[stop-imf] Bangladesh: IMF/WB concerned about civil service pay hikes

[Robert Weissman]

     From New Nation Online Edition

Front Page
New pay scale awaits Cabinet approval tomorrow: WB, IMF caution against
inflation: Saifur
By Staff Reporter
May 14, 2005, 13:17

As the government is going to place the recommendations of new pay scale
for the government officers and employees at a regular cabinet meeting
tomorrow (Monday), the donors have expressed their deep concern about
it, said Finance and Planning Minister M Saifur Rahman yesterday.

'The draft of the new pay scale will be placed at the regular meeting of
the cabinet on Monday after consultation with the Prime Minister. But,
the World Bank (WB) and International Monetary Fund (IMF), which provide
us money have raised objections fearing price hike and inflation after
the announcement of new pay scale,' he told reporters at the Zia
International Airport on his return after ending a 12-day visit to
Washington and Istanbul yesterday morning.

The Finance Minister said the donors suggested him to announce the new
pay scale within the government's capability so that it does not have
any adverse implications like price hike of essentials in market and
aggravating the inflationary pressure.

"However, I assured them (donors) that it (proposed new pay scale)
remains within the capability of the government," he said.

Saifur left Dhaka for Turkish capital Istanbul on May 2 last to attend
the three-day 48th annual meeting of the Board of Governors of Asian
Development Bank (ADB) in Istanbul, Turkey.

 From Istanbul, he later went to Washington, where he met World Bank
President-designate Dr Paul Wolfwitz and Managing Director Shengman
Zhang, IMF Managing Director Rodrigo de Rato, USAID Administrator Andrew
Natsios and five US lawmakers. In Istanbul, the Finance Minister also
attended the South Asian Finance Ministers' meeting discussing
cooperation issues among the nations of this region at the sideline of
the ADB meeting. Indian Finance Minister, however, was not there.

Narrating the outcome of his 12-day visit to Istanbul and Washington to
reporters at ZIA at about 6am yesterday, Saifur said though the donors
appreciated the macro-economic stability and ongoing reforms in
financial sector, they expressed their utter dissatisfaction about the
prevailing confrontational politics, corruption and governance issues.

In spite of all these issues, the IMF team which visited Dhaka last
month submitted a positive report on Bangladesh to the IMF headquarters
in Washington, Saifur informed.

He said the stalled installment of US$70 million IMF loan under its PRGF
programme would be released soon, as he was informed by the IMF Managing
Director.

The installment was scheduled to be released last December, but the IMF
review sought some signs of measures by the government to increase
revenue collection as well as improvements in privatisation of the
state-run Rupali Bank.

The IMF has already disbursed three of the installments and the fourth
was scheduled for December 2004. But the disbursement of the latest
installment now hinges on the implementation of the policy measures.

The Fund has approved a loan of US$490 million to Bangladesh under
Poverty Reduction Growth Facility (PRGF) and scheduled the disbursement
in seven equal installments on the basis of the ongoing financial-sector
reform performance.

The Finance Minister also indicated that the government was going to
raise bank interest rates soon.

He said the country's policy on bank interest rates would be consistent
with the growth prospect towards poverty reduction.

'We'll do it within our capability=85 It will be consistent with the
macroeconomic stability,'

Replying to a question about the IMF chief's insistence on the worldwide
phenomenon of raising interest rates amid inflationary situation, Saifur
said the low interest rate regime has gone.

The Finance Minister said he would consider raising the interest rates
taking into account the economic stability as well as employment
generation. The interest rate movement in other parts of the world,
including China and European Union, would also be taken into
consideration, he said.

'Nothing can continue in a static situation in the era of globalisation=85
the situation may change overnight.'

During the visit, the finance minister mainly apprised the World Bank
President-designate Dr Paul Wolfwitz of the economic situation of
Bangladesh and requested him to consider the bank's policy towards
funding to infrastructure as a means to create jobs and thus alleviate
poverty.

Wolfwitz did not yet join the office, but assured the Finance Minister
of considering his request after taking office on June 1.

Saifur said the World Bank Managing Director Zhang insisted on
continuing the democratic process in Bangladesh and expressed concern
about confrontational politics.

Zhang also stressed the need for ensuring governance and assured their
full support in reforms to ensure good governance.

The Finance Minister informed that the World Bank provided financial
assistance of US$800 million in fiscal 2004-05, which was US$525 million
in the previous year.

At his meeting with USAID Administrator Andrew Natsios, Saifur requested
him to support Bangladesh's bid to become a member-country of the
Millennium Challenge Account (MCA).

Saifur told Natsios of the country's case that one or two countries have
already become members of the MCA although their ranking in the
corruption perception index are below Bangladesh. There are 40 countries
who rank below Bangladesh in the index, he added.

Natsios assured the minister of supporting Bangladesh's cause as the
country established Anti-Corruption Commission (ACC). He, however,
suggested making the body effective.

The Finance Minister said five US Congressmen and Senators assured him
of supporting Bangladesh's cause to get duty-free access of its
products, including textile and clothing, to the US market.

On the annual meeting of ADB, he said the role of the bank has increased
a lot with the inclusion of few countries from the Middle East as its
members.