The International Monetary Fund has warned that inflation may cross double digits by the end of the fiscal year.

A visiting IMF delegation also said the Bangladesh economy stood up well to the global recession, but despite this and bumper farm output, GDP growth would not exceed 5 percent this year.

The finance minister, however, rejected the latter forecast.

The IMF gave its assessment of the state of the Bangladesh economy on Thursday, after holding a series of meetings with government, policymakers and financial operators in the country from Oct 19.

“Bangladesh Bank’s accommodative monetary policy has caused a 35 percent rise in stock market prices,” Masato Miyazaki, IMF Asia-Pacific adviser told a press conference.

Miyazaki expressed concern too over massive excess liquidity in the money market.

He also said, despite inflation falling as low as 2.2 percent in June this year, it was on the rise again, reaching 4.7 percent in August.

Inflation could well cross the two-digit mark at the end of 2009-10, said Miyazaki, head of a visiting seven-member IMF delegation to Bangladesh.

He suggested immediate steps must be taken to curb it.

The IMF team also expressed concern over high subsidies for energy and farm sectors, slowdown in investment and poor ADP implementation.

It also predicted GDP growth coming down to 5 percent from almost 6 percent the previous year.

The government has been at odds with key donor agencies in recent months over their forecasts for GDP growth for 2009-10.

Finance minister AMA Muhith, dismissed IMF’s predictions on Thursday, reiterating that growth will not be less than 6 percent and may be higher.

The Bangladesh economy achieved 5.9 percent growth in 2008-09. The target is between 5.5 and 6 percent for the current fiscal year.

The finance minister in his June budget speech said the target for GDP growth was set lower than last year keeping global recession in mind.

But last month, Muhith told bdnews24.com told that global recession had exerted no significant impact on the Bangladesh economy, and ruled out the possibility of any greater impact in future.

He also said the target for GDP growth may even be adjusted up this year.

Miyazaki said Bangladesh’s GDP growth not reach above 5 percent in 2009-10 due to the global slump.

Elaborating the causes, Miyazaki said import for industry, including capital machinery, has waned and so has export earnings.

Loan flow into the private sector and manpower exports have waned simultaneously, he added.

Muhith rejected the forecast. “IMF’s forecast is in no way acceptable and we can say emphatically that our economic growth will not be less than 6 percent,” he told bdnews24.com after the press conference.

“It might even be higher.”

“The impact of recession is not as severe on our economy as we thought it would be earlier.”

Investment is coming out of a bad phase and revenue is also rising, he said.

Muhith also said the government would continue to provide subsidies to vital sectors even if it means setting aside IMF management tips.

“The IMF delegates raised questions about government subsidies. They said we are providing excessive subsidies to some,” he told the press conference after the IMF meeting.

“But we have told them clearly that to keep our economy stable and to provide it with a firm foothold, we will continue to provide support to the sectors that need it.”

Muhith said the government had, however, promised IMF to mount all efforts to rein in inflation.

A review of the Bangladesh Bureau of Statistics data shows that escalating prices of fuel, food and other essentials in the international market led to Bangladesh’s soaring inflation of 11.59 percent in Dec 2007.

It gradually eased down to 6.03 by Dec 2008.

According to BBS, point-to-point inflation shrank all the way down to 2.25 percent in June this year, but began rising again to 3.46 percent in July and 4.69 percent in August.

(Over the same period last year, inflation stood at 10.6 percent in June 2008, 10.82 percent in July and 10.11 percent in August.)

BBS data indicate that inflation in the food sector in August this year was 4.93 percent and for other sectors 4.54 percent.

The August inflation figure for urban areas was 5.41 percent and for rural areas 4.25 percent.

Food inflation alone in August was 6.92 in urban areas and 4.07 percent in rural areas. Urban inflation for other sectors was 4.39 percent and 4.60 percent in rural areas

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