2169 23.63 30.71 32.81 30.71 32.61 32.82 27.91 30.50 27.91 30.50 2701 30.SDDiesel 0;1 (NW) 20.23 22.50 20.02 22.50 20-96 23.63 30.00 32.81 30.00 32.81 32.82 27.91 30.50 27091 30a50 27.0l 30.0Fuel 01 (F196) 11.61 13.00 15.12 16.66 1.54 1751 22.73 24.54 22.71 24.54 24.55 19.28 21.37 10.26 21.37 19.26 21.37ou.fi.d Pet,oluue CeC (Li0 30.00 54.38 50.00 54.31 50.00 64.36 50.00 s4.36 95.00 105.00 10.c00 49.50 113.50 40.50 113.50 40.50 113.50

P'ieo soe ulecd to 6 7

s1 c ylfnds. 3*11h *ftft fce.e 12 Augut 1962.E--r.fmnerp ead s.-depot t Chitt.un. tn July. 1964 W'i" .r f;cd In 0iteus el;lh *norSdjOentsIn 0e-d4ept Pre.e a.o-.. E.--of;...y pI ces eor not ch.engd.

DeabIs.

Soveu.c T*;ts Cu. Cosuny *nd u nal.d.uh Petrolu sCorporutlo..

Table 9.3 -227-ELECTRICITY TARIFF STRUCTUREOF THE BANGLADESH POWER DEVELOPMENrT BOM(Effective July 1. 1989)

Consumr Oroup ;inimum Charge Unit Rates

Category A: Reaidential Not applicable - Monthly consumptienLight and Poyer up to 200 KWh Tk 1.55/Kdh

- Monthly consumptionfrom 201 KWh to 600(Ah Tk 2.95/Kl8h

- Monthly consumptionover 600 KWh Tk 3.85/KWh

Category B: Agricultural Tk 12S/HP per monthPumping during season. Tk 1.75/KWh(up to S0 M) K

Category C: Small - Without tim-of-dayIndustrial Consumer meter Tk 2.40/KWh(up to 50 MW) - With time-of-day

"to"- Off-peak hour, Tk 2.10/KWh- Peak hours Tk 4.45/KWh

Category 0: Non-residential Tk 100/KW of sanctioned Tk 1.95/KWhLight and Power load(up to SO KO)

Category E: Commrcial Tk 125/MW of sanctioned - Without tie-of-day(up to 50 KW) load meter Tk 2.95/KWh

- With time-of-daymeteor- Off-peak hours Tk 2.1S/KWh- Peak hours Tk 5.70/KWh

Category F: Medium Voltage Tk SOIKW of sanctioned - Without time-of-dayCeneral Purpose load but not lees than meter Tk 2.20/KWh(up to 5 MW) Tk 8000/month - With ti.-of-day

mter- Off-peak hours Tk 1 .80/KWh- Peak hours Tk 4.25/KWh

Category C: Extra-high Tk 80/KW of contracted - Off-peak hours Tk 0.95/KWhVoltage Ceneral Purpose load - Peak hours Tk 2.95/KWh(132 KV end up to 160 NlW)

Category H: High Tk 80/Ml of contracted - Without tie-of-dayVoltage Ceneral Purpose load meter Tk 2.05/KWh(33 KV and up to 10 MW) - With time-of-day

meter- Off-peak hours Tk l.70/OKWh- Peak hours Tk 3.80/KWh

Category I: High Voltage Not applicableBulk Supply for RhB/Palli Tk 1.28/KWhBiddyut Samity

Category J. Street Light Not applicable Tk 2.25/KWhand Water Pumps

Source: Bangladesh Poser Development Board.

Table 9.4ILeSA PRpces OP C0II IN0 UtA AREAS. 190/81-19t/e9

(Taik Per unit ehown)

TroditionalimUnits ila/ 1961/,2 19" 10113,64, 1964/6 9i/64 196/67 1937/66 191/69

idmeur _mund 80.1S 488.14 400.0 419.42 896.42 865.06 700.33 749.76 784.90

Kheeri esod 251.62 230.90 218.46 301.00 219.48 248.61 41U.07 334.4 409.77

Potatoes. leal (best quality) Pound 112.26 103.11 79.02 122.9 124.36 142.21 192.97 186.86 22.91

Rohu fish (large cut pieces) mound 962.00 1067.00 1007.00 17.76 1460.00 l190. 13 Wt7.17 2264.67 2206.60

Chicken leug. fresh 100 91.20 101.00 107.00 121.9 144.46 177.9 169.33 168.36 218.00Chillies, dry (superior qulity ) mund 1080.76 W7.6 12.70 1181.06 1441.36 619.69 964.00 19.01 1297.99Turmeric 0b4.1 b"t quaity) mumod 486.10 476.17 854.06 VW." 1874.1 1441.00 986.31 936.85 1212.63

Muotard; 1l, lecal ( bee quality) _und 1092.02 998.88 1004.69 1*4.2? 1408.5 13920.87 1467.33 1478.45 1870.08

oh.. (coo) sound 2497.00 8106.00 8240.00 8816.90 4218.3i 8107.47 889.00 6741.00 6814.34

Coconut oll. iapopted (sup. quality) aOund 1062.86 1117.46 1006.80 1468.8? 1.91 1480.11 1297.17 16612.11 1941.01

VegCtable oil (Pakvan) 35 Ibe. 378.06 391.32 452.48 569.02 784.06 697.26 694.86 784.86 780.00

Tobacco leaf (atiharl. eup. quality) eaund 910.18 689.67 768.86 994.60 1111.84 1079.12 1038.60 15.61 1341.26

betelnut (Tanti. whole. dry. aup. quality) ound 1228.49 1200.89 973.48 12.63 1601.89 206.81 1691.17 875.8 1487.72

Babel leaf (maium Oise) 6400 291.86 389.61 476.49 461.51 844.76 829.69 S8.33 617.60 1164.00f;re_od, amari 100 eound- 2361.00 2667.00 296.00, 2906.09 696.21 6541.78 8718.90 6746.7r 3402.62

Kerosene whit. i gea lone 83.00 108.00 140.25 135.72 ,11.68 13.13 Ut10 131.92 132.00

Cigarettee (Cepetan) 280 98.82 100.16 1.72 125.10 12.66 189.99 18.86 164.85 178.60

Match" (boz of 40) Oree 26.90 84.36 43.09 38.78 40.80 u.82 60.17 69.35 70.17

Paper. 10 lbo. foolecp ream 90.11 98.56 109.54 118.40 120.62 117.89 119.68 120.74 142.28

Cylel tye. imorted (MeteSr Service) don 783.89 736.68 1140.61 1478.69 172.08 2097.80 1968.79 2294.51 2594.00

Cyclo tube, (Oeahi) dozen 260.26 282.20 286.18 257.03 348.91 413.7* 448.21 388.89 686.00

Longc loth (ad;Iue qua lity) 40 yarde 429.00 S02.00 849.00 648.00 7W.00 712.07 746.94 737.45 610.60

Metric Unite

Naser Ike 14.19 16.99 14.96 1S.86 14.60 18.67 16.76 20.09 20.28

Kh eeri ke g9.89 S.2 7.97 11.24 6.94 6.89 11.04 9.s0 10.96

Potatoea, local (bets quality) kg 4.19 8.68 2.98 4.59 4.84 8.61 8.17 4.20 6.06

Rohu fish (large cut piece) kg 28.61 27.82 29.44 34.15 89.1? 81.11 6t.SS 61.22 89.16

Chicken ogge. fret'h hundred 91.20 101.00 107.00 121.69 14.46 177.98 102.33 181.36 218.00

Chillies, dry (tuperior quality) kg 39.22 38.67 19.14 43.00 6.80 16.60 21.68 42.68 84.78

Turmeric (O.tldi. beat quality) kg 17.08 17.77 20.68 49.49 58.76 86.61 28.67 28.09 33.s7

mustard oil, local (beat quality) kg 40.76 87.18 87.80 82.04 84.SS 38.30 39.68 89.46 42.07

o**. (cow) kg 67.00 68.81 68.98 69.27 113.19 16.84 144.48 168.85 169.20

Coconut oil, aperted ("up. quality) kg 40.41 41.71 87.87 85.48 70.36 89.6 34.78 44.6 82.01

Vegetable oil (Pokevn) kg 21.61 24.65 21.e0 38.6 47.80 48.92 43.78 46.27 48.96

Tobacco loaf (Notibhri. uip. quality) kg 33.97 81.33 29.25 67.13 41.49 26.91 27.62 29.38 88.94

Seteinut (Tanti. nhole. dry, cup. quality) kg 45.7r 44.61 86.33 45.94 67.24 54.62 48.81 42.21 89.06

Batel loaf (mediue size) thou-nnd 48.83 61.68 74.76 72.12 68.12 62.76 84.11 127.78 188.00

Firemfood, aezeri metric ton 861.22 1086.18 1094.72 1065.47 u36.89 1993.78 213n.44 2148.68 1270.00

Kerome, *hita lifter 4.36 S.6" 7.71 7.46 7.81 7.40 7.16 7.26 7.26

Cigarettee (Capstan) thou tend 382.06 432.72 SA2.8 498.20 818.44 689.9e 602.24 68.82 702.00

Matche. (boa of 40) thouand 200.69 286.61 299.24 269.10 268.33 446.10 478.40 412.18 487.29

Paper. 10 Ibe. foolwap thousand 100.22 191.12 219.08 Z0.60 241.54 244.86 249.65 211.64 296.35

Cycle tyre. impoted (Mster Service) oech 68.32 61.40 98.08 122.61 148.80 168.9W 164.07 191.21 216.17

Cycle tube. (Deehi) each 22.36 21.6S 21.41 21.42 28.68 34.48 R6.04 29.67 69.67

Lcngclotl (medius quality) meoer 11.19 13.68 14.96 17.87 19.61 19.40 20.46 20.16 22.16

Note: All pric"e e o repreaet simple averaeg, of vmldy average price. during the fiacal year

* for the .tban entners covered.

Source: Bangladesh treasu of Statistics.

Tablo 9.8W PRICE IDOICS OF UIOLL*MALO AM KM. RaIstS,. 1976/M7-1r980j9(39,6/70 * D10)

Veiglet. is$at total 1976/77 1977/78 1978/79 1979/60 190/81 1981/82 1962/I8 19113/4 1964/48 196/66 196/6? 19w7/ 196/S9

AUIOCLPAAL PR0UCTS 67.67 875.14 408.96 443.89 499.132 838. f05.0D 616.30 781.74 929.00 6.00 1.48 1146.25 S21.95Foo 41.06 411.42 86.96 442.8 6.14 Jf1.27 48.22 U6." 742.62 msoD 912.00 1072.20 1110.6 119.22Pa. mtaeile 25.94 489.40 94.62 49s.86 429.23 494.72 87.18 "4.47 74.Y 1069.00 92.00 106.92 11W4.8n 1521.1Fuel 0.6S 40.86 67.65 412.94 476.7Tf 61.14 669.41 #3.12 797.74 1092.00 1256.00 1118.3 1417.6 146 U.24

D61AT21L 8. CTS 02.1J 407.6 440.80 442.88 868.91 894.09 62.60 75.01 M 70.95 67.00 11.00 "90.S0 969.66 1057.60Food 7.90t 416.8 4S2.29 469.40 517.48 61i7.06 890.45 611.1 760.2S 987.00 10.00 12.44 1111.60 19.48Res _terial. 6.36 418.464 8D.22 439.16 61.24 808.2 817.24 W87.64 66.67 76.00 749.00 601.0 6."996 90.Ful and lighting 6.U16 89.4u 404.67 410.66 943.67 621.92 79.60D 960.47 986.42 977.00 20.00 1021.92 1041.74 1064.52lhnufectur.e 11.86 403.10 422.10 442.7 2.32 647.64U 07.81 762.02 766.88 7.00 648.00 6M.0 9.6191, 9919.51

ALL PRODUCTS 100.00 S86.60 418.60 486.98 820.88 84.55 62D.J4 t62.20 760.96 96.00 926.00 1011.98 1090.64 1169.21

O1IflACW:AOPICLTI*AL FROTS 67.67 860.u4 416.06 476.80 512.2a 641.20 6Wa.47 44.23 7M0.26 898.00 1004.00 11I6.8 1144.61 1s22.81

food 41.06 666.66 899.u1 448.76 888.64 576.48 6M2.69 674.76 776.09 44.00 102s.00 117.60 1186.47 S219.01Re. e"riale 25.94 9.42 449.11 499.27 486.17 445.43 26.10 s9.u 736.97 977.00 967.00 106D.2 1126.61 1247.40Fuel 0.fS 8u19.99 67.06 404.71 U18.92 i1.76 6MY.4 711.76 642.35 477.D 1210.00 18.69 12t7.48 1414.90

Iti7RUIL I.PRXcT5 82.18 412.4t 440.40 487.73 587.96 608.67 U7.01 760.91 00.U 664.00 915.00 932.12 99.44 1067.111Fwd 7.6 8a.110 496.67 804.2 898.67 56.10 488.84 676.00 941.6 9814.00 1086.00 1112.24 1202.U14 6.06Ro. maetrial. 6.86 400.1 625.n 418.65 475.88 82.0 823.88 8".8 704.70 760.00 764.00 76.25 605.97 90.1 6F..# and lighting 6.16 400.16 400.61 468.42 677.2r ,62.6 009.09 1017.06 10617.81 10U8.00 1112.00 16.04 1164.67 1188.61P,6.dafactuee IS.4 86.25 40e.10 448.06 542.81 480.18 698.46 771.97 709.87 744.00 766.00 606.43 669.67 t=.6

ALL fRTsSO 1.00 877.2 428.52 470.84 819.00 61.27 6866.75 411.78 774.67 9.00 975.00 1070.25 1096.67 1175.17

41C0 LARI1. MRcTs t7.67 847.78 896.88 444.94 41.41 806.98 860.79 596.20 726.98 66.00 919.00 1028.29 1I0.16 1174.69Food 41.06 6.816 87.s90 429.67 827.7 i4s.40 62.98 4u.u 723.02 617.00 911.00 1029.6 I 1('8.04 1U2.40PeN mterit l 25.94 864.88 427.49 44.80 4061.47 449.42 86O.46 661.n9 729.51 96e.00 919.00 102.4 19i.9 1300.62Fel 0.48 402.3s 408.ti 468.68 820.0 41.76 701. 49.41 770.79 1018.0 1291.00 127.43 1a.04 1442.U1

t05KMI FR. PCT5 82.8 891.88 481.69 449.86 84A.9S 608.02 867.44 740.8a 7u.23 684.00 904.00 918.10 964.12 1088.66Fod 7.96 412.49 440.73 480.40 816.59 62."4 594.72 627.76 M7.10 987.00 1014.90 1019.90, 1108.27 1212.1Re. mteri,l- 6.8a 897.16 811.18 414.42 S13.67 829.78 51s.79 862.44 497.u1 722.00 786.00 78u.3 774.12 961.06Ful and lighting 6.1 882.44 862.18 448.45 86.66 8I61.04 64.90 998.02 974.80 999.00 1089.00 1004.46 1064.6 1071.78Raeufactmfo 11.68 894.4 416.40 449.86 876.75 644.68 712.21 771.7 747.00 794.00 640.00 692.02 924.n 974.70

ALL FRUIS 100.OD 0 61.2 407.62 446.86 801.51 80.99 60f.6U 642.67 746.u1 MA.00 914.00 56.64 1047.78 1129.87Aeu.el Inciaras (6) 0.7 12.7 9.8 12.4 7.9 12.6 5 8. 16.2 17.20 4.60 .14 8.99 7.7n

Note: The wholesale price ir;dces (ba*e 1969/70 * 100) ore praared for ai, urban caster,s bealdeel (oheb.* Ch atbaoog.Rhulna. Rejahah;. Sythet and Raniu.) and cover 44 i0diridual iteal. Weights or. aiged is ;p owportlo. to te geoasIwo of production for each it" in the bae year 1969/70. The nstional indes rspecraet toe useightd aveaeof tho idice for the *ei arban cantrs.

Source 8angladesh Ile.... of Statistics.

Table 9.6 -230-RPLIC FOWOOAIN RATION QWTAS AM ID AM SALES *ICES. 198-1990lT/waundl(Maund * 37.826 kgl

Adult Cereal QuotasRicO Wheat (esers/week)

_________________- ------------ ______- (soer - 2.0S7 lbs.] Rice/Wholesale Retail Wholesle Ret Il -- ________----- Wheat

Effective Date lIAU Sale IUe- Sale Total Rice Wheot Ratio

Nov. 1. 1965 /a 25.40 26.40 17.62 18.80a Jan. 1, 1970 29.62 30.80 19.62 20.80

Jan. 11. 1971 29.00 30.00Jan. 15, 1973 28.82March 19, 1973 S.00 0.76 2.25 0.33July 1, 1973 38.82 40.00 28.82 30.00Sep. 3, 1973 38.00 28.00May 27. 1974 58.00 60.00 48.00 80.00February 24, 1978 2.80 0.50 2.00 0.25September 6. 1975 2.80 1.80 1.00 1.50Dee. 20. 1978 68.00 70.00 83.20 68.00Feb. 7. 1976 87.00 90.00 67.00 70.00August 31, 1976 8.00 2.00 1.00 2.00October 16, 1976 4.00 2.S0 1.50 1.67March 8, 1977 3.00 2.00 1.00 2.00December S, 1977 3.00 1.80 1.80 1.00Dec. 31, 1977 97.00 100.00 77.00 80.00May 19, 1979 117.00 120.00 87.00 90.00M1y 8, 1980 197.00 140.00 107.00 110.00 8.00 1.00 2.00 0.80Nov. 13. 1980 136.00 140.00 106.00 110.00January 8. 1981 2.80 0.78 1.78 0.48Apr. 11, 1981 /b 151.20 16.20 112.00 116.00Dec. 12, 1981 /c 171.00 178.00 120.00 124.00 2.00 0.80 1.80 0.83July 3. 1982 /d 191.00 195.00 130.00 134.00July 18, 1983 /h 2.00 0.50 1.80 0.3IJan. 3, 1983 /a 209.00 218.00 139.00 148.00Dec. 31. 1984 /f 262.00 268.00 167.00 172.90Dec. 1, 1988 269.00 278.00 178.00 181.00June 15, 1986 283.00 289.00 186.00 192.00Dec. 29, 1986 /a 1.£0 0.00 1.80Aug. 3. 1987 288.80 294.80 191.80 197.80Jan. 4, 1988 313.00 319.00 197.80 203.70June 6. 1988 318.60 324.60 204.80 210.80July 17, 1989 844.40 380.40 221.60 227.60Feb. 26. 1990 349.60 385.60 225.00 231.00

/a For wheat, since April 18. 1961./b Since April 11, 1981, ex-godoan/ x_-sll issue prices payable by

ration dealers have been differontiated slightly in accordance withthe distance of the dealers' shops from the nearest MOF warehouse ormill, while retail prices have been maintained at a uniform levelthroughout the statutory rationing are*as. A of January 8. 1983.the actual issue prices vary by up to Take 0.50 per maund for rice,

P paddy and wheat./c For wheat, effective December 12. 1981, the isUe price for wheat

sold to flour mills and large employers was set at Tk 129 per wound./d For wheat, effective July 3, 1982, the issue price for wheot sold to

flour millc end large eaployers was set at Tk 19 per maund./e For wheat, effective January 3, 1983, the issue price for wheat sold

to flour mills and large employeor wasi et at Tk 150 per sound./f For wheat, effective April 1, 1983./g Applicable for statutory rationing aras.Ih Effective on July 10. 1983, ration quotas are set in kilograms.

Notes: The wholesale issue price is the ca-godown/ex-mill price chargedto ration dealers (and includes the cost of gunnies). while theretail malee price is the price charged to ration card holdersbuying their permissible quote at ration shops. The differencebetween wholeale issue price and retail *oles price, thus,represents the official mrgin for the ration shop dealers.

Sourco Ministry of Food.

Tablo 9.7DAILY WA0i FOR WUNKILLED LABOR. 1979/80-1988/89 /a(Tk/dmy)

1979/00 1980/81 1981/82 1982/8S 1983/64 1984/85 1985/86 1966/87 1987/88 1988/89

AORICULTURE DIfTHOT FOOD]curen t 12.46 13.97 15.48 17.05 19.t8 24.29 29.53 82.92 82.80 81.89

1973/74 prices /b 6.20 6.53 5.91 6.13 6.28 6.88 8.00 7.76 7.08 6.51Index, 1973/74 - 100 98 98 89 92 94 108 120 116 106 97.00

FISHERYcurrent 18.34 18.34 21.56 21.48 19.80 22.51 25.42 31.27 n.n. n.m.

1973/74 prices /b 7.6S 8.87 8.28 7.78 6.38 6.38 6.89 7.38 n.o. n.o.Index, 1978/74 * 100 112 128 121 114 9S 94 101 108 n.m. n.o.

$"ALL SCALE RIRAL IDOUSTRY /dcurrent 11.94 13.90 15.59 16.38 24.25 28.88 81.45 89.30 40.16 48.69

1973/74 prices /b 8.94 6.50 5.95 5.89 7.77 8.18 8.52 9.32 8.81 9.20Index. 1973/74 * 100 118 129 118 117 154 163 169 18S 175 183.00

COTTON TEXTILE WOr(Scurrent 14.77 16.90 17.97 19.68 21.63 24.04 28.68 32.17 88.67 38.95

1973/74 prices /c 7.54 7.97 7.33 7.80 7.62 7.84 8.17 8.12 8.48 8.64Indeox, 1978/74 100 138 144 182 141 138 136 147 147 152 158.00

JUTE TECTILE WOWKEEcurrent 18.86 16.49 17.87 19.38 20.22 20.81 28.29 S2.71 33.10 39.12

1973/74 prices /c 6.82 7.78 7.17 7.69 7.12 6.52 8.06 8.28 7.64 8.68Index, 1973/74- 100 90 103 95 100 94 88 108 109 103 118.00

4ATC4 INDUSTRY WORKERScurrent 12.88 18.80 16.40 18.82 20.12 20.57 22.01 24.38 30.58 35.89

1973/74 pricos /c 6.42 6.51 6.69 7.38 7.08 6.45 6.27 6.15 7.23 7.89Index. 1973/74 - 100 101 102 los 116 111 101 98 96 114 124a00

84OINESOINO lDERy 14018(80current 13.83 15.89 18.22 20.88 22.78 26.00 36.48 34.40 30.64 38.69

1978/74 prices /c 6.80 7.28 7.44 7.97 8.02 8.15 10.38 8.69 7.26 8.38Index. 1973/74 - 100 109 116 119 128 128 180 166 189 118 187.00

VEnETABLE OIL LIEUSTRY 140RKS(current 12.89 13.72 15.40 16.08 16.47 18.14 20.93 23.48 26.30 30.69

1973/74 prices /c 6.32 6.47 6.29 6.29 5.80 5.69 5.96 8.92 6.2S 6.81Index, 1973/74 - 100 115 117 114 114 105 108 108 107 113 124.00

CONSTRUCTION WORKERScurrent 17.21 19.29 21.74 23.80 24.56 26.3S6 33.2 38.98 45.24 50.84

1973/74 priceo /c 8.78 9.10 8.87 9.14 8.63 8.26 9.49 9.84 10.72 11.27Index. 1973/74 e 100 124 129 125 129 122 117 134 189 1S8 l59.00

/a Based on averae wage rates for Ohaka. Chittagong, Rajehahi and Khulns Divisions./b Deffated by rural conauser price index./c Deflatod by the average of the consumer price indices for industrial workers in Chittagong, Khulna and Narryenganj./d Refors to skill workers.

Source: Bangl-desh Bureau of Statistics.

Tabl 9.8WAOE DIFF E8IlT S. 1978/79-1W8/89

1978/?9 1979/80 1900/81 1981/82 1982/83 1988/84 1984/88 1985/86 1986/87 1967/8a 1988/89

UNSKILLED IDNSTRIAL WORKERSS IDNSKILLUD ARICULTURAL WORKERS

* Agriculture 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00Fishing 0.91 1.2S 1.81 1.89 1.26 1.01 o."9 0.86 0.95 n.a. n.S.S.S. Industry 0.88 0.96 0.99 1.01 0.98 1.24 1.19 1.07 1.20 1.24 1.39Cotton Text l 1.09 1.19 1.21 1.16 1.17 1.10 0.99 0.97 0.98 1.10 1.24.Jute Textile 0.99 1.07 1.18 1.14 1.13 1.08 0.86 0.98 0.99 1.02 1.25

batbches 0.93 1.01 0.99 1.06 1.10 1.03 0.8S 0.75 0.74 0.95 1.13

Engineering 0.99 1.07 1.10 1.10 1.19 1.16 1.07 1.28 1.04 0.95 1.23Vegetable O;l 0.91 0.99 0. 0.99 0.94 0.04 0.78 0.71 0.71 0.81 0.98Construction 1.26 1.38 1.38 1.40 1.97 1.28 1.09 1.13 1.18 1.40 1.62

SKILLED WRKER U4SKILLE WORKER

I48USTRYCotton texti le 1.28 1.27 1.81 1.38 1.33 1.37 1.81 1.40 1.85 1.42 1.36Jute texti le 1.35 1.27 1.20 1.24 1.29 1.87 1.81 1.36 1.47 1.52 1.33Hatches 1.26 1.22 1.28 1.34 1.44 1.36 1.85 1.39 1.43 1.39 1.32Engineering 1.81 1.87 1.80 1.83 1.80 1.66 1.58 1.37 1.68 1.79 1.97Vegetable oil- 1.24 1.26 1.26 1.20 1.26 1.44 1.46 1.48 1.52 1.58 1.44

CONSTRUCTICN 1.98 1.94 1.98 1.98 2.04 2.04 1.98 1.90 1.97 2.05 1.98

ACRICUlLTURE 1.18 1.17 1.17 1.28 1.30 1.44 1.40 1.51 1.50 n.o. n.e.

FISHERY 1.34 1.30 1.28 1.28 1.31 1.62 1.64 1.69 1.98 n.a. n.a.

Source: Bangladesh Bureau af Statistics.

* ble 9.0AMICLlU,RL WIC PtAT7. tI960/-19W7/6CM/day. uithma foed)

01, lee.jOiefrita/DltO 190/41 i9 19t2/66 196"/66 19614/5 1/s 1968/67 1W67/6

Rojahabl 12.26 13.61 14.62 15. 21.97 26.22 27.00 25.67OlmaGPUr 10.80 11.65 14.00 14.33 26.60 25.00 27.91 27.15Ibwipur 14.00 15.17 14.83 I1.66 24.00 26.25 24.8S 22.49Were 10.00 12.06 15.80 15.00 19.86 25.00 25.0 25.85RbojhaIb 14.00 15.47 14.92 14.42 19.00 24.6S 27.75 26.47Pt.. 11.63 14.67 15.6 17.92 25S.00 30.00 29.1 27.90

jOuln. 15.57 15.9S 14.78 18.87 26.47 26.06 26.67 26.66Kuelitia 11.17 0.92 11.6 16.67 19.17 26.86 21.25 2.64 Jare 12.50 12.92 18.58 1.6 19.80 24.16 52.0 2.74Owin. 15.00 15.17 IS.6 15.56 22.00 80.00 29.66 26.46serlal 15.42 15.65 16.00 19.00 25.75 27.72 52.50 82.51Patuahhel 18.75 14.65 16.92 22.00 27.92 80.00 27.0 80.71

Ohab 15.60 15.11 16.56 19.27 21.66 27.45 80a.6 80.80ROumoejgh /a 11.67 14.17 14.71 17.86 20.96 26.96 30.96 80.91

f(.mai.gh) 12.80 15.60 15.00 16.75 20.67 85.85 80.25 80.82(K.sahat.j) 11.83 14.65 14.42 16.00 21.25 24.56 31.86 31.20

Tang;1 14.50 150O 15.0C 21.86 25.80 2.85 29.00 29.61ch*oc 16.25 21.25 25.80 25.75 25.00 29.00 82.42 82.68Fertidur 12.56 14.00 15.00 14.80 16.80 26.91 80.80 29.08

Chitt aoo 16.48 18.60 22.00 24.96 31.61 36.48 41.79 40.51Sylht 15.00 15.42 20.00 25.92 29.80 80.16 54.56 84.79

Cosi lS 15.00 17.80 18.75 25.42 80.80 82.2f 35.42 80.70NokheIlI 16.42 19.42 26.75 24.75 83.3t 87.60 40.42 87.24chitteago 18.50 20.25 24.25 21.25 88.68 42.o0 46.75 82.17Chittagong Hill Trect 17.25 2s.86 24.75 29.86 51.67 40.16 44.44 47.64

Country Averag 14.01 15.30 17.05 19.86 24.45 29.5s 82.92 82.80

6241. VA0 RATUcm/da. withtut fewd. U79/74 pg;cea)

Rajahl 5.68 S.84 S.39 5.25 6.25 7.11 6.87 5.67Otntjfwr 5.17 4.73 5.07 4.70 6.11 6.76 6.56 5.95Rangur 6.93 6.07 5.19 5.82 6.52 7.11 5.74 4.93s.rs 4.57 4.52 8.47 5.00 8.69 6.76 6.09 8.86Rajaahi 7.0e 5.7 S.44 4.69 6.59 6.75 8.54 5.00fabns 6.40 6.49 5.77 6.07 7.86 6.18 5.80 6.12

1lOI 6.68 5.62 8.6 6.47 7.02 7.60 6.76 6.86Ituchtte 5.47 4.61 4.45 6.67 5.99 7.86 5.01 5.2sie_ ., 6.61 S.1is 5.22 S.64 .09 6.58 7.67 6.60Ol.hIn 7.35 6.02 s.99 5.49 6.66 6.15 6.98 6.25

a S.b.etl 7.56 6.26 6.15 6.69 7.42 7.51 7.67 7.1isPtluaball 6.74 5.66 6.51 7.75 6.73 8. a 6.49 6.75

Ohab. 6.46 6.12 6.07 6.87 6.12 7.44 7.26 6.71I*oAiflgh /a 5.75 5.17 5.32 5.95 5.61 7.66 7.80 6.76Tango I 6.65 5.75 5.32 6.7M 7.02 7.41 6.84 6.54Ohba 7.45 6.14 6.38 6.17 7.02 7.66 7.65 T.16f.vidur 6.00 5.40 5.62 4.80 4.66 6.21 7.80 6.87

Ch@itt,a 7.44 6.61 7.67 7.46 6.70 9.67 9.88 6.66Sylhet 6.69 5.6S 6.90 7.27 6.6 6.U17 6.16 7.66C.ni la. 6.69 6.86 6.4" 7.78 6.80 6.75 6.85 6.7SN.hhalI 7.38 6.60 7.64 7.62 9.42 10.16 9.55 6.17Chittaseng 6.52 7.64 8.45 6.18 6.90 11.40 11.60 11.44ChiOtsons Hill Tract. 7.95 7.6 6.6C 8 6.60 6.8 5 10.6 10.45 10.45

coutry i£e.,.a 8.S5 5.90 6.1a 6.34 6.90 6.00 7.76 7.06

_______ - --------- --------- ---------__ _ _ _ _ _ _ _ - ----- __

/ Includin jam1pur.

Notes Notinanl. division. en diatrict fiaurae sbh n aeo unaighted aveae" of' wag

< INDIA ~~~BANGLADESH

\ab J T> )? \ ¢; O ~~~~~~~~~~~~~~~~~Upazilla Headqwfrers ~~ Upozillr Boundaries'Xd/ ' oy9^.L o4tb )to ^ <t ,^t4't * ~~~~~~~~~ZiBqa Hwdquqrters- 7illq BoundaJries

26~~~~~~~~~~~~~~~~~~~~~~~~~~ D [ivision Headquarters - --ivisionq Boundaries 26l

. ' J '' S f~~ ~~~~~~~~~~~~~~~~~~~~~ Noia aiolt 'rwialBudre

i" ' ~~~~~~~~~~~~O

X,' ,R'aJ'' W )K ,~~~~~~~~~VI

i'8~~~~~~t1

I25 NNEIA ;TS

> *s-~~~~~~~~~~ i J ^ , t3>~~~~~~~~~~~~~~~~~22> -~~- j { 1d 1 X,Ur/ .. ,,, gAWr~~~~~~H gz

-23 2;

' r-iW-'

INDIA 41."'i t <

N ~ ~ ~ ~ ~ ~ oO H v. ,0 I,o 2,0 30 Xq 50M11FS ( t M Y AR~~~~C

,' ~ ~~~~ ~ ~~~~ -21 O 20 40 40 Sq KIAIETFS a21

a~~~~~~~~~~~~~~~~~i 511 .O KMRS2

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