Identifier
Created
Classification
Origin
05DHAKA3884
2005-08-09 08:49:00
CONFIDENTIAL
Embassy Dhaka
Cable title:  

FINANCE MINISTER DISCUSSES CHALLENGES FACING

Tags:  EFIN ECON KCRM KTFN BG 
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This record is a partial extract of the original cable. The full text of the original cable is not available.
C O N F I D E N T I A L DHAKA 003884 

SIPDIS

E.O. 12958: DECL: 08/09/2015
TAGS: EFIN ECON KCRM KTFN BG
SUBJECT: FINANCE MINISTER DISCUSSES CHALLENGES FACING
BANGLADESH ECONOMY


Classified By: CDA Judith Chammas; reason 1.4(d)

C O N F I D E N T I A L DHAKA 003884

SIPDIS

E.O. 12958: DECL: 08/09/2015
TAGS: EFIN ECON KCRM KTFN BG
SUBJECT: FINANCE MINISTER DISCUSSES CHALLENGES FACING
BANGLADESH ECONOMY


Classified By: CDA Judith Chammas; reason 1.4(d)


1. (C) Summary: Finance Minister Rahman told CDA he is
satisfied with the economy's performance in FY05. He cited
several factors, including continued high oil prices, which
may adversely affect the economy going forward. End summary.


2. (U) CDA Judith Chammas paid a courtesy call on Finance
Minister Saifur Rahman on August 8, accompanied by econoff
(note taker). The 30-minute meeting focused principally on
the economy.


3. (C) Rahman dismissed press reports that he had described
the economy as "in crisis." He acknowledged, however, that
several factors are putting pressure on the economy and the
government's budget. Chief among these is high oil prices,
which have increased pressure on foreign exchange reserves
and driven up the cost of government fuel subsidies. Rising
costs of other commodities, especially fertilizer and scrap
metal, and increased food imports to offset lower production
following last year's flood, have had a similar impact.


4. (C) Even good news creates problems. Industrial growth
is nearing eight percent; however, it has contributed to a
surge of capital goods imports. Despite strong export
growth, imports are growing faster, as is the trade deficit.
Remittances, which traditionally offset the trade deficit,
have slowed, adding to pressure on foreign currency reserves.
Reflecting these pressures, the taka has depreciated by 10%
this year against the dollar. Inflation at 6.6% remains low
by regional standards but is edging up.


5. (C) Rahman admits these pressures are taking a toll on
the budget, noting an increase in the projected fiscal
deficit for FY06. Moreover, it is increasingly difficult for
the BDG to meet IMF and World Bank fiscal targets. Rahman
said failure to meet some benchmarks triggered a 35% decline
in World Bank development support credits. The loss of these
funds, coupled with diversion of revenues for food and oil
imports, is crowding out developments funds, Rahman said.


6. (C) On anti-money laundering and terrorism financing,
Rahman expects the Law Ministry to complete shortly
formalities for the deposit of the instruments of accession
to the UN Convention on the Suppression of the Financing of
Terrorism. He is reviewing draft amendments to the
anti-money laundering law and is working with the Law
Ministry to strengthen the enforcement provisions.

CHAMMAS