Contractionary monetary policy an IMF ‘prescription’: Unnayan Onnshan
It fears GDP growth rate may dip to 5.47 pc
Dhaka, June 8 (UNB) - The Unnayan Onneshan, an independent think tank, in its quick budget assessment has said the fiscal measures, suggested in the proposed budget coupled with contractionary monetary policy and orthodox exchange rate management, are part of a three-year programme agreed between the government and the International Monetary Fund (IMF).
“The programme articulated in the Memorandum of Economic and Financial Policies (henceforth IMF-MEFP) is a typical IMF programme of austerity measures, which in recent times have come under serious attacks from mainstream economists for inducement of slowing down economic growth” says the research organaisation.
Terming the recent macroeconomic pressures as a making of the present government, ensued by wrong choices of policies, stemming from chaotic management of the economy and pursuance of policy conditionalities in order to be eligible for the loan from the Extended Credit Facility of the IMF, the Unnayan Onneshan cautions that these will have a knock on effect, particularly on investment, leading to a deceleration of growth of national output.
The Unnayan Onneshan estimates that the real GDP growth may reach as low as 5.47 percent in the 2011-2012 and the IMF also projected a GDP growth rate of 5.5 percent. “If such policies and instruments of tightening remain in place and no recourse is made to escape the trap, the research organisation alerts, “The GDP growth may further dip in 2012-2013.”
Expressing its concern, the Unnayan Onneshan further says the contractionary monetary policy to curb inflationary pressure resulted in slump in investment, particularly by the private sector through increasing the cost of fund.
“Thus, ever-increasing domestic borrowing of the government and low foreign exchange reserve due to mounting petroleum bills resulted in crowding out effect and squeezed the scope for domestic investment.”
About poverty, the research organisation says the basic problem of poverty lies in its concept that poverty is the manifestation of social property relationship. “However, slump in investment has squeezed the scope for employment generation opportunity without which the process of alleviating poverty is next to impossible and the overall impact may lead into stagnation in the pace of reduction in poverty,” it added.
“The programme articulated in the Memorandum of Economic and Financial Policies (henceforth IMF-MEFP) is a typical IMF programme of austerity measures, which in recent times have come under serious attacks from mainstream economists for inducement of slowing down economic growth” says the research organaisation.
Terming the recent macroeconomic pressures as a making of the present government, ensued by wrong choices of policies, stemming from chaotic management of the economy and pursuance of policy conditionalities in order to be eligible for the loan from the Extended Credit Facility of the IMF, the Unnayan Onneshan cautions that these will have a knock on effect, particularly on investment, leading to a deceleration of growth of national output.
The Unnayan Onneshan estimates that the real GDP growth may reach as low as 5.47 percent in the 2011-2012 and the IMF also projected a GDP growth rate of 5.5 percent. “If such policies and instruments of tightening remain in place and no recourse is made to escape the trap, the research organisation alerts, “The GDP growth may further dip in 2012-2013.”
Expressing its concern, the Unnayan Onneshan further says the contractionary monetary policy to curb inflationary pressure resulted in slump in investment, particularly by the private sector through increasing the cost of fund.
“Thus, ever-increasing domestic borrowing of the government and low foreign exchange reserve due to mounting petroleum bills resulted in crowding out effect and squeezed the scope for domestic investment.”
About poverty, the research organisation says the basic problem of poverty lies in its concept that poverty is the manifestation of social property relationship. “However, slump in investment has squeezed the scope for employment generation opportunity without which the process of alleviating poverty is next to impossible and the overall impact may lead into stagnation in the pace of reduction in poverty,” it added.
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