Donors won’t cut aid, will try to increase it

Bangladesh Bank Governor Salehuddin Ahmed yesterday said multilateral donors like the World Bank and IMF would not cut their assistance to Bangladesh in the wake of global financial crisis.
“They won't cut aid from their commitment, rather they will try to increase it, if possible,” he told reporters at Zia International Airport on his return from Washington, DC, where he attended the World Bank-IMF annual meetings.
On the sidelines of the annual meetings, the governor rang the alarm bell at an international roundtable on “The Impact of Financial Crisis in South Asia” that a slowdown in ODA and bilateral fund flow would mount pressure on the government budget in Bangladesh.
It will result in affecting the ongoing poverty alleviation, social safety net, health and education programmes, he added.
Replying to a question, Saleuddin said the central bank would give a careful consideration to the foreign exchange rate as taka remained stable for quite a long time.
Local manufacturers and exporters already expressed concern over the possibility of losing competitiveness to other countries, as their respective currencies depreciated against the dollar due to the crisis.
“We'll have to look at the import costs as well,” said the governor, adding that the impact of foreign exchange rate on inflation deserves a deep consideration. “We don't want to 'disturb' the exchange rate at this moment.”
He, however, admitted that the country's exports would be affected in the long term as the fallout of it, but said, “There is a silver lining that we export low-end products.”
About the global financial turmoil, he said the impact would not hit “our financial sector due to different contexts” which he did not elaborate. However, the country's financial sector has no significant link with the international financial sector.
The governor said the global financial crisis generated for leaving regulations completely on the market while investment banks and insurance companies have been given freedom overly. “They'll now understand the impact of leaving regulation on the market.”
Asked whether the Bangladesh Bank would go for tightening further the country's financial sector taking lessons from the global financial crisis and protected financial sector at home, the governor gave an oblique reference just to avoid a straight answer.
“They (the affected countries) followed the core risk and Basel-II requirements theoretically, not practically. But, we tried to follow the principles in practice,” he said, adding that one cannot do anything with numbers.
“You have to have some judgments, you cannot do everything mechanically,” he said.