Responses: Professor Mustafizur Rahman, Centre for Policy Dialogue (Bangladesh)

The G-20 decision has put in a lot of responsibility on the IMF. Since, the IMF’s major focus has been with regard to addressing balance of payments difficulties in times of crisis, LICs such as Bangladesh which have not faced any BOP crisis (indeed we have gained from lower commodity prices, robust remittance flow and modest export growth and our BOP situation has indeed improved somewhat) have not benefited from this. Apprehension (at least in Bangladesh) about IMF’s conditionalities have also deterred Bangladesh to explore any IMF window that could come with any support (such as policy support instrument – although this is a low conditionality window). LICs such as Bangladesh need more of project – type support rather than BOP or policy advice type of support of IMF.

For countries such as Bangladesh, in view of the above, support from World Bank is thus more crucial. Many LICs (such as Bangladesh) is going for large budget deficit (in case of Bangladesh for FY2009-10 it is projected to be about 5% of GDP). WB support will become crucial, particularly because of the drawbacks of other alternative sources (borrowing from bank could crowd-out sources of funding for the private sector, central bank borrowings could be inflationary). The WB support is desirable more in the form of budgetary support (which provides more policy flexibility – Bangladesh’s 2009-10 budget will receive $200 million budgetary support from WB). More initiative will be required to disseminate knowledge about the new opportunities of receiving support from G-20 initiatives and LICs should be helped in identifying avenues where such support should be directed (lobbying for funds still remains important). Additionally, strengths in crisis time could give way to weaknesses in times of recovery (as other competitors reposition) and WB support should thus be more forward-looking and future oriented for countries like Bangladesh which have not been adversely affected by the crisis so far, but which are already experiencing the lagged affects of the crisis through slower export growth and lower number of migrant workers going abroad, higher number of returnee migrants, and rising commodity prices.