En vurdering av betalingsbalansestøtte til Bangladesh
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- Bora-import 
Norway has been requested by IMF to provide balance ofpayment (BOP) support to Bangladesh, which is facing a criticalreduction in its foreign exchange reserves. This report,which has been commissioned by NORAD, analyses whetherNorway should provide such support. It is argued that BOPsupport and budget support have similar macroeconomicimpacts although the conditionalities put forward by thedonor may differ in the two cases.There are severe imbalances in Bangladesh’ external as wellas internal accounts. We are arguing in this paper that externalconditions are the main explanatory factors for thecurrent crisis. Foreign reserves have been halved since 1995and now cover only six weeks of imports. The growth ratein exports has declined from 27 % in 2000 to a negativegrowth of 11% in 2001. We expect the crisis to be more thantemporary, partly because exports of garments will face additionalstructural problems when the Multifibre Agreementis phased out in 2004. Bangladesh will therefore not moveeasily out of its present distress, and is in strong need of foreignexchange including BOP support.We find that the reform programme and its conditionalitiesput forward by IMF in Bangladesh make sense. The IMFnevertheless needs to give a better justification for why a systemof flexible exchange rate is seen as a prerequisite for providinga loan. Since the negotiation about a loan packagecurrently has broken down, Norway should at the presentstage not provide BOP support.After completing an interim poverty reduction strategy in thenear future, bargaining for a loan package will be recommenced.The report discusses conditions that NORAD shouldapply for providing balance of payment support in the future.We are emphasising the importance of a well-developedpoverty reduction programme and co-operating donor partners.
PublisherChr. Michelsen Institute
R 2002: 3