Inflation rate in the country has gone high on enforcement of IMF (International Monetary Fund) prescription to liberalise imports, not because of huge money supply, speakers said at a workshop in Dhaka.

They said the conditions Bangladesh had to go by to get $490million PRGF (Poverty Reduction Growth Facility) loan has caused such inflation.

Unnayan Onneshan (the innovators), a non-governmental organisation, organised the workshop on The Role of IMF in Policy Making in Bangladesh at the Cirdap auditorium yesterday.

M Iqbal Ahmed, research associate of the organisation, presented the keynote paper at the workshop, chaired by Rashed Al Mahmud Titumir, the team leader.

Professor Anu Muhammad of Jahangirnagar University said Bangladesh is following trade-liberalising policy to keep prices of essential commodities at a tolerable level as per suggestions of the international lending agency.

“But unfortunately, reality is that due to execution of the IMF suggestions, inflation goes up over 10 percent and in some cases it surged to 20 to 60 percent,” he remarked.

The economist also pointed to the conditions the IMF imposed for its PRGF loan disbursable in 7 instalments.

These conditions are tightening demand management policy through monetary and fiscal reforms including some austerity measures, more liberal exchange regime by moving into floating exchange rates, more liberal trade regime by reducing tariffs and removing trade barriers and privatization of nationalised commercial banks (NCBs) and state-owned enterprises (SoEs).

Professor Abu Ahmed of the Economics Department at Dhaka University said adopting contractionary monetary policy by the central bank in accordance with the IMF advice to rein in inflation would be a suicidal one.

“Because inflation occurs due to free import policy and high cost of production of essentials, not for increased money supply,” he observed.

In his presentation M Iqbal Ahmed said the average tariff reduced to 6.93 percent in February 2007 from 23.6percent in June 2003.

“Trade deficit increased by 85percent to $3458million in 2007 from $1865million in 2000, which leads currency to depreciate, making an impact on inflation,” Iqbal said.

India and China have been the main sources of import for Bangladesh in the last five years, which account for 28 to 30 percent of the total import.

In the period mentioned, Indian Rupee and Chinese Yuan have appreciated by 17percent and 6percent respectively, while between 2003 and 2007 taka against dollar depreciated by about 19 percent meaning that cost of import from these countries increased substantially, he said.

Besides, the government is mulling to increase the utility prices in order to reduce budget deficit. However, the policy of increasing prices of public utilities would not solve the overdue losses incurred by the public utilities, he pointed out.

“When the country needs an investment-friendly environment to generate employment and production to eradicate poverty, a tight demand management policy has been destablishing the economy with low investment, low capital formation, low output and low employment thus leading to a stagflation,” he said, adding that at the same time cut in public spending makes the poor marginalised further.

The speakers underscored the need for bringing donors’ activities under public trial as the country has been suffering a lot by adopting their prescriptions for the last few years.

“We should introduce a counter monitoring mechanism to control all activities of the donors in the country,” Professor Anu Muhammad suggested.

Khushi Kabir of Nijera Kori, an NGO, said Bangladesh should not follow such IMF policies that make the country poorer like countries in the African region.