Critical Analysis of Second PRSP and World Bank, IMF Prescription

1. Second PRSP and World Bank, IMF PrescriptionS Urging for commitment in establishment of sovereignty in poverty reduction planning. Equity and Justice Working Group (Equitybd) www.equitybd.org

2. Second PRSP and World Bank, IMF Prescription Process lacking in preparing of 1st and 2nd PRSP Equity and Justice Working Group (Equitybd) www.equitybd.org

3. Second PRSP and World Bank, IMF Prescription • Some major policy features in 2nd PRSP • The 2nd phase PRSP (2009-2011) is prepared without any performance • evaluation of 1st PRSP. • There are no policy directives for government's direct investment in • reducing the poverty and creation of necessary employment. • This PRSP has emphasized to privatization policies in all development • sphere rather than necessity of state regulation of economy. • Preparing the PRSP has ignored the country’s reality and development • needs which is not relevant to long-term poverty reduction strategy. • Emphasized the implementation of IMF, WB’s conditionalities of wholesale • privatization and liberalization and have been more focused in the 2nd • PRSP comparing with the 1st. Equity and Justice Working Group (Equitybd) www.equitybd.org

4. Second PRSP and World Bank, IMF Prescription • Result of 1st PRSP • Implemented of IMF, WB’s conditions: • - Emphasized contractionary monetary policy • - Implementation of structural Adjustment Policy • - Government has denationalized the State Owned Enterprises. • - Import liberalization is done and Tax has been reducing @25% from • 300%. • Implementation of fiscal policies: • Broadening the tax base and also planned in 2nd PRSP to bring the • agriculture under tax net • Government has decreased her actual budgetary allocation in service • sectors like health, education and also promoting the private sector giving • different facilities, comparing to the inflation rate. Equity and Justice Working Group (Equitybd) www.equitybd.org

5. Second PRSP and World Bank, IMF Prescription • Pro poor development issues of policy matrix of 1st PRSP has not implemented; • Capacity building of State Owned Enterprises those could play a • significant role to accelerate the growth. • Government didn’t implement the policy of increasing investment in real • terms especially in pro poor development sectors i.e. education, health • and agriculture. Rather these sectors had to face reducing budgetary • allocation in every year. • Government didn’t follow the policy of reducing the borrowing trend from • domestic and foreign sources. • Towards agriculture development government didn’t implement the policy • to strengthen the BADC (Bangladesh Agriculture Development Corporation) • activities especially for quality seed production and fair fertilizer • distribution. • The policy was outlined to ensure the quality in Health and Education • sector that’s yet to be implemented. Equity and Justice Working Group (Equitybd) www.equitybd.org

6. Second PRSP and World Bank, IMF Prescription • Impact of 1st PRSP: • During 1st PRSP (2005-2007) domestic investment has been reduced • drastically @16.7% from35% of GDP due to implementation of • contractionary monetary policy. • Near 04 million people have gone down the poverty line (Source: BHES- • 2005) • Income inequality has been raised. According BHES information the • income inequality was 0.38 in 2000 and 0.46 in 2005. • Government budget deficit is increasing and raised up to 4.9% of GDP in • 2008-09 fiscal year from 3.8% in 2005. • Extreme inflation (14.7% according government report) had to face • country which has made hardship of livelihood of people. Equity and Justice Working Group (Equitybd) www.equitybd.org

7. Second PRSP and World Bank, IMF Prescription • Policy Matrix-01: Macro Economic Management • Policy Issues: • Government has to keep the budget deficit within a level of 5% of GDP • Debt liability of the government shall not exceed 60% of GDP and outstanding of • external debt shall not exceed 40% of GDP • Our concern: • The 2nd PRSP didn’t specify the issue on what will be the exact monetary policy to • be follow by government. This important policy issue has cautiously avoided and • given a scope to donors (IMF, WB) the unexpected intervention of controlling • our policy. • Adopting the policy of external debt stock provides the legality to government to • borrow the external loan from donors. Because the 2nd PRSP didn’t clear the • government borrowing strategy for expected development outcome. • This Macro economic management policy ultimately impacted the increasing of • budget deficit and also non-implementation of the pro poor issues as like as • past. Equity and Justice Working Group (Equitybd) www.equitybd.org

8. Second PRSP and World Bank, IMF Prescription • Policy Matrix-1.6: Accelerating Growth towards poverty reduction • Policy Issues: • Increase the volume of private sector investment • Access the poor to credit sector in free mode • Pro poor investment will be @ 8.5% of GDP • Broadening the tax base by bringing the agriculture and its sub sectors under tax net. • Our concern: • Policy of Pro poor investment have been reduced @ 0.5% comparing 1st • PRSP target. • Bringing the agriculture and its sub sectors under tax net will hamper the effort of attaining self sufficiency in food and marginal farmers will be looser. • The policy didn’t the strategies on how the pro poor investment will be materialized. Equity and Justice Working Group (Equitybd) www.equitybd.org

9. Second PRSP and World Bank, IMF Prescription • Policy Matrix-02: Resource Mobilization • Policy Issues: • Tax policy unit will be separated from Tax administration and tagged with ministry of Finance • More import liberalization and reducing the import sensitive list is under active consideration • The Padma and Jamuna Oil company (State Owned Enterprises) will be denationalized through sale in private sector • Our concern: • Policy of separating the tax unit will create a scope for IMF to further intervention in controlling the tax policy • Thus IMF may pressure to govt. for reducing the corporate tax as well as increase and broadening the individual other indirect tax • Government will compelled to make more liberal her import policy that will hamper the domestic investment and employment Equity and Justice Working Group (Equitybd) www.equitybd.org

10. Second PRSP and World Bank, IMF Prescription • Policy Matrix-05: Development private sector • Policy Issues: • Expediting the process of privatization govt. will denationalize new 26 no of SoE (State Owned Enterprise). • Existing Private sector investment policy will be revised and make more easier. • Our concern: • - Govt. has denationalized 34 no of SoE during 1st PRSP period. That’s why 0.15 million labor force have been unemployed. • - According to new plan of denationalization of 26 SoE will unemployed more 0.2 million of labor newly. Equity and Justice Working Group (Equitybd) www.equitybd.org

11. Second PRSP and World Bank, IMF Prescription • Policy Matrix- 11: Agriculture growth towards poverty reduction • Policy Issues: • Government will promote the organic food production and marketing • Facilities will provide to develop of Bio Technology and its research • Pro market policy for irrigation will be given emphasis • Private sector participation will be facilitated to produce seed and marketing • Our concern: • Government has been promoting the commercialization of agriculture instead of increasing necessary investment and strengthen the agriculture related State owned Enterprises. • This resulted as endanger our food security and also our marginal farmers will faces the loss ultimately. Equity and Justice Working Group (Equitybd) www.equitybd.org

12. Second PRSP and World Bank, IMF Prescription • Our Position • Due to the PRSP process our own process of preparing national plan of has • been deterred. In fact as it is the IMF prescriptions to prepare PRSP, in • fact the process has became the space for integration of WB and IMF • conditionalities. This is being resulting more indebt ness (debt servicing is • 17 % of revenue budget in last year) and more reduce level (annual debt • servicing in more than $ 800 millions which is less then annual health • budget which is less then $ 700 millions) of public investment in public • service sector. • Present global crisis is sufficient enoug to tell that IMF and WB policies • have proved as failure in the economy and they maintain double standard • in respect of advice. In this context while the whole world especially the • developed countries taking efforts to regulate market and nationalization, • but our government in second PRSP outlined the policies of more import • tariff reductions, reduction of sensitive list etc. which in fact will foreclose • the growth of domestic industries and reduce scope of employment. Equity and Justice Working Group (Equitybd) www.equitybd.org

13. Second PRSP and World Bank, IMF Prescription • Our Position • In view of present global crisis, as because of policy failures of IMF, WB / • or existing global financial architecture, the UN has taken an initiative of • reform ie, to bring democracy in global financial governance with the • participation of all countries of the world. But avoiding this UN process, US • president Bush has called a meeting of G20 in Washington on 15th • November on the issue, which is nothing in reform rather avoidance to the • democratic initiatives and to uphold the previous characters of WB and • IMF. Our leaders and the Government of Bangladesh must protest and line • with UN initiatives. Equity and Justice Working Group (Equitybd) www.equitybd.org

14. Second PRSP and World Bank, IMF Prescription • We demanding: • The second PRSP has to declare as scrape and poverty reduction plan has • to develop with our own national planning process, through a participatory, • political and parliamentary process. And all above without any involvement • of WB and IMF. • Poverty reduction plan is also a political agenda and this will have to clear • cut mention in election manifesto of political parties. • - Bureaucratic dominancy has to be reduce in development planning. • Because in absence of democratic and political participation the vested • interest group like IMF, WB have scopes to control over the issues. Equity and Justice Working Group (Equitybd) www.equitybd.org

15. Thank You Equity and Justice Working Group (Equitybd) www.equitybd.org