Report No. 710a-BD FiLE COPYBangladeshThe Current Economic Situationand Short Term OutlookMay 2, 1975

South Asia Region

Not for Public Use

U

Document of the International Bank for Reconstruction and DevelopmentInternational Development Association

This report was prepared for official use only by the Bank Group. It may notbe published, quoted or cited without Bank Group authorization. The Bank Group doesnot accept responsibility for the accuracy or completeness of the report.

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CURRENCY -EQUIVALENTS

Prior to January 1, 1972:

US$1 = Pakistan Rs. 4.762Rs. 1 = US$0.21Rs. 1,000,000 = US$210,000

After January 1, 1972:

The new currency, the Bangladesh Taka (Tk.)is officially valued at 18.9677 to the Pound Sterling.The Pound is floating relative to the US dollar andconsequently the Taka-US dollar rate is subject tochange. The rate below has been used throughout thisreport, except where it is stated to the contrary:

US$1 = Tk. 8.0Tk. 1 = US$0.125Tk. 1,000,000 = US$125,000

QUANTITIES AND WEIGHTS

1 crore 10 million1 lakh = 100,0001 maund (md.) 82.2 lbs.1 bale = 400 lbs.

In general the units of measurement referred to in thisReport are those which are actually used or are familiarin Bangladesh.

FISCAL YEAR

July 1 through June 30

This report was prepared by a mission consisting of CarlJayarajah (Chief), Ramgopal Agarwala, Akeel Al Sadi, SangSuh and Fred King. The mission visited Bangladesh inFebruary 1975.

TABLE OF CONTENTS

Page No.

COUNTRY DATA

SUMMARY AND CONCLUSIONS .......................... i - iv

I. INTRODUCTION. 1

II. THE FOODGRAIN SITUATION .......................... 3

III. JUTE .10

IV. THE INDUSTRIAL SITUATION .16

V. INCOME AND PRICES .21

VI. DOMESTIC RESOURCES .26

VII. EXTERNAL RESOURCES .31

STATISTICAL APPENDIX

TMAP

Page 1 of 2 pages

COUNTRY DATA - BANGLADESH

AREA 2/ POPULATION DENSITY

1441,131 krn- 77.4million (mid-1974) 548 per kz$1

Rate of Growth: 2.8 (froml965 tol970 ) 850 per kmV'of arable land

POPULATION CHARACTERISTICS (1973) HEALT(1973)Crude Birth Rate (per 1,000) 47 Population per physician 10,000Crude Death Rate (per 1,000) 17 Population per hospital bed 6,000Infant Mortality (per 1,000 live births) 130

INCOME DISTRIBUTION (1969) DISTRIBUTION OF LAND OWNERSHIP (1968)% of national income, hghest quintile 40 % owned by top 10% of owners 34

lowest quintile 9 % owned by smallest 10% of owners 1

ACCESS TO PIPED WATER (year) ACCESS TO ELECTRICITY (year)% of population - urban 7Z of population - urban

- rural - rural

NUTRITION (196)r) EDUCATION (year)Percentage of population with adequate Adult literacy rate 7. 23 (1961)

calorie intake 54 Primary school enrollment 7/ 56 (1973)Percentage of population with adequate

protein intake 4° 0/GNP PER CAPITA in 1975: US $ 76

GROSS NATIONAL PRODUCT IN 19722/73 ANNUAL RATE OF GROWTH (%. constant prices)

US $ Mln. % 1960-65 1965-70 1972/73

GNP at Market Prices 5,702 lOO.O 4.6 3.6 -12 31Gross Domestic Investment ,7 .0 15.5 6.3 - 3Gross National Saving 3.3 5.4Current Account Balance 600 10:5Exports of Goods, NFS 318 5.6 2.0 3.9Imports of Goods, NFS 918 16.1 12.2 6.8

OUTPUT, LABOR FORCE ANDPRODUCTIVITY IN 1972/73

2/Value Added Labor Force- V. A. Per Worker

USP$ Mln. 7 Mln. % US $ %

Agriculture 3,)403 60 20.5 78 166 76Industry 412 7 1.8 7 229 105Services 1,887 33 3.9 15 484 222Unallocated

Total/Average 5,702 100.0 26.2 100. 217 10O

GOVERNMENT FINANCEGeneral Government Central Government

( Mln.) %7 of GDP (Taka Mln.) % of GDP197 197 196 -7 1973/7 4 3,Z 196 -

Current Receipts 3,774 5.7Current Expenditure -60 7.0Current Surplus -834 -1.3Capital Expenditures 4,000 6.0External Assistance (net) 2,980 4.5

1/ The Per Capita GNP estimate is at 1970 market prices, calculated by the same conversiontechnique as the 1972 World Atlas. All other conversions to dollars in this table areat the average exchange rate prevailing during the period covered.

2/ Total labor force; unemployed are allocated to sector of their normal occupation. "Unallocated" consistsmainly of unemployed workers seeking their first job.

3/ Percentage change over 1969/70.not available.not applicable

Page 2 of 2 pages

COUNTRY DATA - BANGLADESH

Dec. Dec. Dec. 17, June June

MONEY, CREDIT and PRICES 1965 1969 1970 1971 1973 1974(Million Taka outstanding end period)

Money and Quasi Money 5,016 5,952 5,460 9,891 12,165Bank Credit to Public Sector (3,216 (3,388 (6,252 3,960 5,363Bank Credit to Private Sector ( 3 ( 2,594 3,267

(Percentages or Index Numbers)

Money and Quasi Money as % of GDP ,, 0.20 0.18 0. 20 0.18General Price Index (1970 = 100) * 100 120 280 340Annual percentage changes in:

General Price Index -. 20 48 6Bank credit to Public Sector ( 3 ( 5 ( 26 ( 54 35Bank credit to Private Sector ( ( ( ( 26

BALANCE OF PAYMENTS MERCHANDISE EXPORTS (AVERAGE 1973-75)

1969/70 1973/76 1974/75 US $ Mln %(illions US $) Raw Jute 119 33

Jute Goods 186 52Exports of Goods, NFS 679 339 389 Tea 16 4Imports of Goods, NFS 594 958 1,285Resource Gao (deficit = -) - 5 -896

Interest Payments (net) All other commodities 38 11

Workers' Remittances I Total 359 1 0QQOther Factor Payments (net) 10 - 21Net Transfers I EXTERNAL DEBT, DECEMBER 31, 1974Balance on Current Account 656 - 917

US $ MinDirect Foreign InvestmentNet MLT Borrowing Public Debt, incl. guaranteed 1,495

Disbursements 297 607 Non-Guaranteed Private Debt 27Amortization 10 45 Total outstanding & Disbursed 2

Subtotal 287 562 1/Capital Grants 204 335 DEBT SERVICE RATIO for 19c -

Other Capital (net) 126 %Other items n.e.i 68 15Increase in Reserves (+) 121 Public Debt, incl. guaranteed 4.7

Non-Guaranteed Private Debt 4.4Gross Reserves (end year) 64 185 Total outstanding & DisbursedNet Reserves (end year) __ __

RATE OF EXCHANGE IBRD/IDA LENDING, December. 1974 (Million US $)

Through - 1971 IBRD IDA

US $ 1.00 Pakistan Rs. = 4.76 4_9Rs. 1.00 = US $0.21 Outstanding & Disbursed 54-9 206.1

Undisbursed - 179.5Averase 1973 - 1974 Outstanding incl. Undisbursed 5479 383.6

US 1.00 = Txc. 8.0Tk.1.00 = US $ 0.125

1/ Ratio of Debt Service to Exports of Goods and Non-Factor Services,

not available

not applicable

SUMMARY AND CONCLUSIONS

1. The Bangladesh economy continues to be beset by a plethora ofproblems. Foodgrain output increasing at only 1% a year is insufficientto meet the needs of a population growing at 3%. Annual foodgrain importsof the order of 1-2 million tons are, therefore, needed, equivalent in valueto Bangladesh's annual earnings from merchandise exports. Export incomespay for only one-fourth of import needs, the difference being met by aidinflows. Jute, the principal commodity export, accounting for four-fifthsof foreign exchange earnings, has to contend with competition from syntheticsubstitutes; moreover a high export price for jute and jute goods combinedwith erratic quality and delivery schedules endanger Bangladeshts share ofthe world jute market.

2. Domestic resource mobilization lags behind the needs of currentexpenditure and economic development. The principal cause is an inadequatetax effort which, in particular, exempts agriculture, the principal sourceof Bangladesh's national income, from taxation. The heavy dependence onimport duties as a source of tax revenue is an element of weakness; forit is conditional on the size of the import licensing program which, inturn, is predicated on the volume of foreign exchange earnings or aidinflows. The problem is, however, compounded by the many exemptions per-mitted in the payment of import duties. This has resulted in an inordi-nate dependence on the banking system and on counterpart funds generatedfrom the sale of aid-financed imports.

3. An excessive reliance on administrative controls applied at anumber of key points constricts the economy. The application of importcontrols over an extended period of time has conferred the benefits ofscarcity premia on the beneficiaries of import and trading licenses.Controls applied to the pricing of inputs and outputs of Governmententerprises vitiate their capacity to act flexibly or to improve effi-ciency. The application of ceilings to incomes earned by the top echelonof government managers, especially in periods of rapidly declining realincomes, constitutes a drag on efficiency and blunts initiative.

4. Economic priorities require articulation in a more precisefashion. The attainment of self-sufficiency in foodgrains is a nationalobjective deserving the highest priority. Its achievement would enableBangladesh to channel resources presently used for foodgrains imports toother uses. Rural infrastructure in the form of better water resources,feeder roads, institutions for agricultural extension and rural credithave to be built up beyond existing levels. Industry is heavily dependenton imported inputs. It also requires a greater rural orientation, onewhich is sensitive to the needs of the rural sector for critical agricul-tural inputs and consumer goods and which at the same time exploits itssurplus manpower. Exports should not be treated as a residual in an eco-nomy which is heavily dependent on external resources for meeting gaps infood needs, industrial raw material, spares and capital goods. The achieve-ment of increased export earnings involves a much greater commitment to the

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attainment of higher levels of domestic productivity, improvements in qual-ity control for export commodities, and better facilities for transporta-tion and improved marketing practices than has been evidenced in the past.

5. Steps have been taken recently to improve economic management.The efficiency of population planning programs has been improved and inter-ministerial coordination strengthened. There is evidence of a greater poli-

tical commitment to family planning. A Project Implementation Bureau has

been created for the purpose of eliminating obstacles to speedy project im-

plementation and for monitoring progress. Aid disbursement is being facil-

itated by monthly consultations between donor representatives and the Bangla-

desh Government, in Dacca. Border patrols have been strengthened to prevent

smuggling. There is some evidence of a decline in the propensity to hoardessential commodities. Compulsory procurement programs for rice have been

combined with the existing voluntary procurement program in order to maxi-mize the supplies of rationed rice. Interest rates have been raised, new

taxes levied and the dependence on the banking system for the financing ofdeficits reduced. Prices of a number of rationed food items, fertilizerand pesticides have been raised in an effort to reduce the burden of sub-

sidies. A major change in industrial policy has greatly increased thescope for the private sector by raising the ceiling on private investmentin industry from US$330,000 to nearly US$4 million.

6. Yet if Bangladesh is to succeed in its attempts to create theconditions for economic growth, many more difficult steps will have tobe taken to bring the country to grips with the realities of the worldeconomy and to increase the effectiveness of the administration. The

policies Bangladesh should pursue in this context have been spelled out

in earlier Bank Reports. 1/ The following paragraphs focus on priority

issues, on which immediate action is necessary.

7. Exports. The continued sluggish performance of exports does not

provide a satisfactory base for developing a growth strategy for Bangladesh.

A higher rate of growth of traditional and non-traditional exports is essen-tial and it is within the Government's competence to devise policies to

achieve it. In the longer run there is little dispute that Bangladesh will

need to diversify its exports. During the next decade there is considerablepotential for exports based on using the country's natural gas, particularlyurea fertilizer. It is important, however, to see this and other potential

developments not as a substitute for jute exports, but as a supplement.

1/ Bangladesh - Development in a Rural Economy. Report No. 455-BD,September 15, 1974.

A Memorandum on the Current Economic Situation in Bangladesh. ReportNo. BAN 74-3, October 3, 1974.

8. Jute output has been declining in the past few years. It has tocompete with the Aus rice crop for an extent of land which in a normal yearcould amount to 1 - 1-1/2 million acres but more in a period when riceprices are high. While the farmgate price for raw jute and improvedmarketing, storage and transport facilities are important in determiningsupply, the ability to market jute internationally, especially jute manu-factures, is dependent on cost competitiveness. The cost competitivenessof Bangladesh's jute and jute manufactures is declining. Budgetary con-straints limit the ability of the Government to subsidize jute at thelevel of the grower, the manufacturer and the exporter.

9. An integrated package of measures that provides jute growerswith adequate incentives and the jute industry with better control overcosts, and the ability to make profits out of exports, is vital. Jute iscritical to Bangladesh not merely in the short run, but in the longer runas well. The objective seems to be to keep international prices as highas possible and keep domestic prices as low as possible. The result isto compress both demand and supply. There is ample evidence, discussedin Chapter III on jute, that this is not in Bangladesh's interests. Onealternative would be to make export prices more flexible.

10. Foodgrain. The inability of Bangladesh to attain self-sufficiencyin foodgrain represents a drain on potential investible resources. It neces-sitates the use of a significant proportion of current Bangladesh exportearnings. Considerable effort is required to increase the output of food-grain, and in the shortest possible time. This involves improved extensionand research and the provision of agricultural inputs and credit at therequired time and in the required amounts. It also requires a strength-ening of the rural development program and improvement of storage facili-ties for grain.

11. Food procurement programs need to be streamlined so as to maxi-mize cooperation by farmers. The ration price should increasingly reflectthe cost of domestically procured and imported foodgrain. Rigorous cri-teria for eligibility to food subsidies need to be established. At thepresent time the absence of a means test leads to an abuse of the rationingscheme and deviates from its professed goal of helping the really needy.Schemes which enable the Government to substitute higher wages and sala-ries for food subsidies deserve examination.

12. Domestic Resources. There is considerable scope for an improve-ment in efforts to mobilize domestic resources. Levels of taxation wereraised significantly at the time of the 1974/75 budget but the heavydependence on foreign trade for tax revenue makes the contribution ofthat source subject to the vagaries of the import licensing program.However, when, as at the time of the last budget, exemptions from cus-toms duties are extensive, such tax efforts are vitiated. Special treat-ment with respect to the payment of taxes needs to be eliminated. In

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general, there should be no exemptions. Where special circumstances ofa State enterprise or other institution necessitate assistance, suchrelief should represent a call on the revenue budget. Efforts to mobil-ize tax revenue need to be combined with appropriate policies and measuresthat ensure a greater contribution to revenue from Government enterprises.The largely Government owned industrial sector accounts for about 8-9Z ofgross domestic product. Yet its contribution to revenue is a modest one.Government controls over the pricing policies of such enterprises limittheir flexibility in matching revenues to costs. The considerable esca-lation in raw material and other production costs that has been a featurein recent years has reduced the profitability of a number of governmentindustrial enterprises. Greater autonomy for government enterprises inthe matter of pricing policies and a reduction in the degree of centrali-zation with respect to principal policy decisions are necessary.

13. This report spells out a number of economic reforms which Bangla-desh is urged to consider seriously. Ilowever, not all efforts initiatednow to remedy deficiencies in the economy and put it on a steady growthpath will produce rapid results. Export earnings will take time to pickup, partly as a result of the inevitable gestation period for crops andpartly as a result of the current world economic situation. Yet actiontaken now would undoubtedly place Bangladesh in a position to take promptadvantage of an. improvement in the international economic situation.Policies to influence prices will of course need to be complemented bypolicies to increase the availability of technical inputs and credit andto make management, marketing and transport more efficient.

14. Aid. The Bank estimates that Bangladesh will require US$1.2 bil-lion of aid disbursements in 1975/76. About US$400 million is expected tobe disbursed from the existing pipeline. Additional aid disbursements ofUS$800 million are, therefore, necessary from new commitments to be made in1975/76. This would enable Bangladesh to meet its projected foodgrainimport requirements for consumption and also to build up stocks, to in-crease capital goods imports by about 20-25% in real terms over 1974/75,and to increase imports of raw materials and intermediate and consumergoods by about the same percentage. As for commitments, it would also beprudent to allow for some increase in the pipeline. While the project aidpipeline is already large, the non-project aid pipeline should be built upin order to allow Bangladesh to enter 1976/77 with a greater ability to planahead with confidence than it has been previously able to do. Based on theBank's assumption of commitments required to obtain the necessary disburse-ments in 1975/76 and to build up the pipeline, a commitment level of aboutUS$1,400 million is required for the coming year.

I. INTRODUCTION

1. Bangladesh achieved its independence in 1971. The difficultiesattending that event were compounded by complex economic problems. A largeand rapidly increasing population was superimposed on an insufficient re-source base. Low agricultural productivity and annual food deficits hadbecome a recurrent feature. The struggle for independence itself damagedthe country's infra-structure and deprived industry of its entrepreneurialand managerial skills.

2. A whole new administrative and economic apparatus had to befashioned and the economy put on its feet. Large initial infusions ofexternal assistance were intended to facilitate the transition to a normalsituation of uninterrupted economic growth. But in the three years sinceindependence the problems of Bangladesh have multiplied.

3. Starting from what appeared to be the rock-bottom, economic con-ditions have shown very little improvement. Agricultural output fails tokeep pace with the needs of a population growing at 3% a year. Industrialoutput, heavily dependent upon imported inputs, has been badly affected bythe paucity of foreign exchange. State enterprises are often handicapped bymanagement deficiencies, excessive government controls, shortage of keyspares and inputs and lack of autonomy in the matter of determining prices.

4. Exports are stagnant and barely finance a quarter of importneeds. A complex structure of import controls exists, while importprices are kept artificially low, and some export prices are keptartificially high. Revenues are insufficient to meet development needs.Hence external assistance is the principal source of investible resources.Average per capita income today is significantly lower than it was sixyears ago. The rate of inflation is threatening to reach the three digitlevel. This has harmed fixed income earners, the unemployed and landlesslaborers, whose number has increased significantly in recent years. Thesedifficulties have been complicated by periodic natural disasters.

5. Given the constraints within which Bangladesh lives, it has notbeen possible to achieve spectacular results since independence. However,conditions might have been much less difficult if the opportunity to makethe basic economic policy decisions had been grasped in the first years ofthe fledgling nation. Given the already difficult conditions, the Govern-ment was hesitant to take bold policy measures, which always carry a certainamount of economic and political risk. Delays in introduction of essentialpolicies and measures have, however, only compounded the problems. Thepresent impasse offers the Government little choice. It needs urgently toexamine and implement economic measures which have been postponed for solong.

6. The economic situation is now a matter for serious concern. Thecurrent Aman rice crop is 1 million tons below target. The Special Agri-cultural Rehabilitation Program (SARP), launched to offset the adverse

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effects of the floods on foodgrain output, has been largely unsuccessful,principally because inputs did not arrive on time. Foodgrain procurementfor 1974/75 is estimated at 140,000-180,000 tons, double that of 1973/74but well short of the target. Food pricas are still high and many consumernecessities are scarce. Industrial performance lags as a result of insuffi-cient spares and raw material inputs. The volume of imports has been con-strained as a result of the past year's conservative licensing program andhigh international prices. It has affected collections from customs dutiesand indirect taxes. The volume of exports has declined and values are esti-mated to fall short of the target.

7. Measures have been initiated in recent months to correct some ofthe priority problems. Recent political changes have strengthened the handof the Government in its attempts to put down lawlessness, smuggling, hoard-ing and blackmarketeering. Slum clearance in Dacca has gone on apace, borderpatrols have been strengthened and there is improved supervision of publicofficials. Support for population policies has been expressed at tlhe highestpolitical level and practical steps have been taken to improve the quality ofprograms, the dissemination of knowledge and co-ordination among concernedministries. A special bureau has been created to monitor projc t implemen-tation and institutional procedures have been set up to speed up aid dis-bursement.

8. The need for more comprehensive economic reforms is, however,still compelling. The serious economic situation should by itself providestrong reasons for implementing required policies. At the same time, theremight also be some relief as a result of lower import prices. World pricesof foodgrains, cotton and yarn and cement are expected to decline and animproved supply position should help considerably in reducing the momentumof inflation. This is then a very appropriate time for introducing thenecessary policy changes.

9. This report indicates a number of economic reforms which Bangla-desh must consider urgently. Bangladesh would need about US$1.2 billionof disbursements of external aid in 1975/76. The willingness of donors tocontinue providing aid in generous amounts to Bangladesh will no doubtdepend on its ability to demonstrate, by the implementation of satisfactoryeconomic policies and measures, that such assistance will make an effectivecontribution to its economic growth.

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II. THE FOODGRAIN SITUATION

Production

10. Foodgrain production has fallen short of the Five-Year Plan targetsin both 1973/74 and 1974/75, and as a consequence a total of about 4 milliontons of foodgrains have had to be imported. In 1975/76 imports of 1.5 mil-lion tons will be needed even if the Government's production target is to bemet. Any production shortfalls will mean even higher imports. The Five-YearPlan called for only 3.17 million tons of imports over the entire five-yearperiod (1973-78). Bangladesh's prospects of becoming self-sufficient infoodgrains in the near future are, however, not very bright. While weatherand natural calamities can be blamed for some of the shortfalls in produc-tion, fertilizer shortages, lack of expansion of high yielding varieties(HYV) acreage and failure to meet irrigation targets have exacerbated theproblems.

11. Foodgrain production in 1974/75 was not only reduced by the floods(estimates of the loss vary from 750,000 to 1.2 million tons) but also by anacute shortage of urea fertilizer. Table II.1 gives the estimates for the1974/75 crop year and also the Government's targets for 1975/76. Thesetargets should be attainable if weather conditions are normal and inputsupplies are adequate. However, it is unlikely that input supplies astargeted can be fully procured and made available to the farmers in time,as will be discussed below.

12. Estimating foodgrain production in Bangladesh is a difficult task.The Government estimate for the Aus crop is now much higher than either theBank's or the Government's estimate at the time of the first meeting of theBangladesh Aid Group in October, 1974. Some observers feel that the Amanharvest will be much higher than the Government's estimate, but the Govern-ment argues that late sowing has reduced the grain yields, the flood andfertilizer shortage greatly cut the area planted to the higher yieldingvarieties, and the floods did extensive damage in areas not easily reachedby outside observers. HYV acreage is estimated to have fallen from the1973/74 figure of 2.0 million acres to 1.2 million acres in 1974/75, substan-tially below the target of 3.0 million acres. A recent HYV task force hasfound considerable overestimation of the HYV acreage and it may actually beas low as 500,000 acres.

13. The Government had hoped to overcome some of the flood loss througha Special Agricultural Rehabilitation Program (SARP), but this was largelyunsuccessful. Although foreign exchange was made available, it was not pos-sible to procure and arrange shipping of seeds in time, so that only in vege-tables were increases in production made possible.

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Table II.1: FOODGRAINS PRODUCTION(million long tons)

1972/73 1973/74 1974/75 1974/75 1975/76(Annual (estimate) (target)Plan)

Aus rice 2.27 2.80 3.20 2.85 /a 2.90Aman rice 5.59 6.70 7.31 6.00 lb 7.00Boro rice 2.07 2.20 2.46 2.46 Ic 2.70

Total rice 9.93 11.70 12.97 11.31 12.60

Wheat .09 .09 .16 .16 .16

Total production 10.02 11.79 13.13 11.47 12.76

Net available (pro-duction less 10%for seeds, wastage,etc.) 9.02 10.61 11.82 10.32 11.48

Ta Official government estimate (final)./b Government estimate (preliminary)./c Target.

Source: Planning Commission, Government of Bangladesh.

Fertilizer

14. The explosion at and shut-down of the urea factory at Ghorasalhad a serious effect on the supply of fertilizer. Local production in1974/75 is expected to be about 90,000 tons, and by February 1975 only120,000 tons of imports had been contracted for. Thus, during the first sixmonths of 1974/75 the Bangladesh Agricultural Development Corporation (BADC)was able to distribute only 40% of its targets. If scheduled imports arrivein time there will be adequate fertilizer for the Boro and Aus crops, butno reserve for the next Aman season. If the Ghorasal plant is not in pro-duction by June, then serious problems will occur again with the 1975/76Aman crop. While the spare parts for the plant have arrived, negotia-tions over the hiring of outside engineers have already caused a two-month delay in beginning repairs. These delays have put in jeopardy theGovernment9s expectations to have the plant production by June.

15. For 1975/76 the Government has targeted the distribution of 600,000tons of fertilizer, a 20% increase over the target for 1974/75. Table II.2shows the seasonal inputs, local availability and import needs. The BADCestimates that for 1975/76, the Government will need to import 273,000 tonsof fertilizer, 1/ costing approximately $100 million, even if the Ghorasal

1/ Estimate of the Planning Commission is 215,000 tons. However, themission feels that a target of 250,000 tons is appropriate.

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plant is operative throughout the year. It is very doubtful if the distri-bution target of 600,000 tons will be met due to a likely shortfall in localproduction and since imports are estimated at only 250,000 tons. Moreover,the country has not used more than 400,000 tons before.

Table II.2: FERTILIZER CONSUMPTION, PRODUCTIONAND IMPORTS

(thousand tons)

1973/74 1974/75 1975/76Actual Target Estimate Target

Consumption by Crop

Aman 106.5 217.0 74.5 236.0Boro 192.0 206.6 96.1 220.0Aus 56.0 76.4 70.0 144.0

Total 354.5 500.0 240.6 600.0

Local Production 279.0 307.0 /a 90.0 372.0

Imports 125.5 227.4 160.0 273.0 /b

/a The production target was set before the shut down of the Ghorasalplant.

/b See footnote /1, page 4.

Source: Table 7.7 of Statistical Appendix, and mission estimates.

16. Subsidies on fertilizer for 1974/75 will total approximatelyTk. 38.7 million (or Tk. 48.7 million if the price charged to BADC for local-ly produced TSP is raised, as the Bangladesh Fertilizer Chemical and Pharma-ceutical Corporation has asked). 1/ This compares with subsidies of Tk. 84million in 1973/74, Tk. 162 million in 1972/73, Tk. 67 million in 1971/72and Tk. 116 million in 1970/71. The urea subsidy will be 38%, TSP, 60% (or70% at the higher TSP price), and MP, 33%. Hopefully the government willcontinue to reduce these subsidies as the current constraint on fertilizerusage is supply and not the price. Fertilizer is said to command a highpremium on the black market.

1/ Since this fertilizer has already been sold to the farmers, any priceincrease will have to be met from BADC funds.

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Irrigation

17. The expansion of irrigation has been far below the targets in thePlan. Major irrigation schemes have made little progress except for someadditional acreage in the coastal embankment area. Total area irrigatedby large-scale projects in 1974/75 was about 100,000 acres and the goalof 463,000 acres by 1977/78 will be practically impossible to attain.

18. Low lift pump irrigation has expanded steadily since independence.The Government feels certain about continuing this trend; it has planned tofield 40,000 low lift pumps during 1974/75, covering an area of 1.6 millionacres. By the end of December 1974, only 85% of the 35,000 pumps availablehad been repaired. For 1975/76 an additional 5,000 pumps may be added,though it is felt that this may saturate the low lift pump possibilities andthat further expansion of irrigated land must come from tubewells. OnJuly 1, 1974 there were 1,800 shallow tubewells and 1,500 deep tubewells,but progress has been very slow. During the first six months no shallowtubewells and only 420 deep tubewells were sunk and 295 commissioned. Thepolicy of sinking shallow tubewells free of cost to users was discontinuedat the start of this fiscal year. Future increases in food production willbe dependent on a much faster expansion of irrigated land.

Consumption and Distribution

19. The 'food gap' is even more difficult to estimate than production,as it is highly sensitive to both production and population estimates. Afterthe floods the Government estimated that even if a build-up of stocks wasforegone, the Special Agricultural Rehabilitation Program was successful,and if 200,000 tons of grain could be procured locally, an import gap of2.3 million tons would remain. Supply problems resulting from the floodwere compounded by the lack of a buffer stock, lack of foreign exchange topurchase food and failure of aid shipments to arrive in time. The Govern-ment estimates that 20,000-30,000 people died of starvation in the latterpart of 1974.

20. The major problem was one of timely availability of foodgrain forpublic distribution. Bangladesh has been able to overcome previous produc-tion losses by drawing down stocks and increasing imports. However, onJuly 1, 1974, foodgrain stocks were only 228,000 tons, compared to averagesof 200,000-600,000 tons before independence. This included food on ships,in transit in the country and in the central storage depots, so that perhapsonly half of this was available for distribution at the local levels. While516,000 tons of foodgrain were imported in July and August of 1974, thescarcity of foreign exchange a--1 the lack of aid shipments led to importstotalling only about 100,000 tcns for Septe-zer and October, the most cri-tical months of the year. In 1972/73 and 1973/74, imports luring these twomonths amounted to 435,000 tons and 550,000 tons, respectively.

21. Arrivals and commitments picked up in the last two months of 1974and total arrivals are expected to approach 2.37 million tons by July 1,1975. Of this total, approximately 690,000 tons would represent commercialpurchases by Bangladesh at a cost of $150 million, and 1.68 million tonswould be supplied through foreign aid. However, since food aid is oftenon an f.o.b. basis, the government would pay freight charges of approxi-mately $50 million for food aid shipments.

22. The Government estimates an import gap of 1.5 million tons for1975/76, using a daily consumption norm of 15.5 oz. per capita for a popu-lation estimate of 80.67 million. This is shown in Table II.3.

Table II.3: THE FOODGRAIN GAP(million long tons)

1972/73 1973/74 1974/75 1974/75 1975/76(Annual (Estimate) (target)Plan)

Population (million) 74.00 76.20 78.60 78.60 80.67Requirements 11.68 12.03 12.40 12.40 12.73Stock buiid-up - - .25 .30 .20

Total requirement 11.68 12.03 12.65 12.70 12.93Net available 9.02 10.61 11.82 10.32 11.48

Overall gap 2.66 1.42 .83 2.38 1.49 /a

Actual imports 2.74 1.64 2.37

Per Capita Availability(lbs.) 355.9 360.2 - 360.6 -

/a Includes 40,000 tons required to repay U.S.S.R. wheat loan.

Source: Planning Commission, Government of Bangladesh.

23. The events of the past year highlight the need to build up anadequate buffer stock of foodgrain to meet contingencies. The requiredamount has been estimated to be about 600-700 thousand tons. In con-junction with this buildup, however, the food distribution system needsa thorough overhaul. There are many criticisms of irregularities in thedistribution system. The Government is making some efforts at rooting outirregularities and more than 300,000 illegal ration cards in the StatutoryRation Areas have been confiscated between November 1974 and January 1975,saving Tk. 45 million per year. There is still a large number of illegalration cards in the system. The system does not feed the rural poor toany great extent nor those so destitute that they cannot afford the verylow ration prices. The very large subsidy is a great inducement to siphonfood to the free market. The table below shows the ration prices, government

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costs and che free market prices prevailing in January 1975. The foodgrainsubsidy alone is estimated to cost almost Tk. 800 million in fiscal 1974/75compared to estimated total Government revenue of Tk. 5,100 million. Thelarge volume of foodgrain distributed by the Government represents a potentialdevelopment asset not being fully utilized. An expansion in 'food for work'programs, as presently contemplated by the Government, for labor intensiveinvestments is recommended.

Table II.4: FOOD PRICES, JANUARY 1975(Taka/seer)

Item Ration price Government cost Free Mlarket Price

Rice 1.50 3.50 7.75Wheat 1.25 1.99 6.00Sugar 6.40 6.40 16.00Edible Oil 8.00 9.95 28.00Salt .50 n.a. 6.00

Source: Ministry of Food and Civil Supplies, Government of Bangladesh.

24. Another aspect of the foodgrain situation that needs study relatesto the transportation and storage network. Although storage capacity of 1million tons exists, only 800,000 tons of usable capacity is available.Great deterioration in the conditions of the silos has recently been re-ported and repairs and rehabilitation are urgently needed here. Aid donorshave taken an active interest in transportation problems including those atChittagong port. Action to overcome problems in these critical areas isurgently needed.

Procurement

25. The Government launched a compulsory rice procurement program tocoincide with the Aman rice crop. It fixed a price of Tk. 74 a maund forpaddy and Tk. 120 a maund for rice. The amount collected is estimated at127,000 tons this year, as compared to 70,000 tons procured in 1973/74,under a voluntary system (at prices of Tk. 45 a maund for paddy and Tk. 72 amaund for rice). A major effort was involved, with the Government cordoningoff each district, in assessing farmers and collecting the assessed amounts.While the Government has been able to substantially increase procurementas compared to last year's level, it has involved a major mobilization ofthe Government's resources and may have caused some resentment. The pricesoffered have often been below the market price, and cordoning (which wasremoved on February 15) prevented the normal flow of foodgrains out ofsurplus districts, driving prices down in such districts while pricesremained high in urban areas and deficit districts. The Government will

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procure again during the Boro season, but even if this drive is successfuland reaches its optimistic target of 60,000 tons, less than 9% of the fooddistributed will be locally procured. This year has shown a slight improve-ment in procurement, but much remains to be done if the ration system is tobe freed from its dependence on large imports of foodgrains.

26. The Government is studying ways of improving the rice procurementand ration programs. Action is necessary to contain the ration program tothose most in need. If the less needy are progressively diverted to themarket for their foodgrain requirements it would decrease the amount of foodthe Government would need to distribute, ease the impact of the subsidy onthe budget and make the entire ration program more meaningful.

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III. JUTE

27. The year 1974/75 has been a calamitous year for jute in Bangladesh.The acreage planted to jute has fallen to the lowest level in 15 years andthe crop harvested will be only the third in the past 20 years to be lessthan 5 million bales. The export volume of raw jute will be half the aver-age of the past 15 years. Despite record high world prices, the income fromraw jute exports will fall at least 20% below the target. Jute goods ex-ports are also expected to be down significantly with volume falling 18%froma the 1973/74 level and 40% from the 1969/70 level. The current reces-sion and high prices have cut back the demand for jute and jute goods exports,but the crisis in jute has been coming for a long time and an end to therecession will not solve the problems that jute faces. 1/ Export sales ofraw jute for the months of December 1974 and January and February 1975 wereonly 66,000 bales compared to 1.42 million bales and 0.83 million bales inthe same period in 1973/74 and 1972/73, respectively. The price of -e 200/toncharged in the same period in 1974/75 (compared to i. 116 in 1973/74 andi 112-E 114 in 1972/73) has exacerbated the problems caused by deficientinternational demand. If sales continue at this disastrously low level,the outlook for 1975/76 and for the long run position of jute will be verygloomy. Since jute and jute goods provide about 80% of the foreign exchangeearnings of Bangladesh, efforts to increase demand for jute products andimprove the efficiency of jute cultivation and manufacturing are of crucialimportance.

Raw Jute

28. Jute is the second most extensively planted crop in Bangladesh.It is a prime source of the country's foreign exchange income, a major cashcrop for 10 million families on smaller farms and a major source of incomefor farm labor, being much more labor intensive than rice. The higlh priceof rice relative to jute led to a decrease of approximately one-third injute acreage (from 2.0 million to 1.4 million acres) and output (from 6.0million to 4.2 million bales) in 1974/75 compared to 1973/74. Export salesof raw jute during the eight months July 1974 to February 1975 were lessthan 24% and 31% of the corresponding 1973/74 and 1972/73 levels, respec-tively, and exports of raw jute are expected to bring only $100 million thisyear compared to a target of $125 million.

1/ See The World Jute Economy, IBRD Report No. 114a-BD, dated July 12,1973.

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Table III.1: RAW JUTE POSITION(million bales)

Opening Produc- Raw Jute Consumption Carry-Year Stock tion Exports Mills Household Losses over

1973/74 2.1 6.0 2.65 2.9 0.25 0.15 2.2

1974/75 2;2 4.2 1.75 2.5 0.25 0.20 1.7

Source: Ministry of Jute and Bureau of Agricultural Statistics.

29. Because of the large carry-over into 1974/75, there has been nosupply shortage and, as exports of raw jute and production of jute goodshave fallen, a carry-over of at least 1.7 million bales will be availablefor 1975/76. Jute production prospects for 1975/76 will, however, dependon the success achieved in switching some of the land that went to Aus ricelast year back to jute and also in expanding the Intensive Jute CultivationScheme (IJCS) from 270,000 acres in 1974/75 to the Government's target of500,000 acres in 1975/76. The funds for such an expansion are already allo-cated, but the seeds and fertilizer must be mobilized and distributed intime. If half of the land lostlast year is returned to jute and if theIJCS can be expanded, then production next year could reach the Government'sestimate.of about 6.0 million bales. GivenAimproved pricing policies, rawjute exports might then rise to 2.5 million bales.

30. The achievement of the production target depends on the willing-ness of the farmers to reallocate land from rice to jute, and the successof the IJCS. The most difficult judgment relates to the acreage thatfarmers will return to jute. This depends on expectations as to the rela-tive prices of jute and Aus rice. Both sets of prices have been very vola-tile recently. While jute prices went as high as Tk. 130-140 per maundduring a short period in 1974, they have now begun to decline and whilerice prices have fluctuated they are still quite high. The yardstick gen-erally used is that, for farmers to plant jute rather than rice, the jutefarmgate price must be 30% higher than the paddy farmgate price. This hasnot been the case in most districts. The Government's recently announceddecision not to set a high minimum purchase price and the likely lack ofadequate manpower, credit and inputs for the IJCS will adversely affectproduction. For these reasons, raw jute production for 1975/76 is likelyto be well short of the target and fall in the range of 5.0-5.5 millionbales.

31. The major problem facing jute is the squeeze between a high domes-tic price of rice and world market price for jute limited by competitionfrom lower priced synthetics. In the context of the current world economicsituation and the continuing threat from synthetics, there are definitelimits to the ability of the jute sector to pass on rising domestic costsin international markets. Recent experience clearly indicates that overseas

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buyers resist higher jute prices by adjusting the volume they are preparedto purchase. A strategy is needed that will make it profitable to cultivatejute domestically and yet keep exports competitive. In the short run thismeans increasing the domestic price while lowering the world market price.The long run need is to reduce the costs of jute production.

32. One must be careful not to simplify the jute problem into pricerelativities only. While it is true that the price at which jute is pur-chased from the farmer is of material significance in determining produc-tion, there are questions related to research, production and marketingwhich are also crucial to any attempt to tackle the problems of jute. Thereare a large number of inefficiencies in the link between the farmer and thefinal purchaser or shipper, such as poor facilities for collection fromfarms, inadequate primary and secondary collection centers, a serious lackof and deterioration in storage space, and inadequate transport facilities.The IJCS has suffered from poor quality seeds and lack of funds for advance-ment of credit to participating farmers. Jute research has been inadequate,and understandably has not yet led to increased yields or decreased costs.

33. Jute is still a viable and important crop for Bangladesh. Usingthe Bank's projected prices of jute and wheat for the next two years andthe average yields of jute and Aus rice for the last five years, the juteproduced from one acre of land will purchase foodgrains that would needalmost three acres of land in Bangladesh. 1/ Thus it is imperative thatevery effort be made to restore jute to its previous production levels.

34. A comprehensive and well integrated program that encompasses allfacets of jute production is required. A firm commitment to jute and aguaranteed minimum price attractive to farmers should be announced beforethe sowing season. The IJCS needs to be strengthened with a uniform, highquality seed being distributed, and with more credit available to participatingfarmers to purchase necessary inputs. These inputs must be supplied ontime. The number and training of extension workers in jute needs upgrading.Quality control for the IJCS is needed and this means limiting its growthrate as a too rapid expansion of the scheme will dilute its effectivenessand discourage farmers from future participation. The marketing system needsto be streamlined and made more efficient to reduce the high mark-up fromfarmgate to export price (currently over 50%). The research program mustbe strengthened and the results transmitted speedily to farmers. The AsianDevelopment Bank sponsored jute seeds project is a step in the rightdirection. Hopefully the establishment of Jute International will lead toexpanded research in both jute production and end uses. Without a compre-hensive program of the kind outlined above, the future for jute and forBangladesh exports will be bleak.

~/ This assumes that wheat would be imported. If rice is imported insteadof wheat, the advantage still lies with jute, but far less strikingly.

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Jute Goods

35. The jute industry, employing more than 200,000 workers and contri-buting more than one half of Bangladesh's export earnings, is now in direstraits due to falling world demand, rising domestic costs and uncompeti-tiveness in international markets. The export of jute goods increased ata rate of 9% per annum during the sixties, stimulated in part by the higherrate of export bonus given to jute goods relative to raw jute. 1/ Atindependence the industry had to replace many of the former managers andskilled workers who had left and also had to contend with the withdrawalof protection through the establishment of a unitary exchange rate inJanuary 1972. Since independence the jute industry on average has achievedabout 80% of the 1969/70 production levels and has needed substantial oper-ating subsidies from the Government in order to survive.

36. Exports of jute goods in 1974/75 are estimated at 360,000 tons.This is only about 60% of the volume of exports in 1969/70. Because priceshave increased in the interim, total export earnings of about $190 millionwill be about the same. The low levels of exports in 1974/75 are for themost part the consequence of the recession in the developed countries, butthese are also a result of the very high prices set for jute goods relativeto those of synthetic substitutes. Declines in exports are concentrated inhessian and carpet backing, which constituted about 33% and 13%, respectively,of the export volume of jute goods in 1973/74. Sales of both products havebeen severely affected by the deterioration of the price competitiveness ofjute vis-a-vis synthetic substitutes; carpet backing has also suffered fromthe recession in the U.S. housing industry. As of January 1975, 30 units(mostly carpet backing units) had been closed and about 13,000 workers laidoff.

37. The prospects for 1975/76 depend both on the extent to whichdemand in the developed countries recovers from the present recession andon the prices which are set. The Government has set an export target of500.000 tons which implies an increase of nearly 40% over the current year.There is little basis for such an optimistic projection. With some im-provement in the demand situation and with a reduction of 10-15% in prices,Bangladesh should, however, be able to export 400,000-450,000 tons in1975/76, which would result in a 13% increase in export earnings, from$190 million in 1974/75 to about $215 million. Production, exports andstocks of jute goods are shown in Table III.2 below.

1/ For example in 1970/71, raw jute exporters were entitled to bonusvouchers worth 10% of their exchange earnings, while for exportersof jute manufactures the bonus Vouchers were valued at 1.8 times theirface value this meant an effective subsidy of 18% for raw jute andof 72% for jute goods.

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Table III.2: PRODUCTION, EXPORTS AND STOCKS OF JUTE GOODS(thousand long tons)

/a1973/74 1974/75- 1975/76 1975/76(Actual) (-Bank Estimate--) (Government Target)

Carryover 101 114 124 124Production 500 420 450 600Total Availability 601 534 574 724Exports 438 360 430 500Domestic Consumption

(including loss) 49 50 50 40Closing Stock 114 124 94 184

/a During the first half of 1974/75, production was 238,000 tons andexports were 207,000 tons.

Source: Bangladesh Jute Industries Corporation.

38. Costs of production of jute goods in Bangladesh have been higherthan the sales price during most of the post-independence period. During1972/73 and 1973/74 the costs were roughly 20% in excess of sales price.This has required substantial subsidies and represented a drain on domesticresources. Direct subsidies by the Government amounted to Tk. 155 millionduring 1973/74 and bank loans outstanding as of December 31, 1974, wereestimated at Tk. 1,320 million, most of which were already overdue.1 /

39. It may, of course, be argued that the subsidies from the Govern-ment and the banking system simply offset a large part of the tax imposed byan unremunerative export price. This would seriously understate the damagingeffects of the present situation. The losses sustained by the industry haveled to a deterioration in morale. Inevitably, the concern with costs, savingsand higher productivity has weakened. The continuance of a distorted pricestructure provides no guide to proper decisions on investment, consolidation,product mix, etc. The large subsidies financed through the banking systemare not subject to adequate monitoring and control, and their exclusionfrom the budget has contributed to serious miscalculations of the need forcredit to the public sector and its inflationary impact.

1/ In late 1973, the Governme.: decided to convert a large portion of theindustry's liabilities into debentures. These debenitures totallingTk. 500 million (Tk. 200 million to Bangladesh Bank and Tk. 300 millionto other banks) bear inzerest of 4.5% and are repayable in 20 years.

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40. The problems of the jute industry, however, go beyond prices anddemand. There are serious shortages of skilled managerial personnel. More-over, managers do not have the requisite autonomy to operate effectively.There is increasing concern among foreign buyers with respect to the qualityof the jute goods exported from Bangladesh. A recent Bank survey of thejute industry suggests that, as a result of inadequate maintenance and re-pair programs, current requirements for spare parts for the industry areprobably double what may be considered to be its normal requirements. Evi-dently, some of these problems reflect managerial failings. It is thereforeof critical importance to recruit and train skilled managerial personnel,to give management greater autonomy at the mill level and to improve qualitycontrol of production. These measures are not independent, however, of aprice structure which offers a reasonable test of, and incentive to, effi-cient management.

Conclusions

41. The current recession in demand for raw jute and jute productshas led to a great deal of pessimism. Official agencies in Bangladeshresponsible for jute policy may have taken an excessively short-term viewof the situation. By setting prices as high as possible, they have attemptedto keep up export receipts in the short run while endangering the competitiveposition of jute in the longer run. They have simplistically assumed thatan upturn in the world economy will solve the industry's problems. Lowerworld prices for jute are needed to insure that as demand in the developedcountries recovers, jute will maintain and even increase its share in thoseend-product markets in which it competes with synthetics. In many respectsthe prospects for jute are more promising now than they have been for sometime, since the prices of synthetics have been driven up by high pricesfor feedstocks and especially by rapidly rising rates for power. The timeis ripe for an aggressive and imaginative drive to increase consumption ofjute goods and for a lowering of prices relative to synthetics.

42. This would only succeed, however, if Bangladesh were able toincrease production from the very low levels of the current year. Thiscalls for setting of a higher domestic price for raw jute (one which wouldmaintain at least a 30% differential with the paddy farmgate price) and ahigher domestic price for jute products (one which would eliminate theoperating subsidy). These measures would have to be supported by theprograms for research, improved production and streamlined marketing,which have been outlined in the preceding paragraphs.

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IV. THE INDUSTRIAL SECTOR

43. The manufacturing sector, although accounting at present for only8-9% of Gross Domestic Product, is an important and growing element inthe Bangladesh economy. It produces basic consumer goods, providesagriculture with fertilizer and other key inputs and contributes towardsexports and government revenue. The government sector comprises most medium-and large-scale industry while the private sector consists mainly of small-scale enterprises. Existing industrial capacity -- most of which was builtbefore independence -- is, however, not fully utilized. Industrial output

has yet to reach the pre-independence level, and industrial performance in1974/75 is likely to show little improvement over the previous year.

44. The problems of manufacturing industry in Bangladesh have been

identified in earlier World Bank reports. The acute shortage of importedraw materials and spare parts remains the dominant reason for low levelsof capacity utilization and productive efficiency in most industries. Pro-

duction in industries such as steel, cement, petroleum refining and edibleoil, where most raw materials have to be imported and where utilization ofexisting capacity is low, is largely, a function of foreign exchange avail-

ability.

45. The reasons for low capacity utilization in some export-orientedindustries, such as jute goods, leather, frozen shrimp, sugar and tea, aredifferent. As these industries depend on supplies of indigenous raw mate-rials, the shortage of foreign exchange is not the predominant constraint.The export of jute goods is heavily dependent on the supply of raw jute,which in turn affects the relative prices of jute goods vis-a-vis syntheticsubstitutes. Prospects for sugar exports are reasonably good if productionof sugar cane is sufficient to generate a sizeable surplus, by improvingyield at both plantation and refinery levels. Shrimp-freezing plants, run-ning at 30% of capacity, are unable to increase exports due to low catchesof shrimps and prawns. The export of semi-finished leather is largely con-

strained by the availability of raw hides and skins. Tea plantations, ham-

pered in many cases by insufficient machinery and spares, could improve

output for exports.

46. An improvement in the availability of raw materials and spares

will not by itself improve industrial performance in Bangladesh. The

inadequacy of domestic infrastructure, especially power and transportfacilities, continues to hamper efficiency in many industries. Transport

bottlenecks continue to impede the smooth carriage of raw material inputsand finished products between factories, the ports and markets. Production

has been curbed in many enterprises due to frequent breakdowns in the powersupply. Efforts to remove the bottlenecks in infrastructure are being madebut they will take a considerable time to achieve results.

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47. The management of many public sector enterprises suffers frombureaucratic rigidities and inadequate training and experience. There isconsiderable scope for improvements in productive efficiency and financialperformance. While most industries are not realizing their full income po-tential due to incorrect pricing policies and rising costs of production,others such as jute are incurring considerable losses. The web of statecontrols built around the operating procedures of state enterprises and thelack of autonomy in pricing policies are some of the more obvious causes ofthe modest industrial performance in the years since independence.

48. Management-labor relations, which were particularly bad immedi-ately after independence, have improved recently due to the introduction ofincentive bonus schemes in some enterprises, and enforcement of tough meas-ures against labor unrest since the declaration of an Emergency Decree.Labor policy is being formulated but has as yet to be announced and imple-mented.

49. In 1974/75 industrial performance improved in some industries.Sugar production may surpass the record level achieved in 1966/67, gen-erating a surplus of some 12-15 thousand tons for export. The teaindustry has shown a gradual improvement since independence and thisyear's expected output of 72 million pounds will exceed the pre-inde-pendence level. The production of both cotton cloth and yarn shows animprovement over the previous year and the production of cloth is muchhigher than in 1969/70. Output of cement, petroleum products, steelingots, newsprint, diesel engines and pumps during the first six monthsof 1974/75 also showed a slight increase as compared to the previous yeardespite the serious foreign exchange shortage experienced during theperiod.

50. However, performance in other industries is not encouraging.In almost all sectors production during the first half of 1974/75 has beenbelow the target set in the Annual Plan and the rate of capacity utilizationis still very low (see Table IV.1). In several industries, such as edibleoil, soft beverages, steel pipes, matches and footwear, output declined overthe previous year, largely as a result of shortages in required inputs. Thejute industry, as discussed in the previous chapter, is experiencing severedifficulties and the explosion at the Ghorasal fertilizer plant resulted ina sharp decline in urea production.

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Table IV.1: PRODUCTION AND CAPACITY UTILIZATIONIN SELECTED INDUSTRIES /a

(percent)

Production ChangeJuly-December 1974

Compared with Capacity UtilizationJuly-Dec. July-Dec. July-Dec.

1969 1973 1969/70 1973/74 1974

Jute Goods -15 -7 74 69 66Cotton Yarn -9 4 79 59 72Cotton Cloth 42 10 49 77 71Paper -30 -7 102 49 50Newsprint -35 15 69 53 56Cement 189 189 53 35 30Steel (Ingots) 34 23 22 29 30Petroleum

refining -24 101 57 22 43Sugar 42 33 55 52 83 /aFertilizer

(urea) -7 -74 91 G2 15Matches -64 -8 86 31 30

/a Estimate' for the 1974/75 season.

Source: Table 8.1 of Statistical Appendix.

51. Prospects for 1975/76 vary substantially among different indus-tries. The jute industry will face serious problems unless adequate meas-ures, as discussed earlier, are initiated. The cotton textile industry,which is relatively efficient and has a protected domestic market, shouldbe able to show continued improvement provided sufficient foreign exchangeis available for importing raw materials. Fertilizer production shouldpick up during 1975/76 as the Ghorasal plant is expected to reopen in June1975. Export-oriented industries such as leather, tea, shrimp, newsprintand sugar, have reasonably good prospects provided adequate export policiesare introduced. Most other industries, which are heavily dependent on im-ported raw materials and spares, will encounter problems in expanding theiroutput as foreign exchange will continue to be limited. Industrial perform-ance in all sectors will undoubtedly be influenced by the labor situationas well as by management efficiency.

52. There has been some progress in a number of development projectsunder the different sector corporations. During the first half of 1974/75the TSP Factory at Chittagong and the Raz Textile Mills at Jessore werecommissioned. The Cement and C inker Grind-ng Factory at Chittagong startedproduction in July 1974. The North Bengal Paper Mills also started produc-tion on a trial bass. The Sylhet Pulp Mill is expected to start production

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by March/April 1975. Two new textile mills are ready for operation. Aproject for production of pesticides is presently under construction.

53. The dominance of agriculture in the economy and the ample supplyof natural gas has encouraged the Government to give considerable emphasisto developing the fertilizer sector. The Ashuganj fertilizer project, con-sisting of a 1,600 ton per day (TPD) urea plant with an intermediate 925TPD ammonia production plant, is expected to commence plant construction inAugust 1976 ahd production in July 1978. Total project cost, estimated at$249 million, includes a $142 million foreign exchange cost financed by ADB,the Federal Republic of _Germany, Iran, Switzerland, UK, USAID and IDA. As ameans of increasing as well as diversifying exports, two export-orientedurea fertilizer projects, apart from the Ashuganj project, are under con-sideration by the Government. The feasibility studies on these two projectshave been prepared and negotiations with possible donors are under way. Inaddition, an Energy Survey financed by UNDP and ADB is expected to startin March 1975. It will help formulate long-term energy policies and studythe feasibility of a gas line and a liquid natural gas plant.

54. Exploration for oil and natural gas is a significant new develop-ment. In the Bay of Bengal six exploration contracts have been awarded anda signature bonus of $20 million has been collected. Seismic surveys werestarted in October 1974 and drilling may begin around June 1975. 1/ Theresults of the seismic surveys are not available as yet.

55. In order to encourage both private and foreign investment, theGovernment announced a new Investment Policy in July 1974. It raised theceiling on private investment from Tk. 2.5 million to Tk. 30.0 millionand relaxed the rules on foreign investment, allowing for joint ventureswith local private enterprises. The private sector in Bangladesh, con-sisting of some small and medium-sized establishments in such sectorsas pharmaceuticals, edible oil, tanneries, steel re-rolling and tobacco,scarcely provide any competition to Government enterprises. As the effi-ciency of the public sector suffers from lack of competition, any encour-agement to private enterprises resulting from the new Investment Policyshould be welcome. So far the response from private as well as foreigninvestors has not been very encouraging. Private investors tend to berather cautious in interpreting the new investment climate, and the economicand political situation. The inflow of foreign investment has so far beenlimited to exploration for oil.

56. Industry in Bangladesh is heavily protected. Stringent importcontrols deriving from foreign exchange scarcity and the monopoly rightsconferred on Government enterprises continue to guarantee that protection.However, foreign exchange continues to be very scarce for the Bangladesheconomy. Bangladesh manufactures a number of products which can competein international markets provided appropriate policies and measures areintroduced. With current export prices and given existing licensing pro-cedures, it is more attractive to produce for the domestic market. It is

1/ Discussions with India on territorial issues may delay exploration.

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important to change this orientation in the interests of diversifying ex-ports and increasing foreign exhcnage earnings. Industrial capacity maycontinue to be under-utilized for some time, since it was originally createdfor a much wider market than that constituted by Bangladesh. However, evenmodest success in finding new markets should assist Bangladesh in reducingthe present high levels of unused capacity. While, therefore, a long-termstrategy that seeks to develop fertilizer and related sectors on the basisof the country's reserves of natural gas is quite justified, the short-termstrategy should give priority to expanding the limited foreign exchangeearnings in every possible way.

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V. INCOME AND PRICES

57. Per capita income in Bangladesh reached about $90 in 1969/70. Thedamage to productive assets and the disruption of productive activities causedby the struggle for independence were intensified by droughts in 1971 and1972. The result was that, during the first 18 months after independence,per capita income was perhaps 20% below the 1969/70 level. The followingyear brought some recovery, however. With favorable weather conditions,agricultural output increased by 11% in 1973/74. In addition, industrialproduction went up by 20%. GDP overall was probably at about 95% of the1969/70 level. However, with an increase in population of about 6 millionduring the four years, GDP per capita still remained about 10% short of the1969/70 level. Unfortunately, the momentum of 1973/74 was not sustained in1974/75. Severe flooding damaged standing crops and reduced rice output.Moreover, the foreign exchange crisis that developed around mid-1974 sloweddown the flow of imports and industrial recovery. Despite anticipated growthin the construction and service sectors, output in 1974/75 may turn out tobe lower than in the previous year by perhaps 3-5% with per capita incomelower by about 6%.

58. Not only is the level of per capita income significantly lower, butthe decline appears to have hit most hard those who could least afford it --the lowest groups on the income scale, such as the landless and near-landlessrural population. Given the high rate of population growth and the virtualabsence of employment opportunities, especially in the rural areas, the num-ber of the unemployed and underemployed has increased. The decline in agri-cultural output by itself results in higher levels of unemployment or under-employment. The meager prospects for subsisting in the countryside, worsenedby the recurrent natural calamities of droughts and floods, have forced largenumbers of destitute rural people to migrate to urban areas without any realopportunities for work. There has also been a considerable shift from jutecultivation to rice in 1974 with a resultant decline in labor inputs as juteis more labor-intensive than rice. Furthermore, a large number of smalllandholders have lost their land as they became impoverished in the after-math of the devastating floods.

59. The high rates of inflation -- an average of more than 50% perannum over the past three years -- have also effected considerable shiftsin income distribution. Although wages have risen, they have lagged consid-erably behind increases in the prices of essential commodities. Adjustmentsin the salary scales for lower paid Government employees following the rec-ommendations of the National Pay Commission -- intended to improve the dis-tribution of income of public servants within the ceiling of Tk. 2,000 permonth announced after independence -- have been more than offset by infla-tion, bringing the real incomes of state employees down below pre-indepen-dence levels. On the other hand, the maintenance of controls in a situationof rising prices has resulted in increased scarcity premia, thus benefitingintermediaries, mainly importers and traders. Farmers in general have ben-efited from rising prices for rice and agricultural produce, though richer

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farmers have increased their incomes disproportionately as they also benefitmore from subsidized agricultural inputs. In sum, deteriorating levels ofoutput and a rapid escalation of prices have upset the once moderately equi-table character of Bangladesh society.

60. The phenomenon of rising prices has been one of the central prob-lems facing policy makers in Bangladesh. Although no reliable index of thepurchasing power of the domestic currency exists, the cost of living indicesin the major urban centers afford an indication of the magnitude of currencydepreciation. Details are given in Table V.1.

Table V.1: COST OF LIVING INDICES AND RETAIL PRICESOF SELECTED ITEMS

January June June June January1972 1972 1973 1974 1975

Cost of Living Indices(1969/70 = 100)

/aDacca Middle Class 120 141 208 304 430 --Narayanganj Industrial /a

Workers 126 156 245 352 519-'-

Retail Prices of SelectedItems at Dacca

Rice (med.) Tk./md. 49.6 71.6/b 106.8 162.0 330.0Mustard Oil Tk./seer 7.7 9.2/b 12.3 20.9 41.7Gur-Cane Tk./seer 1.9 3.9/b 4.0 4.9 8.2Long Cloth (med.) Tk./yd 3.3 8.0/c 12.8 10.9 13.0Kerosene Tk./22 oz. 0.7 0.5/b 1.1 1.9 1.4

bottle

Note - See also Section 9 of the Statistical Appendix./a December 1974./b July 1972.7c August 1972.

Source: Bangladesh Bureau of Statistics.

61. The cost of living indices for Dacca and Narayanganj show thegeneral rise in prices betwe,n January 1,72 and December 1974 to be nearly300%. In 1972/73 and 1973/74 prices increased by 50% and 40%, respectively.However, a rapid increase in the price level since June 1974 pushed thegeneral indices up by 40 percentage points in less than six months and therate of inflation in 1974 to 80%. The effects of these increases on the

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family budget in Bangladesh may be seen from the price changes of some essen-tial items. The market price of medium quality rice tripled between January1972 and June 1974 and then doubled in the following six months. Over thesame period, the price of mustard oil increased five-fold and that of mediumquality long cloth quadrupled.

62. The failure to contain the rise in effective demand, given thedepressed levels at which the productive system operated, coupled with therise in world prices 1/ have been responsible for the rapid escalation ofprices in the country. A major factor behind the upsurge in effectivedemand has been the rapid and disproportionate increase in money supplyin relation to the growth of production. This was in large part a conse-quence of the Government's failure to enhance revenue in line with increasedmoney incomes, to control budgetary expenditures, and to manage public sectorenterprises efficiently, particularly the jute industry.

Table V.2: CHANGES IN DOMESTIC LIQUIDITY(Taka million)

Dec. 71- July 72- July 73- July 74-June 72 June 73 June 74 March 14, 1975

Domestic Credit +1,049 +2,814 +3,302 +1,706

Government ( +839) (+1,291) (+1,723) ( +176)Other Public Sector ( +676) (+1,713) (+1,052) (+1,136)Private Sector ( -466) ( -190) ( +527) ( +3)

Foreign Sector +821 -188 -832 +163Other -338 +273 -196 -250

Total DomesticLiquidity +1,532 +2X899 +2,274 +1,619

Money Supply +982 +2,103 +1,207 +836Time Deposits +550 +796 +1,067 +783

Source: Table 6.2 of Statistical Appendix.

1/ Much of the price rise was politically difficult to pass on directly tothe consumers and thus was reflected in an increased burden on theGovernment through reduction in potential increases in the incomes of manypublic sector enterprises, and increased deficit finance to cover thedifference.

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63. Money supply increased by 131% from December 1971 to March 1975.The dominant factor in the increase in money supply has been credit expan-sion to the public sector, both to finance budgetary deficits and to offsetlosses incurred by the nationalized industries. Advances to sector corpora-tions and government borrowing have together averaged over Tk. 2.5 billionannually. The private sector also moved to the status of a net borrowerafter the initial effects of the severe uncertainties and low levels ofactivity following independence elapsed. Although little private invest-ment was undertaken in the past few years, credit to the private sectorhas been mainly advanced to finance trade and other services, some of whichappears to have been of a speculative nature. Moreover, the emergence ofsizeable quantities of 'black money' obtained through the exploitation ofprice controls, the evasion of taxes, and smuggling, has fueled the pricespiral.

64. Stringent controls have been initiated recently to limit creditexpansion and to enforce the regulations of the Bangladesh Bank. The Govern-ment also demonetized all Tk. 100 notes on April 6, 1975. These are to bedeposited in 'blocked accounts' for payment of their value later on if andwhen the Government so decides. Since it is estimated that these constituteabout 18% of the money supply, it is hoped that this measure will have aconsiderable deflationary effect, and that it will uncover holdings of blackmoney and evasion of income tax laws. It is unlikely, however, that thesemeasures alone will have the desired effects as long as budgetary deficitsand losses of public sector enterprises continue at their existing levels,and action on basic economic policy measures is postponed.

65. It is noteworthy that the rise in prices since independence hasbeen double that of the increase in money supply, which suggests that otherfactors have been at work as well. The increase of 56% in average importprices in 1973/74 and a further 23% in 1974/75 is of course an importantfactor. In addition there appears to have been an increase in the velocityof circulation of money, as more and more people shift out of money intogoods in a period of inflationary expectations. Commodity scarcities havecreated opportunities and incentives for a large number of traders and otherintermediaries with access to capital and 'black money' to hoard goods andspeculate in commodities. The increase in interest rates which was announcedin June 1974 1/ had little impact as inflation rendered the real rates ofinterest even more negative than before the rise in their nominal rates.Moreover, given the current prices for exports and imports, capital flight inthe form of unrequited smuggling of potential exports further intensifiedthe shortages of goods and the inflationary situation.

1/ The Bank Rate was increased from 5 to 8% and the rates on depositand advances were also raised. See Statistical Appendix Table 6.9for details.

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66. The effects of persistent and accelerating inflation cannot butbe adverse for public morale as well as economic activity. The rise in thegeneral index of prices of the magnitude experienced in Bangladesh requiresstrong measures to reverse the trend. A start should be made to reduce thoseeconomic controls which act as constraints on output. Except in a few caseswhere subsidies are essential to alleviate the hardship imposed on the verypoor, the whole system of pricing of public goods and services needs to beexamined so that it accurately reflects the associated 'real' costs to thebeneficiaries. A fiscal policy limiting current expenditures to a levelconsistent with sound economic growth is urgently needed. Credit expansionshould be geared to the essential liquidity needs of both private and govern-ment commercial and industrial activities. The interest rate structureneeds revision so as to attract private savings, restrain hoarding of rawmaterials and finished goods and reduce smuggling and speculation in com-modities. Further measures to siphon off existing black money are alsocalled for.

67. It has been argued that controls are necessary to contain infla-tion in Bangladesh; in fact, however, they create conditions of excessdemand, and with the inadequacy of the distribution system, they tend toperpetuate shortages and promote black market activities. In this context,an expansion of domestic production of goods and services remains the cor-nerstone for achieving a more stable price level and a basis for acceler-ating economic growth.

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VI. DOMESTIC RESOURCES

68. In 1974/75 Bangladesh received about $12 per capita of externalassistance. Gross investment converted at the official exchange rate wasbelow $10 per capita. If net investment is used and the conversion is madeat an exchange rate reflecting more closely the purchasing power of the taka,the figure would be still lower. What this means is that domestic savingsin Bangladesh were substantially negative and that a considerable portion ofexternal assistance was in support of consumption. This was a consequenceof special factors such as the high levels of food aid which were needed andthe adverse movement in the terms of trade. It was recognized that the Gov-ernment would have a hard time passing on the fall in consumption implied bythese changes to the impoverished population. While this may be unavoidablein a single catastrophic year, it is difficult to sustain over the mediumor longer term. The problem of generating additional domestic savings istherefore central to the Government's ability to regain control over economicmanagement and policy.

69. Since a very high proportion of investment is undertaken by thepublic sector, fiscal policy will need to perform the major role in increaseddomestic savings. But anticipated budgetary savings have been transformedinto deficits in every year. In the budget estimate for 1974/75, a surplusof Tk. 700 million on current account was anticipated. However, it appearsthat there will be a deficit of about Tk. 900 million.

70. Private savings have also been very low in recent years. Thefailure of production in the major sectors of the economy to return to thelevels achieved when the population was 10% smaller, coupled with rampantinflation, have forced the majority of the population to attempt to preservetheir desperately low consumption standards by dissaving. At the same timethe uncertain climate for private investment has inhibited the mobilizationof private savings for productive investment. Thus, despite the announce-ment of the New Investment Policy in July 1974 1/, very little investmenthas been undertaken by private entrepreneurs. Until monetary expansion isbrought under control and a determined effort is made to stabilize the eco-nomy, the prospects for sustained economic growth are limited.

Fiscal Performance in 1974/75

71. Government revenue has been very inelastic in relation to changesin money incomes. It is dependent on a limited number of indirect taxes andis considerably affected by import levels. While it is difficult at thistime to formulate a clear picture of the fiscal position in 1974/75, indica-tions are that revenues are l'-ely to fall short of budget estimates by about10%, while current non-develop aent expenditires may exceed expectations bymore than 20%.

1/ See Chapter IV for details.

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72. The budget for 1974/75 anticipated total revenue to be Tk. 5,594million, including the effects of new tax measures of Tk. 890 million. Col-lections from principal sources of tax revenue during the first half of thecurrent fiscal year were below budget estimates. The situation may be evenworse in the second half, when the effects of the reduced import program inlate 1974 are likely to manifest themselves in declines in domestic productionof commodities subject to excise taxes, principally cigarettes and petroleumproducts. Little information exists on the major items of non-tax revenue,but it is unlikely that budget estimates will be fulfilled, as the loss onthe Railway account is likely to be accentuated and the contributions of thenationalized industries -- caught up in a liquidity crisis and low productionlevels -- are bound to be below budget estimates.

73. Table VI.1 contrasts budget estimates with estimated collectionsunder major revenue heads. The collection figures are provisional estimatesof the Planning Commission. They nevertheless provide some rough measureof the likely revenue level in the current fiscal year.

Table VI.1: GOVERNMENT REVENUE IN 1974/75(Taka million)

Budget RevisedEstimate Estimate

Total Revenue 5,594 5,100

Tax Revenue 4,558 4,290Customs Duty (1,465) (1,370)Import License Tax ( 510) ( 310) /bExcise (1,492) (1,410)Sales Tax ( 460) ( 570)Income Tax ( 244) ( 250)Others ( 387) ( 380)

Non-Tax Revenue /a 1,036 810

Note - For comparable previous years data see Table 5.1 ofStatistical Appendix.

/a Includes contributions of nationalized industries, capitalreceipts, receipts of the Railways and other revenue.

/b The expected shortfall on this tax is attributable to therecent decision to shift the levy to the point of arrivalof goods instead of the time of issue of license.

Source: Ministry of Finance and the Planning Commission.

74. Total current expenditure has been estimated in the budget atTk. 4,908 million. The amount includes allocations of Tk. 150 million forcontingencies. Against the last figure, the Government has already approvedsupplementary expenditures of Tk. 229 million (including a subsidy of Tk. 49million to the jute industries). The loss on jute manufactures and the jute

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trade has been estimated at Tk. 700 million for 1974/75; this was not in-cluded in the budget estimates. In addition, food subsidies are expectedto exceed Tk. 800 million as against an estimate of Tk. 600 million in thebudget. It is also likely that additional appropriations will be made asdifferent ministries and agencies have requested additional allocations.Given these factors an additional amount of current expenditures of Tk. 1.1billion will be needed, bringing the total up to Tk. 6.0 billion or a 22%increase over the budget estimate.

75. Poor fiscal performance in Bangladesh has been detrimental to thedevelopment effort. Development expenditures up to the end of December 1974are estimated at Tk. 1.9 billion and the total for the year is anticipatedto be Tk. 4.5 billion, or about 85% of planned budgetary outlays. The short-fall is expected to occur in spite of an improvement in the availability ofbuilding materials, particularly cement. Project aid disbursements havebeen slow and progress on construction has lagged behind schedule. Innominal terms, development expenditures in 1974/75 are higher than theirlevel in 1973/74; in real terms, given the extent of price increases in1974, they are well below. Actual public sector investment in the form ofnet additions to capital has been much lower than that indicated by thedepressed level of development expenditures.

76. A low level of investment naturally means a low growth potential.But the failure to generate adequate domestic resources in order to furtherthe process of develoment has hurt in another way. Since cuts in the devel-opment budget are usually made on an ad hoc basis, they have distorted in-vestment priorities and impeded the utilization of the aid pipeline. Thishas resulted in weak support to key development-oriented investments. Asa result, the returns from a given investment effort have been much lessthan if adequate resources had been mobilized.

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Table VI.2: GOVERNMENT REVENUE AND EXPENDITURE(Taka million)

1972/73 1973/74 1974/75Revised Revised Budget Revised

Estimates Estimates Estimates Estimates

Current Revenue 2,236 3,774 5,594 5,100

Tax (1,866) (2,911) (4,558) (4,290)Non-Tax ( 370) ( 863) (1,036) ( 810)

Current Expenditure 2,914 4,607 4,908 6,000

of which foodsubsidy ( 783) ( 963) ( 600) ( 800)

Current Surplus or Deficit -678 -834 686 -900Development Expenditure 3,978 4,000 5,250 5,100Overall Surplus or

Deficit -4,656 -4,834 -4,564 -6,000

Financed by

Net Capital Receipts / 640 60 306 200Foreign Grants & Loans 3,183 2,980 3,940 5,730Deficit Finance 833 1,794 318 70

Note - See Table 5.1 of Statistical Appendix for details.

/a Includes depreciation funds, interest charged to development projectsduring construction, proceeds of prize bonds and excess of miscellaneousdeposits over payments.

Source: Ministry of Finance and the Planning Commission.

77. A noteworthy development in 1974/75 is the considerable increasein the inflow of foreign aid (see Table VII.2). The counterpart funds tobe generated from these aid inflows (an increase of 50% over the previousyear) are larger than expected current revenues. They are likely to covervirtually all of the overall budgetary deficit of Tk. 6.0 billion. Moreover,the large increases in tax revenue are attributable to the large infusions offoreign aid as import levels became increasingly dependent on foreign aiddisbursements.

The Level of Public Savings

78. Bangladesh has been unable to generate sufficient savings. Despiteincreased money incomes, and a considerable increase in inrdirect taxes, rev-enues have been consistently below expectations, amounting to no more than4-5% of GDP. The ratio is low in comparison with other Asian countries. Italso reflects the virtual absence of taxation of the agricultural sectorwhich provides over one half of total domestic output. On the other hand,current expenditures have increased rapidly, exceeding the budget allocationsby substantial margins. Although some of this increase has been a result ofnatural calamities, much of it is due to the inability to determine expenditure

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priorities and the lack of effective policies to combat inflation and tocontrol cost overruns. To some extent the increase in the level of currentexpenditure is unavoidable. However, the increase has averaged somethingover 35% per annum during the past two years.

79. The fiscal problems of Bangladesh have been exacerbated by the poorperformance of the nationalized industrial sector. The jute industry, whichincurs substantial losses, has depended on a government subsidy and or assis-tance from the banking system. A similar situation, though on a smallerscale, exists with respect to tanneries and paper and board. Other govern-ment enterprises make some profits, though much below their potential. In-appropriate pricing policies and increasing costs have been a major impedi-ment to improved financial performance. Given the captive domestic marketand the protection afforded to industry by the import licensing system, fi-nancial performance could have been better. At the present time, scarcityprofits accrue to retail traders who sell products of public enterprises atmany times their wholesale cost.

Conclusion

80. Although encouragement needs to be given to private savings andinvestment, the private sector cannot be expected to shoulder a major partof the development effort in Bangladesh in the short run. Much of theburden of mobilizing domestic resources remains with the Government throughits fiscal and financial policies. In these circumstances, Government rev-enue has to grow rapidly, both in absolute amounts and as a percentage ofdomestic income.

81. The establishment of and adheience to a strict set of prioritieswith respect to current expenditures should be a key element of budgetarypolicy. A reasonable allowance for contingencies can help cushion theeffects of erratic changes in economic conditions but it should at the sametime provide the upper limit for expenditures increases. In this context,a thorough examination of existing consumer subsidies is necessary in orderto reduce their relative burden, while confining them to the most needysections of the population.

82. The nationalized industries ought to operate as viable commercialentitites. Except in a few cases, they should not be dependent on budgetsubsidies or the banking system to finance operating deficits. This assumesthat the necessary autonomy in pricing policy is delegated to enterprisesas a prerequisite for efficient operation, subject of course to accountabil-ity criteria.

83. The Government should endeavor to mobilize about Tk. 2 billion ofadditional resource in the bu,et for 1975,'76, either through new revenuemeasures or cuts in current expenditures. This would result in a sizeablesurplus on current account. Coupled with the measures outlined in the pre-ceding chapter, this would enable the Government to restrain the presentinflationary tendencies and obtain the resources necessary for a greaterdevelopment effort.

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VII. EXTERNAL RESOURCES

Developments in 1974/75

84. When the Aid Group met in October 1974, Bangladesh was in themidst of a serious payments crisis. Its principal cause was a sharpdeterioration in the terms of trade which had commenced in 1972/73. Inaddition, rising domestic prices for foodgrain had necessitated larger thannormal foodgrain imports in a year in which international foodgrain priceswere also rising rapidly. Export earnings did not, however, compensate forthe increased outlays for imports. Consequently, there was a marked declinein the country's foreign exchange reserves. These problems were compoundedby the floods which struck Bangladesh in July-August 1974.

85. In response to the extremely serious foreign exchange situationthe Government tightened its import licensing program. A moratorium wasimposed on the issue of new import licenses and expiring letters of creditwere renewed selectively. Payments falling due in the first half of 1974/75were deferred and attempts were made to negotiate short-term credits withforeign commercial banks. A continuation of an import program of this se-verity would have made it difficult even to maintain the already depressedlevels of economic activity and living standards.

86. With the establishment of the Bangladesh Aid Group in October1974, assistance to Bangladesh was stepped up. The Bank estimated at thattime that the import needs for 1974/75 would be about US$1,400 million.Approximately US$40 million were added to the total to meet payments forimports received in 1973/74. A further US$50 million were necessary tomeet the cost of additional fertilizer imports as a consequence of theexplosion at the Ghorasal fertilizer factory. Other transactions, includ-ing amortization of loans, were expected to show a deficit of about US$10million. With projected merchandise export earnings of US$410 million,gross external capital requirements were estimated to be somewhat in ex-cess of US$1 billion. Since disbursements from the aid pipeline existingat July 1, 1974, were expected to be about US$370 million, an unfinancedgap of around US$700 million remained. (See Table VII.1.)

87. Merchandise exports are now estimated at US$354 million for1974/75. This is short of the original estimate by about US$55 million.The decline is entirely on account of lower jute and jute goods exports.Increases in the average price of exports of jute and jute goods have beenmore than offset by very sharp declines in the volume sold. Factors whichaffected jute production have been discussed earlier. Domestic problemsrelating to supply have been compounded by lack of competitiveness in in-ternational markets and the continuing recession in industrial countries,especially the United States and Western Europe. The performance of tea,leather and sugar was, however, slightly better than expected in 1974/75and their combined earnings helped to compensate somewhat for the declinein income from jute.

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88. The cost of merchandise imports in 1974/75 is estimated to be aboutUS$1,250 million, as compared to the estimate of US$1,450 million presentedto the October 1974 Aid Group meeting. Foodgrain imports will total 2.4 mil-lion tons with a value of over US$550 million. This is somewhat larger thanthe figure originally projected. Imports of capital goods are estimated atUS$180 million, or about US$10 million lower than the original projection.The balance, consisting of raw materials and intermediate goods, spare partsand components, essential consumer goods and others, was originally estimatedby the Bank at about US$760 million. The cost of these imports is nowestimated at US$520 million, representing a shortfall of over 30% of theoriginal estimate. The reduction has resulted partly from strict importcontrols exercised in the first half of 1974/75. It is also due to the delaysassociated with the stepping up of the international aid effort for Bangladesh.The net effect of lower imports and exports is a smaller current accountdeficit of about US$900 million, compared with the original estimate ofUS$1,080 million.

Table VII.1: BALANCE OF PAYMENTS ESTIMATES. 1974/75(million US$)

MissionEstimate / Revised

October 1974- GOB Estimate

Merchandise Imports /b -1,438 )-1250Additional Fertilizer Imports /c -50 ) 1Merchandise Exports 410 354

Trade Balance -1,078 _ -896Other Current Account (net) -2 -21

Current Account Balance -1,080 -917Other Receipts and Payments -19 15Amortization -14 -45IMF Oil Facility 45 62Cash Assistance 0 64Change in Reserves (- = increase) 0 -121

External Capital Requirements 1,068 942Disbursements from Aid Pipeline 369 369Disbursements from New Commitments 699 573

/a A Memorandum on the Current Economic Situation in Bangladesh; Report No.BAN 74-3, dated October 3, 1974.

/b Includes approximately US$40 million for payments against imports in1973/74.

/c An additional US$50 million for fertilizer imports were added to theimport estimate as a consequence of the explosion at the Ghorasalfertilizer factory.

Source: Planning Commission, Gnvernment of Bangladesh, and mission estimates.

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89. The response from aid donors to Bangladesh's needs was substantial.Commitments in 1974/75 totalled over US$1.2 billion, about two-thirds of itin non-project forms. Assistance in cash amounted to US$64 million and afurther US$62 million was received from the IMF under the Oil Facility.Disbursements in the year are expected to be about US$940 million, whichwill not only cover the current account deficit, but permit the Governmentto retire some of its short-term liabilities and allow a much-needed build-upof reserves. The balance of payments projections for 1974/75 are given inTable VII.1, while detailed estimates of aid commitments and disbursementsfor 1974/75 are given in Table VII.2. It can be seen from the latter thatthe Aid Group members account for about 85% of the total of commitments anddisbursements.

90. The high levels of food and commodity assistance in 1974/75 combinedwith cash inflows amounting to US$126 million will enable Bangladesh to addto its international reserves, which had been seriously depleted in the firsthalf of 1974/75. International reserves are expected to rise by about US$121million, to about US$185 million, by the end of 1974/75. Some of this in-crease, however, is illusory since it is accounted for by special short-termcapital inflows such as the deposit of US$20 million from Kuwait maintainedwith the Bangladesh Bank. The level of international reserves that prevailedfor the most critical period of the balance of payments crisis was very low,and given the volatility of the payments situation, a further build-up ofreserves can be justified. This should enable Bangladesh to avoid resort toshort-term borrowings. The impact of short-term borrowings in foreign moneymarkets in periods when interest rates have been high and money scarce isreflected in the high levels of payments on account of amortization on short-term account. Amortization payments at US$45 million in 1974/75 representabout 13% of income from merchandise exports in that year.

The Balance of Payments for 1975/76

91. Bangladesh should commence 1975/76 in a somewhat better positionthan at the beginning of 1974/75. Foodgrain assistance for 1974/75 combinedwith purchases out of Bangladesh's foreign exchange resources should totalabout 2.4 million tons. Stocks of foodgrains were at a very low level onJuly 1, 1974 but should, as a result of the foreign purchases, be built upby about 300,000 tons, to 528,000 tons by July 1975. The aid pipeline ofapproximately US$1.1 billion should be about US$300 million higher than itwas on July 1, 1974. While the pipelines for food and commodity aid shouldbe at about the same level as a year earlier, the project aid pipelineshould be much higher than it was in 1974. Bangladesh's internationalreserves, estimated at about US$185 million, should be three times as highas the level at the end of June 1974.

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Table VII.2: AID COIIMITMENTS AND DISBURSEMENTS. 1974/75 /a(million US$)

Pipeline PipelineJuly 1, Commitments Total Disbursements July 11974 1974/75 Available 1974/75 1975

All Sources

Food Aid 53 360 413 381 32Commodity Aid 268 427 695 424 271Project Aid 521 449 970 137 833

Total 842 1,236 2,078 942 1,136

Aid Group

Food Aid 53 346 399 367 32Commodity Aid 241 388 629 376 253Project Aid 280 355 635 100 535

Total 574 1.089 1,663 843 820

Other

Food Aid - 14 14 14 -

Commodity Aid 27 39 66 48 18Project Aid 241 94 335 37 298

Total 268 147 415 99 316

/a Excludes receipts from IMF and other cash assistance.

Source: Planning Commission, Government of Bangladesh.

92. Merchandise exports may increase from US$354 million in 1974/75to US$420 million in 1975/76. (See Table VII.3.) This is predicated on animprovement in the world economic climate and a revival of activity in theindustrial countries. It should permit a reduction in the high level ofstocks of jute goods in Bangladesh. Provided supplies are adequate and ex-port prices are brought down to a level which enables jute to compete effec-tively with synthetics, Bangladesh should increase the volume and value ofjute exports in 1975/76. Ie should also be possible to maintain or improvethe level of earnings from lea, sugar an,' leather as compared to 1974/75since favorable demand for these products should continue in 1975/76.

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Table VII.3: MERCHANDISE EXPORTS RECEIPTS,1974/75 and 1975/76

(million US$)

1974/75 1975/76Estimate Projection

Jute 100.0 125.0Jute Goods 190.0 215.0Leather 18.8 28.8Fish 5.5 7.0Tea 20.0 20.0Sugar 13.2 16.5Others 6.0 8.0

Total 353.5 420.3

Source: Table 3.1 of Statistical Appendix.

93. Details of the Bank and the Government projections of merchandiseimports appear in Table VII.4. The most important element in projectingimport needs in 1975/76 is foodgrain imports. Domestic output is expectedto be 12.8 million tons as compared with 11.5 million tons in 1974/75. Withbetter procurement policies, the Bank expects that foodgrain imports coulddecline from an estimated 2.4 million tons in 1974/75 to 1.5 million tons,costing around US$300 million, in 1975/76. This would allow a 200,000 tonbuild-up of foodgrain stocks, to a total of 728,000 tons. The increase infoodgrain output depends on fulfillment of a number of conditions. Besidesgood weather, it assumes that inputs would be available in the requiredamounts and at the right time. The ability to build up sufficient foodgrainstocks is dependent upon satisfactory storage capacity. Operating capacityis only 800,000 tons, but it is reported that many of the silos are in anunsatisfactory condition. It is difficult to see the basis for the Govern-ment's argument for two million tons of foodgraim imports. On the otherhand, an expanded level of investment and the usual vagaries of the weatherin Bangladesh suggest that higher food imports may indeed be needed. Atthis point it would seem to be more prudent to add to foreign exchangereserves, which could be drawn on to meet contingencies, rather than toincrease food imports. An addition of US$80 million to foreign exchangereserves is provided for this purpose in the Bank projections.

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Table VII.4: PROJECTED MERCHANDISE IMPORTS, 1975/76

Government Projection Mission ProjectionUnit Unit

Commodity quantity Price Value Quantity Price Value(mil.) ($) ($ mil.) (mil) ($) ($ mil)

Foodgrains (tons) 2.0 200 400 1.5 200 300Edible oil (tons) 0.1 965 97 0.1 800 80Cotton Textiles .. .. 20 .. .. 20Petroleum (tons)

Products 0.5 130 65 0.2 130 26Crude (tons)Petroleum 1.07 106 113 1.0 106 106

Raw Cotton (bales) 0.36 225 81 0.36 219 78Cotton Yarn (bales) 0.10 410 41 0.10 410 41Fertilizer (tons) 0.215 416 89 0.250 380 94Cement (tons) 0.5 67 34 0.5 50 25Capital Goods .. .. 300 .. 250Misc. Raw Materials,

Intermediate & Con-sumer Goods .. O 400 .. .. 320

Total 1,640 1,340

Source: Planning Commission, Government of Bangladesh, and mission esti-mates.

94. The Government has projected capital goods imports of US$300 mil-lion in 1975/76. This compares with estimated imports of US$180 million in1974/75. A higher level of capital goods imports in 1975/76 is clearlydesirable. The foreign exchange crisis of the past year resulted in givinglow priority to capital goods imports; this may require some redress in thecoming year. Also, the establishment of the Project Implementation Bureau(PIB) in early 1975 should accelerate the pace of project implementation.MIoreover, the prices of imported capital goods continue to rise; it isexpected that they will increase by almost 11% in 1975/76, as compared withthe previous year. The Government's proposed expenditure on capital goodsimports for 1975/76, however, implies an increase of almost 40% in realterms as compared with 1974/75. On the basis of past experience, thisappears to be too ambitious a target; an increase of 20-25% appears feasible.Consequently it would be reasonable to assume that capital goods imports in1975/76 could be of the order of US$250 million, much of which could befinanced from the aid pipeline.

95. Apart from foodgrain and capital goods, the remaining importsconsist of the eight commodities shown in Table VII.4, plus miscellaneousraw¢ rmiaterials and intermediate and consumer goods. In 1974/75 imports inthese categories were about US$525 million. The Government has projectedthat, if certain policy measures were taken, US$940 million of imports in

- 37 -

these categories could be absorbed. This would mean an increase of 80% innominal terms, and given the fact that many of the items have fallen in pricedespite overall world inflation, probably as much as 70% in real terms. Itis recognized that such imports were abnormally constrained by the foreignexchange crisis of 1974/75. However, assuming that the economy could haveabsorbed imports of this type of about US$600 million in 1974/75, an importlevel of US$800 million in 1975/76 looks feasible. This would permit anincrease of 25% in real terms over the level of 1974/75 and would leave anadequate margin for re-stocking, and increasing production.

96. The balance of payments projections for 1975/76 are given inTable VII.5, together with a repetition of the picture that is likely toemerge for 1974/75.

Table VII.5: BALANCE OF PAYMENTS ESTIMATES,1974/75 and 1975/76

(million US$)

1974/75 1975/76Estimate Projection

(Government) (Government) (Mission)

Merchandise Imports -1,250 -1,640 -1,340Merchandise Exports 354 392 420

Trade Balance -896 -1.248 -920Other Current Account (net) -21 -25 -30

Current Account Balance -917 -1,273 -950Other Receipts and Payments 15 -80 -80IMF Oil Facility 62 0 0Cash Assistance 64 0 0Amortization -45 -89 -90Change in Reserve (- = increase) -121 0 -80

External Capital Requirements 942 1,442 __2

Disbursements from Aid Pipeline 369 450 400

Disbursements from New Commitments 573 992 /a 800 /a

/a Required disbursements.

Source: Bangladesh Planning Commission and mission estimates.

97. It should be possible for Bangladesh to absorb imports of US$1,340million in 1975/76 on the assumption that the Government takes the policiesand measures recommended in this report. Given export receipts of approxi-mately US$420 million a trade deficit of US$920 million is projected. Amor-tization payments will necessitate a further US$90 million. Other transac-tions are expected to yield a deficit of about US$110 million. Allowing, as

- 38 -

proposed for a further reserve build up of US$80 million external capitalrequirements in 1975/76 would amount to US$1,200 million.

Aid Requirements, 1975/76

98. The estimated external financing requirement of US$1,200 million isabout 17% less than the Government's estimate of US$1,442 million. The reasonsfor this difference, as explained earlier, are basically the considerablyhigher government estimates of merchandise imports and somewhat lower esti-mates of merchandise exports. The difference is reduced, however, by themission's recommendation of an increase in reserves of US$80 million. Pro-jections being what they are, especially in the uncertainties prevailingin Bangladesh and especially also since the estimates have been made onthe assumption that economic reforms will be adopted, it would be difficultto argue that the Government's estimates are entirely unrealistic. However,taking all things into account, including absorptive capacities, the likeli-hood of increases in industrial production, etc., the mission's estio1te ofa financing requirement of US$1,200 million seems the more prudent one onthe basis of which to mount an aid program. A part of the US$1,200 millionwill be financed from disbursements out of the aid pipeline and the re-mainder will have to come from disbursements out of new committments tobe made for the period beginning July 1, 1975.

99. As for the pipeline, it is expected to total US$1.1 billion atJuly 1, 1975. The pipelines of food aid at US$32 million and of commodityaid at US$275 million are approximately the same as the amounts in thosecategories that were available a year before, on July 1, 1974. However,the project pipeline, at US$833 million, is substantially higher, a factwhich speaks much for the wish of donors to contribute to Bangladesh'seconomic development as well as to help meet its urgent and immediatebalance of payments problems. Although a number of steps have recentlybeen taken, especially by the Government but also by the donors, to in-crease the speed of disbursements, it does not seen prudent to count onmuch more in the way of disbursements from the pipeline next year thanwill have taken place this year. Although the Government visualizesdisbursements of about US$450 million from the pipeline, it seems moreprudent to count on only about US$400 million from this source. (It willbe about US$370 million in 1974/75.)

100. On the basis of the mission's estimates, US$800 million wouldtherefore remain to be financed from disbursements out of fresh commit-ments. Since this gap is predicated on the initiation of significanteconomic reform, it should be possible for Bangladesh to obtain someassistance from the International Monetary Fund towards meeting thisgap. On the basis of expectations at this time, Bangladesh may be ableto obtain about US$75 million itom the Regul ,r Facility of the IMF andabout US$30 million under the Oil Facility. (Another US$30 million mightbecome available under the Oil Facility later in the year, but it wouldnot be prudent to count on it at this time.)

- 39 -

101. Some of the uncovered gap should be available from non-membersof the Aid Group. The Government estimates that new commitments from thissource could result in disbursements of the order of US$35 million. Takingaccount, therefore, of reasonable expectations from the IMF and from non-AidGroup sources, the gap that would need to be covered out of new commitmentsfrom the Aid Group itself is reduced from US$800 million to a little overUS$650 million.

102. Food and commodity aid will have to carry the overwhelming bruntof the burden of covering disbursements of this magnitude. Even with im-provements in project implementation and disbursement of project aid nowunderway it can be expected that new project commitments can yield only avery small proportion of the required disbursements. Although food andcommodity aid of the rapidly disbursing variety must provide the over-whelming bulk of the disbursements, commitments of project aid should notbe neglected if donors are to continue to focus on Bangladesh's longer termdevelopment prospects.

103. It should be noted that the Government's estimates of requireddisbursements from new commitments are substantially higher than thoserecommended here. On the other hand, the US$800 million figure shoujld beconsidered as a minimum--not only because of the necessarily approximatenature of the estimates involved, but also because the Government shouldhave a considerable degree of flexibility to deal with contingencies thatmay arise from the implementation of an economic reform program.

104. The achievement of the proposed level of about US$650 million ofdisbursements out of new commitments from the Aid Group will require totalcommitments from the Aid Group of about US$1.0 billion. However, it wouldbe desirable to provide for a modest addition to the pipeline of commodityaid, in order to give the Government some flexibility in planning for1976/77. To achieve these objectives, total commitments from the AidGroup should therefore come to about US$1.2 billion. In either event,about 80% of the total needs to be in the form of food and commodity aid.

STATISTICAL APPENDIX

Table No. Title

1.1 Population Estimates 1960-1980

2.1 Gross Domestic Product at Factor Cost

3.1 Merchandise Exports3.2 Merchandise Imports3.3 Import and Export Price Indices3.4 International Reserves and Outstanding

Commercial and DIF Borrowings

4.1 External Public Debt Outstanding as of December 31, 19744.2 External Public Debt as of December 31, 1974

5.1 The Budgetary Situation

6.1 Money and Quasi-Money6.2 Changes in Domestic Liquidity6.3 Scheduled Banks - Selected Assets and Liabilities6.4 Distribution of Deposits by Ownership6.5 Bank Credit by Sector6.6 Bank Credit by Major Economic Groups6.7 Export Bills Purchased and Discounted6.8 Number of Branches of Banks6.9 Selected Interest Rates

7.1 Area under Main Crops in Bangladesh7.2 Production of Main Crops in Bangladesh7.3 Yield of Main Crops in Bangladesh7.4 Rice: Area, Production, Yield7.5 Procurement, Distribution and Stock Position

of Foodgrains7.6 Foodgrain Production, Imports and Per Capita

Availability7.7 Fertilizer Consumption, Production and Imports

8.1 Production and Capacity Utilization in SelectedIndustries

8.2 Financial Performance of the Public Sector Corporations

Table No. Title

9.1 Dacca Middle Class Cost of Living Index9.2 Narayanganj Industrial Workers Cost of Living Index

9.3 Indices of Wholesale Prices at Dacca9.4 Wholesale Prices of Selected Commodities at Dacca9.5 Retail Prices of Selected Consumer Goods at Dacca9.6 Average Prices of Rice in Bangladesh9.7 Average Retail Prices of Rice at Dacca9.8 Prices of Building Materials and Wages of Construction

Workers9.9 Average Wage Rate per Day: Dacca, Selected Industries

10.1 Production and Exports of Jute Goods

10.2 Export Prices of Jute Goods (FOB Sight)10.3 Stocks of Jute Goods and Raw Jute by Jute Mills

10.4 Financial Performance, of Jute Industry10.5 Exports and Prices of Raw Jute

10.6 Statistical Position of Raw Jute

TABLE 1.1

POPULATION ESTIMATES 1960-1980(in Millions)

Year Population(January 1)

1960 53*91961 55.31962 56.81963 58.41964 59.91965 61.61966 63.31967 65.11968 66.91969 68.81970 70.81971 72.31972 72.41973 74.0a1974 76.21975 78.61976 81.01977 83.51978 86.01979 88.51980 90,8

Note - The estimates in this table are based on adjusted 1961 census data. The first census in independentBangladesh was taken in February 1974 and ita provisional results show total population to be 71.3million. It is too early to judge the census results as adjustments for underenumeration and otherfactors would be made.

a/ Figure was adjusted from 74.4 million for the projections to coincide with Planning Commission estimate.

Source: IBRD Population and Human Resource Division, except for 1960 where the figure is from the BangladeshBureau of Statistics.

TABLE 2.1

GROSS DOMESTIC PRODWUCT AT FACTOR COST

(in Taka million; 1972/73 prices)

Sector 1969/70 / 1970/71 % 1971/72 % 1972/73 % 1973/74 %

Agriculture 31,836 61.4 30,401 62.1 27,146 64.4 27,220 59.7 30,307 59.5

Industry 4,281 8.3 3,629 7.4 1,990 4.7 3,298 7.2 3.949 7.8

Large and Medium Scale (2,634) (5.1) (2,377) (4.8) (1,281) (3.0) (2,096) (4.6) (26599) (5.1)

Small Scale (1,647) (3.2) (1,252) (2.6) (709) (1-7) (1,202) (2.6) (1,350) (2.7)

Construction 2,377 4.6 1,664 3.4 812 1.9 1,723 3.8 1,829 3.6

Power and Gas 124 0.2 114 0.2 73 0.2 147 0.3 195 0.4

Transport Services 2,399 4.6 2,224 4.5 1,860 4.4 2,399 5.2 2,655 5.3

Trade Services 3,864 7.5 3,641 7.4 3,117 7.4 3,513 7.7 3,942 7.7

Housing Services 2,293 4.4 2,357 4.8 2,357 5.6 2,360 5.2 2,426 4.8

Public Administration 1,263 2.4 1,515 3.1 1,639 3.9 1,395 3.1 1,941 3.8

Banking and Insurance 258 0.5 279 0.6 301 0.7 328 0.7 338 0.7

Professional and Other Services 3,138 6.1 3,169 6.5 2,852 6.8 3,232 7.1 3,264 6.4

Total 51,833 100.0 48,993 100.0 42,147 100.0 45,615 100.0 50,876 100.0

Note - Provisional estimates. No estimates have been made of domestic product at current prices.

Source: The Planning Commission

TABLE 3.1

MERCHANDISE EXPORTS(Value figures in millions of US$)

1972/73 1973/74 1974/75 1975/76Quantity Unit Quantity Unit Quantity Unit Quantity Unit(million) Price Value (million) Price Value (million) Price Value (million) Price Value

_ (us) (US$) (Us$) (US$)

Commodities/a

Raw Jute (bales) 2.83 46.0 130.2 2.66 48.0 127.8 1.60 62.5 100.0 1.80 69.4 125.0Jute Goods (tons) 0.41 422.0 174.3 0.44 451.6 197.8 0.36 527.8 190.0 0.43 500.0 215.0Tea (lbs.) 38.00 0.25 9.4 53.00 0.28 14.7 60.00 0.33 20.0 60.00 0.33 20.0Leather .. 16.3 .. .. 17.2 .. .. 18.8 .. .. 28.8Fish & Shrimp .. 4.4 .. 7.9 .. .. 5.5 .. .. 6.0

Sugar - - 0.02 660.0 13.2 0.03 550.0 16.5

Other .. 4.2 .. 6.0 .. .. 6.0 .. .. 8.0

Total .. 338.8 371.8 353.5 419.3

Note - Minor discrepancies are due to rounding errors.

/a The average projected price per bale of raw jute for 1975/76 represents a reduction from the average price of about US$8O per bale whichprevailed during the second half of 197h/75.

Source: Mission estimate.

TABLE 3.2

MERCHANDISE IMPORTS

(Values in millions of US$)

1972/73 1973/74 1974/75 1975/76Government Estimates Mission Projections

Quantity Unit Quantity Unit Quantity Unit Quantity Unit(million) Price Value (million) Price Value (million) Price Value (million) Price Value

(US$) (US$) (US$) __(US$) __(US$)

Consumer Goods

Foodgrains (tons) 2.78 115 320.8 1.66 185 308.4 2.37 236 559.0 1.50 200 300.0Edible Oil (tons) .. .. .. 0.05 702 34.4 0.08 800 60.8 0.10 800 80.0Cotton Textiles (yards) .. .. .. 59.00 *- 18.5 13.1 *. 20.0

Intermediate Goods

Petroleum Products (tons) 0.13 44 5.7 0.51 95 48.6 0.17 159 27.5 0.20 130 26.0Crude Petroleum (tols) 0.73 24 17.5 0.45 86 38.6 0.82 85 70.0 1.00 106 106.0Raw Cotton (bales) 0.32 175 41.8 0.26 133 34.5 0.28 276 77.5 0.36 219 78.0Cotton Yarn (bales) 0.04 309 13.6 0.06 552 33.1 - - 9.8 0.10 410 41.0Fertilizer (tons) 0.24 117 28.0 0.13 189 23.8 0.24 415 99.5 0.25 380 94.0Cement (tons) 0.32 22 7.0 0.40 45 18.0 0.45 64 29.0 0.50 50 25.0

Capital Goods .. .. 100.0 .. *- 155.2 *- *- 187.8 *- 250.0

Misc. Raw Materials & Other /Intermediate & Consumer Goods .. 192.6 204.5 .. .. 252.9 .. b. 320.0

Total 727.0 917.6 1,386.7 - 1,340.0

Note - Minor discrepancies are due to rounding errors.

/a Includes imports of edible oil and cotton textiles./b Total imports in 1974/75 are now estimated at $1,250 million by the Government. The commodity composition of this table is not available.

Source: Planning Commission and mission estimates.

IMPORT AND EXPORT PRICE INDICES(1972/73 = loo)

1973/74 1974/75_ 1975/76

A. IMPORT PRICE INDICES

Foodgrains 160.9 205.1 168.8

Edible Oil 146.1 166.5 166.5

Cotton Textiles 125.4 125.4 94.1

Petroleum Products 218.3 364.1 297.8

Crude Petroleum 363.4 363.4 448.8

Raw Cotton 76.o 157.1 125.1

Cotton Yarn 178.8 178.8 132.4

Fertilizer 166.3 365.3 334.5

Cement 206.1 293.1 306.9

Capital Goods 115.0 130.0 143.7

Miscellaneous 197.5 232.3 254.2

Weighted Average 156.0 191.3 189.1

B. EXPORT PRICE INDICES

Raw Jute 104.4 135.9 150.9

Jute Goods 106.6 124.8 118.2

Tea 119.4 132.0 132.0

Leather 121.4 121.4 121.4

Others 122.2 158.9 171.1

Weighted Average 107.5 129.7 130.4

Note - The weights used are respective year's value in 1972/73 prices.

Source: Mission estimates.

TABLE 3.4

INTMRNATIONAL REShRVES AND OUTSTANDING COMMERCIAL & IMF BORROWINGS

(in millions of US$)

RESERVES-/ COMMERCIAL & IMF BORROWINGSCash Securities / Total Foreign I.M.F.

Banks Total Regular Compensatory Oil ExtendedFacility Financing Facility Facility

1973

I 10.8 197.5 208.3 n.a 75.0 75.°'

II 3.6 131.4 135.0 n.a. 75.0 75.0

III 31.6 134.9 166.5 n.a. 75.0 75.0

IV 5.0 144.3 149.3 n.a. 75.0 75.0

1974

I 4.1 92.6 96.7 n.a. 75.0 75.0

II 11.5 48.5 60.0 n,a. 112.9 37.9- 75.0

July 6.3 29.0 35.3 n.a. 112.9 37.9 75.0

August 5.2 32.7 37.9 n.a. 112.9 37.9 75.0

September 6.6 40.6 47.2 25.6 161.4 37.9 75.0 14.8

October 15.8 53.5 69.3 15.1 161.4 37.9 75.0 48.5

November 26.1 75.6 101.7 35.9 161.4 37.9 75.0 48.5

December 40.5 97.4 137.9 27.2 161.4 37.9 75.0 48.5

1975

January 23.5 153.0 176.5 27.2 161.4 37.9 75-0 62.0

February 20.2 191.0 211.2 20.7 174.9 37.9 75.0 62.0

March 25.4 207.9 233.3 20.7 174.9 37.9 75.0 62.0

a/ Quarterly average of end of month balances; end of month balances starting July 1974.~/ Includes Treasury Bills, Securities and I.B.R.D. Bonds/c/ First drawn in December 1972.# Drawn in June 1974.

Source: Bangladesh Bank and IMF.

TABLE 4.1-BANGLADESH 03/14/75

EXTERNAL PUBLIC DEBT OUTSTANOING AS OF DECEMBER 3#11974

FOR LOANS ISSUED DURING THE PERIOD JANUARY 1* 1900 a DECEMBER 31019?4DEBT REPAYABLE IN FOREIGN CURRENCY

IN THOUSANDS or U.s. DOLLARS

DEBT OUTSTANDING DECEMBER 31*1974

CREDITOR COUNTRY UNDISTYPE Of CREDITOR DISBURSED BURSED TOtAL

INDIA 21*510 8.803 30,313JAPAN 70359 7#359POlAND 9 9*517 9R817UNITED KINGDOM 22,764 22,764USSR 44*712 29.061 730773YUGOSLAVIA 23*236 38,172 61*408

SUPPLIERS 119.581 85*853 205o434

NETHERLANDS 10>381 9,968 20*349SINGAPORE 12*178 12*178UNITED KINGDOM 1'279 146 1J425

PRIVATE BANKS 23.836 lo*114 33*952

ASIAN OEV.BANK 5,636 56JS14 62*150IDA 166*528 179*537 346t065

LOANS FROM INTL. ORGANIZATIONS 172*164 2360051 408S215

AUSTRALIA 48P966 48,966BElGIUM 1I385 2,078 3P463BULGARIA - 3P747 3*747CANADA 18*160 * 18*160CZECHOSLOVAKIA 11*919 23*485 35*404DENMARK 5P714 5*791 11*505FRANCE 11*750 11*250GERMANY (EAST) ' 23*485 73p485GERMANY (FEDeREPe0F) 88,482 76,088 164P570INDIA 25.972 63,439 59P41IRAQ , 45,000 45s000JAPAN 39,166 16*747 55.913POLAND 2*09U - 2*090ROMANIA, REPUBLIC OF 10*470 26*733 37*203SWEDEN 6*T25 6*658 130383UNITED ARAB EMIRATES 12O000 380000 50s000UNITED KINGDOM 11,704 22,667 34*371USA 49*207 85*393 134*600USSR 37*280 29*309 66*589

LOANS FROM GOVERNMENTS 369*240 479's70 &49.11o

TOTAL EXTERNAL PUBLIC DEBT 1) 684.823 811*888 1*496#711

TABLE 4.1-BANGLADESH (CONTINUED) 03/14/75

EXTERNAL PUBLIC DEBT OUTSTANDING AS OF DECEMBER 31.1974

FOR LOANS ISSUED DURING THE PERIOD JANUARY 1* 1900 * DECEMBER 31*1974DEBT REPAYABLE IN FOREIGN CURRENCY

IN THOUSANDS OF U.Ss DOLLARS

DEBT OUTSTANDING DECEMBER 31.1974

CREDITOR COUNTRY UNDISOTYPE OF CREDITOR DISBURSED BURSED TOTAL

NOTE: DEBT WITH A MATURITY OF OVER ONE YEAR

1) EXCLUDES THE FOLLOWINGI AMOUNT

UNCOMMITTED PARTS OF FRAME AGRMTSIPOLAND 1#926uSsR 9,638

SUPPLIERS 11,564

ULUGARIA 4,286ROMANIA, REPUBLIC OF 23,267

LOANS FROM GOVERNMENTS 27.553

TOTAL 39.117

INTEREST IN ARREARSI

GEkMANY (FED.REP*OF) 22SWFDEN 24

LOANS FROM GOVERNMENTS 46

TOTAL 46

INCLUDES PRINCIPAL IN ARREARSI

INDIA 987LOANS FROM GOVERNMENTS 9B7

TOTAL 967

EXTERNAL DEBT DIVISION

ECONOMIC ANALYSIS AND PROJECTIONS DEPARTMENT

TABLE 4.2 BANGLADESH 03/14/75

EXTERNAL PUBLIC DEBT AS OF DECEMBER 31,1974

FOR LOANS ISSUED DURING THE PERIOD JANUARY Is 1900 - DECEMBER 3101974DEBT REPAYABLE IN FOREIGN CURRENCY

IN THOUSANDS OF U.S. DOLLARS

TOTAL

DEBT OUTSTANDING TRANSACTIONS DURING PERIODBEGINNING OF PERIOD CANCEL

LATIONS*DISBURSED INCLUDING COMMIT& DISBURSE* SERVICE PAYmENTS ADJUST-YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS

(1) (2) (3) (4) Cs) (6) (7) (a)

7211 123P312 15,378 - 21*69672-2 37,073 1450008 162,603 8,921 6,92273-1 52,916 314,533 222,676 710876 - 52,03973-2 175,351 589,248 253,O75 181P778 5,367 3,885 9'252 -1,43674-1 357,867 835,520 2560956 134,971 4,868 3#231 8#099 5o67574-2 489,842 1,093,283 406,202 203,600 12'122 6,422 18'544 8,361

75 1 683,836 1#495,724 * 242,975 25,199 6,871 32J07075-2 869,612 1,438,525 1580883 27,p555 6,167 28,722761 1,005,940 1,415,970 - 75,669 44,823 10,054 54P877 -76-2 1,036,786 1,371,146 - 52,329 37,s574 8,914 46#48777 1 1s051,542 1,333,573 - 34,666 34,588 10,044 44*63277 2 1,051,620 1,298,984 33.152 2A,428 8,220 34.64878 1 1,058,345 1,272,557 30,122 24,337 9,837 34P17478-2 1,064,130 1,248,219 25.513 15,845 8,401 24.24679 1 1,073,798 1,232,374 23,929 23,094 9*583 32.67879-2 1,074,633 1,209,280 - 22J503 13#455 8,049 21504 -8011 1,083,681 1,195,825 17P497 25,757 9.757 35P51580-2 1,075,422 1,170,068 16,557 17,416 8,181 25P59781 1 1,074,563 1.152.652 13,835 25,915 9,394 35P30981-2 1,062,483 1,126.737 13,791 18.390 7.815 26.20582 1 1,057,884 1,108,347 . 12,147 29,579 9*026 38.605 -82 2 1,040,452 1,078,768 - 12.078 20,415 7,372 27'787 -83-1 1,032,114 1.058,353 12.078 30,172 b.759 38.93283-2 1,014,020 1,028,181 - 12,078 22#763 7,140 290903 -84-1 1,003,334 1,005,418 - 2,082 37,092 8*427 45.519 -84-2 968,325 968,326 - - 29,799 6,554 36.352 -85 1 938J526 938,527 . 35.158 8J200 43J35885-2 903,368 903,369 - - 21,634 5,852 27.48686-1 881,735 881,736 - . 30,398 7,536 37D934 -86-2 851,337 851,338 I - g.478 5.308 24P78687-1 831,859 831.860 - - 26.338 6*952 33#290 -87-2 805,521 805,522 - * 19,391 4,884 240274 -88-1 766,130 786.131 - - 24,835 6,711 31.54588-2 76I8296 761,297 I- 7,o700 4,812 22.51289-1 743.596 743,597 - 19,974 6,157 26.13189-2 723,621 723P622 - - 16,032 4,427 20J459S

TABLE 4.2 BANGLADESH (CONTINUED) 03/14/7S

EXTERNAL PUBLIC DEBT AS OF DECEMBER 3101974

FOR LOANS ISSUED DURING THE PERIOD JANUARY l, 1900 * DECEMBER 311974DEBT REPAYABLE IN FOREIGN CURRENCY

IN THOUSANDS OF U*S. DOLLARS

DEBT OUTSTANDING TRANSACTIONS DURING PERIODBEGINNING OF PERIOD CANCEL-

LATIONS,DISBURSED INCLUDING COMMIT- DISBURSE- SERVICE PAYMENTS ADJUST-

YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS(1) (2) (3) (4) (5) (6) (7) (8)

90-1 707,590 707,591 * - 18,081 5,746 23'82790-2 689,508 689,509 - - 1S,945 41,126 20,071911 673,563 673,564 = 16.690 5,381 22iO71 91-2 656,874 656,875 - - 14,148 3,844 17,99292'1 642,725 642P726 - - 15,364 5,056 20,42092-2 627,361 627,362 - - 13,359 3'599 16,958 -93'1 614,003 614,004 - - 1s,851 4,764 20.614 -93-2 598,152 598.153 - - 14,322 3P375 17,697 -94'1 583,830 583,831 - - 16,499 4.470 20,97094-2 567,331 567,332 - - 15.138 3.144 18P283

(1) EXCLUDES UNKNOWN nLD 32,000 32,000

EXTERNAL DEBT DIVISTON

ECONOmIC ANALYSIS & PROJECTIONS DEPARTMENT

TABLE 5.1

THE BUDGETARY SITUATION

(in Taka million)

1972/73 1973/74 1974/75

Budget X Revised % Budget % Revised % Budget %

Revenue 2,916 100.0 2.236 100.0 4,113- 100.0 3.774 100.0 5.594 100.0

Tax Revenue 2,684 92.0 1,866 83.5 3,459 84.1 2,911 77.1 4 558 81.5

Customs 1,280 43.8 697 31.2 1.400 34.0 1,232 32.7 1,975 35.3

Excise 652 22.4 550 24.6 1,165 28.3 782 20.7 1,492 26.7

Sales 406 13.9 214 9.6 463 11.3 450 11.9 460 8.2

Income, Corporation & Agric. Income 117 4.0 141 6.3 164 4.0 176 4.6 244 4.4

Others 230 7.9 264 11.8 267 6.5 271 7.2 387 6.9

Non-Tax Revenue 231 8.0 370 16.5 654 15.9 863C/ 22.9 1,036 18.5

Nationalized Sector 150 5.1 191 0.5 280 6.8 185 4.9 167 3.0

Interest Receipts 3 0.1 7 0.3 233 5.6 241 6.5 350 6.2

Others 78 2.8 172 7.7 141 3.4 132 3.5 163 2.9

Railvays - - - - - - 304 8.0 356 6.4

Current Expenditures 2,184 100.0 2.914 100.0 2.953 100.0 4,607 _Op,O 429_0 100.0

Revenue Collection 140 6.4 128 4.4 148 5.0 151 3.3 167 3.4

Defense 400 18.3 202 6.9 470 15.9 600 13.0 710 14.5

Civil Administration 690 31.6 731 25.1 1,042 35.3 1,189 25.8 1,143 23.3

Interest Py5ments 49 2.2 134 4.6 97 3.3 132 2.9 240 4.9Social Sectors 557 22.5 562 19.3 726 24.6 779 16.9 1,007 20.5

Others (Ic.. Contingencies) 349 16.0 374 12.8 470 15.9 457 9.9 680 13.8

Food Subsidy - - 783 26.9 - _ 963 20.9 600 12.2

Railways - - - - - - 336 7.3 361 7.4

Current Surplus (+) or Deficit (-) 732 -678 1.160 -834 686

Development Exenditures-/ 5.010 100.0 3.978 100.0 5,253 100.0 4 0005/ 100.0 5,250 100.0

Agriculture, Rural Development 6 Water 1,792 35.8 1,350 33.9 1,600 30.5 1,362 34.0 1,615 32.7

Industries 366 7.3 294 7.4 790 15.0 453 11.3 710 13.7

Transport Communication & Pover 1,431 28.5 1,157 29.1 1,678 31.9 1,408 35.2 1,685 32.1

Physical Planrng & Housing- 299 6.0 307 7.7 410 7.8 270 6.8 480 9.1

Social Sector- 1,122 22.4 870 21.9 775 14.8 507 12.7 660 12.6

Overall Deficit (-: -4,278 100.0 -4,656 100.0 -4,093 100.0 -4,834 100.0 -4,564 100.0

Financed by:

Capital Receipts (net) -82 -1.9 640 13.7 387 9.5 60 1.2 306 h/ 6.7

Deficit Financing 610 14.3 833 17.9 186 4.5 1,794 37.1 '318 7.0

Foreign Grants & Loans 3,750 87.6 3,183 68.4 3,520 86.0 2,980 61.7 3,940 86.3

of which

Food Aid 1,050 24.5 n.a. - 630 15.4 750 15.5 1,040 22.8

Project Aid i n.a. - 1,200 29.3 910 18.8 1,270 27.8

Non-Project Aid 12,700 163.1 n.a. - 1,690 41.3 1,320 27.4 1,630 35.7

Note: Revised budget estimates for 1974/75 are not yet available.

a/ Including net effect of new tax proposals of Tk.239.9 million in 1973/74 and Tk.891.4 million in 1974/75(of which Tk.510 million is to be collected as a result of the imposition of the import license tax).

b/ The Railvay budget has been moved to the Central Governmient Budget from 1974/75.

c/ The revised estimates for 1973/74 include the Railway receipts and payments comparable to the 1974/75 budget.

d/ Including Reconstruction and Rehabilitation expenditures for 1972/73 and 1973/74.

e/ Include expenditures on Cyclone Reconstruction.

i/ Includes Health and Education.

a/ Calculated on the banis of an across the board shortfall of 14 percent.

h/ Food Subsidy is to be paid for by Tk.206 million from domestic capital receipts and Tk.394 million from current revenue.

Source: Ministry of Finance, the National Board of Revenue and the Planning Commission.

TkBLE 6.1

MONEY AND QAUSY-MO4NEY(in Tk million)

Currency Demand Money Percentage Time Totalwith the Deposits Supply Change DepositsPublic (Dec.1971=100)

Dec. , 1969 2,210 1,460 3,670 95 1,346 5,016

Dec. , 1970 2,590 1,700 4,290 111 1,662 5,952

Dec. 17, 1971 2,o66 1,809 3,875 100 1,585 5,46o

June 30, 1972 1,756 3,101 4,857 125 2,135 6,992

Dec. 29, 1972 2,898 3,897 6,795 175 2,546 9,341

June 29, 1973 2,864 4,o96 6,960 180 2,931 9,891

Dec. 28, 1973 3,208 4,871 8,079 208 3,445 11,524

June 28, 1974 3,311 4,856 8,167 211 3,998 12,165

Dec. 24, 1974 4,028 5,350 9,378 242 4,305 13,683

Jan. 31, 1975 3,986 5,165 9,151 236 4,567 13,718

Mar. 14, 1975 4,069 4,934 9,003 232 4,781 13,785

Notes - Provisional Figures:

Excluding inter-bank items.

Including deposits with Bangladesh Krishi Bank andBangladesh Shilpa Bank.

Savings deposits have been broken down and areincluded in demand and time deposits accordingto their terms.

Source: Bangladesh Bank

TABLE 6.2

CHANGES IN DOMESTIC LIQUIDITY

(in Taka million)

Variations Dec. 71- July 72- July 73- July 74-June 72 June 73 June 74 Mar. 14, 1975

Domestic Credit 1,049 2,814 3,302 1,706

Public Sector 1,515 3,004 2,775 1,703GovernmentLa ( 839) (1,291) (1,723) ( 176)Nationalized Industries;b ( 600) (1,624) ( 889) (1,136)Othe r/C~. ( 76) ( 89) ( 163) C 391)

Private Sector -466 -190 527 3

Foreign Sector 821 -188 -832 16

Othe.r/d -338 273 -19 -2q

Total Domestic Liauidity 1,532 2 899 2,274 1,619

Money Supply 982 2,103 1,207 836

Currency with the Public ( -310) (1,108) ( 447) ( 758)Demand Deposits (1,292) ( 995) ( 760) ( 78)

Time Deposits 550 796 1,067 783

Note - Provisional Figures

/a Investments of Bangladesh Bank and scheduled banks in governmentsecurities and treasury bills,other government borrowings from BangladeshBank, borrowings by Food Department from the banking system and treasury.advances.

/b Bangladesh Bank's investment in debentures of Jute Industries Corporation(Tk. 100 million in 1973/74 and another Tk. 6o million up to Mar. 1975) andscheduled banks' credit to public sector.

/c Scheduled banks' investments in autonomous and semi-autonomous organizations.

/d Includes quantitatively unidentified elements mainly as a result of incompletereporting by the scheduled banks.

Source: Bangladesh Bank

TABLE 6.3- .!~~~~/

SCHEDULED BANKS - SELECTED ASSETS AND LIABILITIES

(in Taka million)

December Q June 30,A December Q June 29,Q December Q June 28, 0 September Q December M March17, 1971 1972 29, 1972 1973 28, 1973 1974 27, 1974 24, 1974 14, 1975

Deposits .3,39..2 5,236.1 6,443.4 7,026.7 8,36.1 8,853.9 8,952.3 9,655.3 9, 715.1Demand Deposits 1,809.0 3,101.0 3,896.8 4,095.9 4,871.5 4,856.4 4,712.9 5,350.0 4,934.0Time Deposits 1,585.2 2,135.1 2,546.6 2,930.8 3,444.6 3,997.5 4,239.4 4,305.3 4,781.1

Borrowings from Bangladesh Bank 669.0 391.1 405.8 468.5 624.9 947.4 1,303.1 41,701.5 1,337.8

Cash in Tills 45.6 356.1 150.5 189.6 161.9 211.4 185.2 221.1 225.7

Balances with Bangladesh Bank 170.1 1,032.2 390.1 658.4 657.2 666.7 573.5 682.1 781.4

Advances and Bills Purchased 4,251.7 4,266.1 5,512.7 6,125.5 7,425.6 8,169.3 8,864.2 9,628.8 9,108. 7

Investment in GovernmentSecurities 232.9 283.0 1,208.8 1,099.9 1,376.4 1,334.9 1,315.2 1,332.8 1,3143. 5

Other Investments 195.2 270.7 322.0 359.7 420.0 522.8 786.3 790.1 91)4. 0c/

Excess Reserves - 10.9 759.4 52.4 288.7 225.4 206.5 103.0 182.6 270.4

a/ The scheduled banks include the six nationalized commercial banks, the three foreign banks,Bangladesh Krishi Bank and Bangladesh Shilpa Bank (see Table 6.8).

b/ Including credit to nationalized enterprises.c/ These are the scheduled banks' balances with Bangladesh Bank minus the amount of statutory cash balances.All scheduled banks have to maintain a compulsory cash reserve ratio, at present amounting to 5 percent

of demand, time and savings liabilities (including inter-bank). In addition the scheduled banks are requiredto maintain a prescribed liouidity ratio, now 25 percent (the sum of balances with Bangladesh Bank andSonali Bank, cash in tills, and holdings of unencumbered Government-guaranteed securities as a proportion ofthe sum of demand, time and savings liabilities). These ratios have not been changed since independence.

Source: Bangladesh Bank, Selected Economic Indicators.

TABLE 6.4

DISTRIBUTION OF DEPOSITS BY OWNERSHIP(End of Month Figures; in Taka million)

Ownership June Sept. Dec. Mar. June Dec.1973 7. 1973 % 1973 % 1974 % 1974 % 1974 %

-Public Sector 2,395.8 33.6 2,372.8 32.5 3,176.1 36.7 2,803.9 34.0 3,204.5 35.0 3,751.0 37.3

Government 574.4 8.0- 603.8 8.3 814.5 9.4 684.4 8.3 675.5 7.4 568.4 5.7

Nationalised SectorCorporation Industries 478.9 6.7 466.9 6.4 705.1 8.2 616.2 7.5 946.6 10.3 1,235.1 12.3

Other Public Corporationsand Autonomous & SemiAutonomous Bodies 1,224.0 17.2 1,196.0 16.4 1,554.0 17.9 1,387.8 16.8 1,474.2 16.1 1,812.3 18.0

Local and MunicipalBodies 118.5 1.7 106.1 1.4 102.5 1.2 115.5 1.4 108.2 1.2 135,2 1.3

Co-Operative Sector 116.6 1.6 142.9 2.0 155.5 1.8 184.6 2.2 147.0 1.6 143. 1.4

Private Sector 4,611.4 64.8 4,777.8 65.5 5,315.0 61.5 5,254.6 6A.7 5,802.6 63.4 6156.5 61.3

Companies 337.5 4.7 347.1 4.8 419.1 4.8 405.3 4.9 401.7 4.4 517.5 5.2

Business Enterprises 632.3 8.9 672.2 9.2 837.8 9.7 781.1 9.5 913.6 11.0 954.4 9.5

Private Individuals 3,032.4 42.6 3,210.6 44.0 3,451.0 39.9 3,410.3 41.4 3,501.4 38.2 3,651.4 36.3

Other (including Non-Residents) 609.2 8.6 547.9 7.5 607.1 7.1 657.9 7.9 985.9 10.8 1,033.2 10.3

Grand Total 7,123.8 100.0 7,293.5 100.0 8,646.6 100.0 8,243.1 100.0 9,154.1 100.0 10,050.9 100.0

Note - The table covers the six nationalized banks, three specialized banks(Bangladesh Kirshi Bank, Bangladesh Shilpa Bank and Bangladesh JatiyaSamabaya Bank) and the three foreign banks.

Source: Bangladesh Bank

TABLE 6.5

BANK CREDIT BY SECTOR(in Taka Million)

December % June % December % June % Dec. %1972 1973 1973 1974 1974

Public Sector 3,741 61.0 3,96U 60.4 4,957 63.0 5,363 62.1 6,827 67.9

Government 476 7.8 648 9.9 912 11.6 1,143 13.2 1,095 10.9

Nationalized Sector Corporations 2,577 42.0 2,567 39.2 3,120 39.7 3,511 40.7 4,768 47.3

Other Public Sector 688 11.2 745 11.3 925 11.7 709 8.2 964 9.6

Private Sector 2,394 39.0 2,594 39.6 2,907 37.0 3,267 37.9 32~O0 32.2

Total Bank Credit 6 100.0 6,554 100.0 7,864 10,077 100.0

Note - Total bank credit stood at Rs. 4,252 million on December 17, 1971 and Tk. 4,266 million at the end of June 1972.

Source: Bangladesh Bank

TABLE 6.6

BANK CREDIT BY MAJOR ECONOMIC GROUPS(in Taka Million)

Economic Group June % Dec. % June % Dec. %1973 - 1973 1974 1974

A. Agriculture, Forestry 1,088 16.6 1,120 14.2 1,110 12.9 1,188 11.8& Fishing

B. Mining & Quarrying - - - - - -

C. Manufacturing (Large 2,080 31.7 2,572 32.7 2,464 28.6 2,950 29.3& Medium)

D. Manufacturing (Small 104 106 128 106 126 1.5 194 1.9Scale)

E. Trade & Commerce 1,767 27,0 2,272 28,9 2,510 29.1 3,599 35.7

F. Procurement and Dis-tribution of Seeds,Fertilizer & Pesti-cides 6 - 31 0o4 1 - 15 0.1

G. Services 149 2.3 177 2.2 188 2.2 217 2.2

H, Real Estate 112 1.7 122 1.6 125 1.4 62 0o.6

I. Personal & PrivateIoans (ExcludingLand & Real Es-tate) 624 9.5 715 9.1 942 10,8 388 3.9

J. Overseas (OverseasResidents & Non-Residents 2 - 4 - - - 27 0.3

K. Foreign Bills Pur-chased & Dis- 400 6,2 384 4,9 749 8,7 736 7.3counted

L. All Others 222 3.4 339 4.4 415 4.8 699 6.9

Total 6,554 100,0 7,864 100.0 8,630 100.0 10,077 100.0

Source: Bangladesh Bank

EXPORT BILLS PURCHASED AND DISCOUNTED(June 30 1974; in Tk million)

Hides,Raw Jute Skins,Jute Products Tea Fish Leather Other Total

Public Sector 260.8 400.9 0.4 0.9 4.7 4.4 672.1

Government 14.5 - - - - 0.1 14.6Sector Corpor. 230.9 397.4 0.4 0.9 1.7 3.8 635.1Other 15.4 3.5 - - 3.0 0.5 22.4

Private Sector 35.4 27.7 0.6 0.4 6.6 5.4 76.1

Totul 296.2 428.6 1.0 1.3 11.3 9.8 748.2

In Percent

Public Sector 88.0 93.5 40.0 69.2 41.6 44.9 89.8Private Sector 12.0 6.5 60.0 30.8 58.4 55.1 10.2

Tottl 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Source: Quarterly Banking Statistics, June 1974.

TABLE 6.8

NUNBER OF BRANCHES OF BANKS(June 1972 - Jan. 1975)

June 30, June 30, June 30, January1972 1973 1974 31, 1975

Nationalized Banks

Sonali Bank 269 287 338 359Janata Bank 249 272 292 312Agrani Bank 245 258 285 290Rupali Bank 159 180 202 210Pubali Bank 99 123 145 169Uttara Bank 57 57 74 87

Foreign Banks

National & Grindlays Bank 10 10 10 10Chartered Bank 2 2 2 2American Express Interna-

tional Banking Corporation 2 2 2 2

Specialized FinancialInstitutions

Bangladesh Krishi Bank (BKB) 75 75 136 146Bangladesh Shilpa Bank (BSB) 7 7 7 7

All Banks 1174 1273 1493 1594

Note - In March 1972, the 12 Bangladesh commercial banks werenationalized and consolidated into six banks. On December17, 1971 the number of branches of all banks, includingforeign and specialized, was 1169.

Source: Bangladesh Bank

TABLE 6.9

SELECTED INTEREST RATES(in percent per annum)

Up to End 1973/74 1974/75

Deposit s(21) Special notice accounts or

deposits withdrawable at noticeof 7 to 29 days 3 4

Special notice accounts or

deposits withdrawable at noticeof 30 days or over 3¼ ¼4

(2) Savings bank accounts withchecking iacilities 54

Savings bank accounts withoutchecking facilities, i.e., accountswithdrawals from which are allowedthrough withdrawal slips and onproduction of passbooks only l 6

(3) Fixed (or term) depositsFor 3 months and over butless than 6 months ih 6

For 6 months and over butless than 1 year 43/4 6h

For 1 year and over butless than 2 years 5 7

For 2 years and over butless than 3 years 824

For 3 years and over 9 9¼

Postal Savings ) a General 7½Yields up to 7½ ) b Fixed:

) For 1 year 8) For 2 years 9) For 3 years 10

AdvancesThose extended by smaller banks 9 ) 12-13Those extended by larger banks 10 )Advances for jute, jute goods and tea 71½ ick

Bank RateGeneral rate for borrowing from Bangladesh Bank 5 8Rate for borrowing by Bangladesh Krishi Bank 3 6Rate for borrowing by Bangladesh Samabaya Bank

(Apex Cooperative Bank) 3 6

Page 2

TABLE 6.9

SELECTED INTEREST RATES (continued)(in percent per annum)

Industrial Lending Up to end 1973/74 1974/75Lending rates of Bangladesh Shilpa Bank

short term loans 7 )12-13long term loans 8 )

Agricultural LendingBorrowing Lending

Up to end 1973/74 1974/75 Up to end 1973/74 1974/75

(a) Bangladesh SamabayaBank (Apex Cooperative Bank) 3 6 4 (to Central )

Coop. Banks))

(b) Central Cooperative Banks 4 6 (to PrimarySocieties) )

) 1h(c) Primary Societies 6 9 (to Farmers, ) Max

etc.) 3(d) Bangladesh Krishi Bank 6 7 (short term) )

8 (long term) )

Money Lenders (Unorganized Sector)

Rates vary; typical annual rates are 30 and up

Notes - The Bank Rate has been increased from June 21, 1974; rates ondeposits and advances were increased effective July 1, 1974.

For deposits, Bangladesh Krishi Bank and Bangladesh Shilpa Bank(Agricultural Development Bank and Industrial Development Bankof Bangladesh, respectively) are allowed to quote 1 percent morethan the rates given above. However, deposits with these insti-tutions so far have been negligible because their services aremore limited than those provided by commercial banks.

For advances, the rates given are maximum rates., The nominalinterest rate on advances to the private sector is on averageabout 10-11 percent. Effective rates are 2 to 3 percentage pointshigher because of margins (15 to 30 percent, depending on thecreditworthiness of the borrower or on the type of commodityfinanced).

Agricultural loans are routed by the Bangladesh Samabaya Bankto farmers through the Central Cooperative Banks and the PrimarySocieties.

Source: Bangladesh Bank

TABLE 7.1

AREA UNDER MAIN CROPS IN BANGLADESH(Million Acres)

1969-70 1970-71 1971-72 1972-73 1973-74

1. Rice

(a) Aus 8.46 7.88 7.42 7.24 7.68(b) Aman 14,84 14.18 13.37 14.12 14.13(c) Boro 2.18 2.42 2.19 2.43 2.60

Total (25.48) (24.48) 22.98) (23.79) (24.41)

2. Wheat 0.30 0.31 0.31 0.30 0.303. Other Creals 0.28 0.30 0.25 0.18 0.24.

4. Pulses 0.91 0.92 0.89 0.78 0.70

5. Oilseeds

(a) Rape & Mustard 0.54 0.53 0.47 0.47 0.44(b) Til & Linseed 0.16 0.15 0.15 0.15 0.14(c) Groundnut 0.08 0.08 0.07 0.06 0.05

Total (0.78) (0.76) (0.69) (o.68) (0.63)

6. Spices 0.42 0.40 0.39 0.38 0.357. Sugarcane 0.40 0.40 0.35 0.32 0.368. Potato 0.21 0.21 0.19 0.19 0.209. Sweet Potato 0.18 0.18 0.17 0.16 0.15

10. Fruits & Vegetables 0.64 0.63 0.58 0.58 0.5911. Jute 2.46 2.20 1.68 2.21 2.02

12. Cotton 0.03 0.02 0.03 0.04 0.0213. Tea 0.11 0.11 0.11 0.11 0.1114. Tobacco 0.11 0.11 0.10 0.12 0.11

15. Others 0.53 0.50 0.39 0.40 0.31

Total All Crops 32.84 31,53 29.11 30.24 30 50

Net Cropped Area IncludingCurrent Fallot 22.49 22.48 22.47 22.47 22.48

Cropping Intensity 146% 140% 130% 135% 1367,g

Source: Bureau of Agricultural Statistics, Ministry of Agriculture.

TABLE 7.2

PRODUCTION OF MAIN CROPS IN BANGLADESH

(thousands of long tons)

crops 1969-70 1970-71 1971-72 1972-73 1973-74

1. Rice U1,816 10,968 9,780 9,930 11,700

2. Wheat 103 110 113 90 90

3. Gram & Pulses 293 296 269 222 208

4. Edible Oil Seeds

a. Rape & Mustard& Til 163 163 112 132 123

b. Groundnut 51 47 38 31 27

5. Potato 857 849 741 747 719

6. Sugarcane 7,418 7,598 5,686 5,318 6,342

7. Jute ('000 bales) 7,171 6,670 4,193 6,514 6,000

8. Mesta ('000 bales) 220 131 93 110 106

9. Tea ( mln.lb.) 67 69 22 53 60

10. Tobacco 91 86 76 87 41

Source. Bureau of Agricultural Statistics, Ministry of Agriculture.

TABLE 7.3

YIELD OF MAIN CROPS IN BANGLADESH

In Maunds (82.27 lb.) Per Acre

1969-70 1970-71 1971-72 1972-73 1973-74

1. Rice

(a) Aus 9.5 9.9 8.6 8.5 9.9(b) Aman 12.7 11.3 11.9 10.8 12.9(c) Boro 23.7 24.6 22.6 23.2 23.3

Total 12.6 12.2 11.6 11.4 13.1

2. Wheat 9.3 9.6 9.9 8.2 9.73. Gram & Pulses 8.7 8.7 8.2 7.7 8.14. Edible Oil Seeds

(a) Rape & Mustard 6.6 6.7 5.1 6.0 6.1(b) Groundnut 17.3 16.0 14.8 14.0 14.6

5. Potato 111.0 110.0 106.0 107.0 98.26. Sugarcane!/ 504.0 516.0 442.0 452.0 473.67. Jute 14.2 14.7 12.1 14.3 13.78. Tea 7.4 7.6 2.4 5.8 6.69. Tobacco 10.0 9.5 9.2 8.8 9.6

a/ These official yield figures of sugarcane are considered to be too high by the Bangladesh SugarcaneCorporation and by the IBRD 9 Volume Sector study. Reasonable yield may be between 2/3 and 3/4 ofthese official figures.

Source: Bureau of Agricultural Statistics, Ministry of Agriculture.

TABLE 7.4

RICE: AREA. PRODUCTION. YIELD

Area in Million Acres Average Yield Per Acre in Maunds Production in Million Long-Tons(82.27 lb.)~

Aus Aman Boro Total Aus Aman Boro Average Aus Aman Boro Total

1965-66 7.32 14.67 1.14 23.13 10.8 12.6 14.8 12.1 2.92 6.80 0.62 10.331966-67 6.96 14.06 1.39 22.41 10.4 11.5 16.2 11.4 2.67 5.92 0.83 0.421967-68 8.22 14.68 1.53 24.43 10.2 12.6 19.7 12.2 3.07 6.81 1.11 10.991968-69 7.66 14.40 2.01 24.07 9.5 13.0 21.8 12.6 2.68 6.87 1.61 11.161969-70 8.46 14.84 2.18 25.48 9.5 12.7 23.7 12.6 2.96 6.95 1.90 11.81

5-Year Average 7.72 14.53 1.65 23.90 10.1 12.5 19.9 12.2 2.86 6.67 1.21 10.74

1970-71 7.88 14.18 2.42 24.48 9.9 11.3 24.6 12.2 2.86 5.91 2.19 10.961971-72 7.42 13.37 2.19 22.98 8.6 11.9 22.6 11.6 2.34 5.70 1.74 9.781972-73 7.24 14.12 2.43 23.79 8.5 10.8 23.2 11.4 2.27 5.59 2.07 9.931973-74 7.68 14.13 2.60 24.41 9.9 12.9 23.3 13.1 2.80 6.70 2.20 11.70

Source: Bureau of Agricultural Statistics, Ministry of Agriculture

TAELE 7.5

PROCUREMENT, DISTRIBUTION AND STOCK POSITION OF FOODGRAINS

(long tons)

July-Dec.1972/73 1973/74 1974 1974/75/a

Opening Balance 359,237 296,621 228,000 228,000

Imports 2,039,866 1,64o,748 933,000 2,334,900

Local Procurement 52 70,863 25,000 127X000

Available for PublicDistribution 3,099,155 2,008,232 1,186,000 2,689,900

Statutory Rationing 464,802 502,488 266,000

Modified Rationing 1,592,148 776,710 303,000

Relief 207,109 52,409 100,000

Others 354,385 396,016 270,000

Total Distribution 2,618,444 1,727,623 939,000 2,034,0oo

Shortages and Losses 184,o90 52,609 59,000 100,000

Closing Balance 296,621 228,000 188,000 -55900

/a Estimate

Source: Ministry of Food and Civil Supplies

TABLE 7.6

FOODGRAIN PRODUCTION, IMPORTS AND PER CAPITA AVAILABILITY(in millions of long tons)

1969/70 1970/71 1971/72 1972/73 1973/74 1974/75 a

A. Production1. Rice 11.81 10.96 9.78 9.93 11.70 11.47

a. Aus 2.96 -277 2.3 4 2.27 2.80 2.85b. Aman 6.95 5.91 5.70 5.59 6.70 6.00c. Boro 1.90 2.19 1.74 2.07 2.20 2.46

2. Wheat 0.10 0.11 0.11 0.09 0.09 .16Gross Production 11.91 11.07 9.89 10.02 11.79 11.47Less 10 % for seed,

feed & wastage 1.19 1.11 .99 1.00 1.17 1714

Net Production 10.72 9.96 8.90 9.02 10.62 10.33

B. Imports1. Rice 0.50 0.38 0.67 0.37 0.08 0.28

2. Wheat 1.04 0.88 1.02 2.37 1.56 2.05Total Imports 1.55 1.26 1.69 2.74 1.64 2.33

C. Total Availability forConsumption 12.27 11.22 10.59 11.76 12.26 12.66

D. Population (millions;mid-year) 70.8 72.3 72.4 74.0 76.2 78.6

E. Per Capital Availability(lbs.) 388.2 347.4 327.5 355.9 360.2 360.6

a/ Estimates

Source: Ministry of Agriculture, Ministry of Food, Planning Commission,Bangladesh Bureau of Statistics and Table 1.1.

TABLE 7.7

FERTILIZER CONSUMPTION, PRODUCTION AND IMPORTS(thousand tons)

1973/74 1 9 7 4 / 7 5 1975/76Actual Target Actual TargetUrea TSP MP Total Urea TSP MP Total Urea TSP MP Total Urea TSP MP Total

Consumption by Crop

Aman 74.3 27.7 4.5 106.5 131.5 63.2 22.3 217.0 53.4 18.4 2.7 74.5 165.0 55.0 16.0 236.0Boro 123.6 57.8 10.6 192.0 120.3 63.4 22.9 206.6 I 52.9 34.5 8.7 96.1 140.0 60.0 20.0 220.0Aus 46.6 6.6 2.8 56.o 48.2 18.4 76.4 .. 95. 35.0 14.0 144.0

Total 244.5 92.1 17.9 354.5 300.0 145.0 55.0 500.0 .. .. .. .. 400.0 15o.0 50.0 600.0

Local Production 279.0 - - 279.0 262.0-o 45.0 - 307.0 1 34.0 6.3 - 40 3/- 300.0 72.0 - 372.0Imports - 95.0 30.5 125.5 65.1 101.5 60.8 227.4 19.5 29.7 4.0 53.2/I 125.0 93.0 55.0 273.0

/a Production target was set before the explosion and shut down of the Ghorasal fertilizer plant.L Actual production ana imports figures are for the first six months of tne fiscal year.Source: Bau?gladesh Agricultural Development Corporation.

TABLE 8.1

PRODUCTION AND CAPACITY UTILIZATION IN SELECTED INDUSTRIES

Production Change (%) Production I Cpencity UtilizationIndustry Unit production Julv-Deconber 1974 Autual/Tsrget 1969/70 19;2/73 1973/74 1974/75 1974/75 1975/76

1969/70 1972/73 1973/74 1974/75 1974/75 1975/76 Over Over July-DecJuly-Dec July-Dec July-Dec July-Dec --------- Actual -------- (Adtnels) (Esticuete) (Target)

-------------- Actual …… --------------------------------- (Estinate) (Tergetr 1969 1973 19741. Jute Tectile 560 446 500 239 483 600 -14.6 - 7.0 69 74 56 69 66 67 83

Hessiac (000 ton) 228 155 172 76 160 221 -33.3 -15.5 58 n.e. n.a. 72 63 67 92Sacking (000 ton) 279 210 227 116 230 272 -12.8 - 1.7 67 o.a. n.a. 69 70 70 83Carpet Backing (000 ton) 33 54 66 29 60 66 75.8 -11.6 73 n.e. n.a. 57 50 52 58Other. (000 ton) 20 27 35 17 33 41 70.0 - 1.7 - n.e. n.e. 100 97 94 9L

2. Cotton Textile

Cloth (Million Yards) 60 59 79 42 s8 110 41.7 9.6 89 49 49 77 71 74 93Yarn (Million lbs) 106 81 91 48 83 110 - 8.8 4.2 93 79 60 59 72 62 82

3. Paper and Board

Nevsprint (000 ton) 36 28 26 14 28 35 -35.4 14.7 79 69 54 53 56 56 88Paper (000 ton) 31 21 24 12 23 45 -29.8 - 6.9 80 102 69 49 sD 48 94

4. Fertilior

Urea (000 ton) 95 226 279 34 67 260 - 6.5 -74.0 21 91 62 62 15 15 58TSP (000 ton) - - - 6.3 20 70 - - 19 - - - 8 13 46Anioni_ Sulphate (DO ton) 4.7 6 10.3 1.7 3.5 10 308.0 -73.0 35 39 50 86 28 29 83

5. Conet (000 ton) 53 32 53 58 160 300 188.9 188.9 45 53 23 35 30 40 57

6. Steel Ingoto (000 ton) 54 68 74 37 75 150 33.7 23.1 82 22 27 29 30 30 60

7. Petroleun Producto (000 ton) 853 776 323 326 993 1200 -23.6 101.9 66 57 52 22 43 66 80

8. Matchen (Million groan boon-) 12.9 5.9 5.0 2.3 4.8 2.0 -6h.4 - 8.0 49 86 28 31 30 30 11

9. Tea (Million lbo) 67 53 61 49 72 72 n.a. n.a. n.a. n.a. n.e. n.e. n.e. n.-. n.e.

10. Fontw.ar (000 DoS) 655 681 440 131 263 9! 500 -56.0 -/ -31.0 / 59 / .. n.. n.. 22- 22k 43-/

11. Fond ond AlLied Pruducto

Edible Oil ond (000 tun) 11 10 19 6 13 55 -9.1 -36.8 43 31 27 26 16 17 73

Vegetable Gboe

Fi;h procneoitg (100 lbs) 2502 1115 3100 1886 3800 5000 50.8 21.7 134 36 16 24 29 30 - 39Soft Bovoroge (000 bottloo) 622 3960 6840 2441 4848 .. a. 654.9 -28.6 45 22 20 79 57 56 u.a.Cigarettes (billion) 17.8 12.0 12.9 5.0 n. n.a. -43.8 -22.5 n. n. u.a. 23 18 n.e. n.a.

12. Sugar (000 ton) 93 19 8S 38 132 132 41.9 32.9 100 55 11 52 59 83 83

13. Engineering and Shipping

Diesel Engine (No.) 1284 1353 1720 4052 4200 5000 533.1 426.9 156 43 45 57 n. 129 83Purpu (N..) - 900 1865 4541 6400 8000 - 189.1 116 u.s. n.e. n.a. u.s. n.n. n.

He-ny Vehiclen (N..) 455 1228 2068 635 1200 2000 128.4 -38.6 71 no. n. 69 42 42 67(-ar, buu tachk)

G.I.Sheet snd Stoel (Ton) 5134 2800 3661 377 S00 2500 -05.5 -79.4 27 n.e. u.s. 58 12 12 25Pipe.

at public scter only

Source: PlanninBig C-oisiuu; Nation-liaed Iudnotrie- Division and sectur Corpor-tiom; Bureun of Statiutics.

TABLE 8.2FINANCIAL PERFORMANCE OF THE PUBLIC SECTOR CORPORATIONS

(in Taka Million)Net Profit (-+e./Loss(-)a/ Gross Sales

July-Dec July-Dec1969/70 1972/73 1973/74 1974 1969/70 1972/73 1973/74 1974

1. Bangladesh Jute Industries n.a. -283.5 -332.2 -220.0 773.0 1440.0 1550.0 906.3Corporation (BJIC) (-19.7) (-21.4) (-24.3)2. Bangladesh Textile Industries n.a. 100.0 79.0 60.0 n.a. 769.4 1013.0 640.2Corporation (BTIC) ( 13.0) ( 7.8) ( 9.4)3. Bangladesh Sugar Mills -10.9 - 37.3 39.0 n.a. 95.0 122.0 229.3 n.a.Corporation (BSgMC) (-11.5) (-30.6) ( 17.0)4. Bangladesh Steel Mills -37.3 - 25.6 19.2 11.9 101.1 147.8 268.0 113.2Corporation (BStMC) (-36.9) (-17.3) ( 7.2) ( 10.5)5. Bangladesh Paper & Board n.a. - 33.5 -28.7 -28.4 218.0 153.8 226.9 148.6Corporation (BPBC) (-21.8) (-12.6) (-19.1)6. Bangladesh Engineering & n.a. 7.5 25.0 12.5 74.7 198.1 313.1 122.4Shipbuilding Corporation (BESC) ( 3.8) ( 8.0) ( 10.2)7. Bangladesh Fertilizer, Chemical & n.a. 15.0 80.5 10.1 n.a. 220.6 534.9 265.5Pharmaceutical Corporation (BFCPC) ( 6.8) ( 15.0) ( 3.8)8. Bangladesh Food & AUlied n.a. 15.1 25.7 10.0 n.a. 215.8 346.8 206;7Industries Corporation (BFAIC) ( 7.0) ( 7.4) ( 4.8)9. Bangladesh Forest Industries - 1.2 5.5 31.1 17.4 8.7 11.0 81.8 n.a.Development Corporation (BFIDC) (-13.8) ( 50.0) ( 38.0)LO. Bangladesh Tanneries n.a. - 9.4 -1.1 - 2.2 n.a. 37.6 28.1 26.9Corporation (BTC) (-25.0) (- 3.9) (- 8.2)

a/ The figures in parenthesis are ratios of profit (or loss) over sales in percentage.

Source: Sector Corporations; Nationalized Industries Division.

TABLE 9.1

DACCA MIDDLE CLASS COST OF LIVING INDEX(1969/70= 100)

1970/71 1971/72 1972/73 1973/74 July Aug. Sept. Oct. Nov. Dsc.1974 1974 1974 1974 1974 1274

General Index 105 121 182 253 316 352 385 416 423 430(5) (15) (50) (39) (46) (59) (70) (75) (76) (76)

Food 105 122 185 263 340 395 455 508 517 529(5) (16) (52) (42) (51) (71) (91) (100) (106) (106)

Fuel & Lighting 105 133 192 250 309 331 318 392 361 370(5) (27) (44) (30) (49) (56) (41) (64) (56) (66)

Housing & HouseholdRequisites 101 108 132 16i 182 191 195 19$ 195 199

(1) (7) (22) (22) (25) (28) (31) (30) (27) (28)

Clothing & Footwear 102 117 229 355 399 402 404 414 418 418(2) (15) (96) (55) (23) (24) (29) (22) (21) (19)

Miscellaneous Items 112 125 179 236 300 323 327 328 336 339(12) (12) (43) (32) (38) (63) (58) (56) (51) (49)

Note - Group weights are: Food - 52.67, Fuel & Lighting - 5.38, Housing - 11.98,Clothing &. Footwear - 8.43, and Miscellaneous - 21.54. Figures in parenthesisare percentage increase over the previous year.

Source: Bangladesh Bureau of Statistics

NARAYANGANJ INDUSTRIAL WORKERS COST OF LIVING INDEX(1969/70 = 100)

July Aug. Sept. Oct. Nov. Dec.1972/73 1973/7 174 1974 1974 1974 1974

General Index 205 286 362 410 456 492 504 519(39) (47) (63) (78) (80) (83) (89)

Food 187 261 346 408 467 517 533 554(40) (58) (82) (104) (109) (115) (123)

Housing & House-hold Requisites 210 208 317 339 333 340 347 337

(-1) (40) (41) (34) (36) (32) (39)

Clothing & Footwear 323 489 528 547 567 571 571 572(51) (12) (18) (25) (17) (18) (16)

Miscellaneous Items 204 273 344 351 383 386 387 394(34) (50) (48) (56) (51) (49) (56)

Note - Group weights are: Food - 69.77, Housing & Household - 9.35, Clothing andFootwear - 10.38, and Miscellaneous - 10.50. Figures in parenthesis arepercentage increases over the previous year.

Source: Bangladesh Bureau of Statistics

TABLE 903

INDICES OF WHOLESALE PRICES AT DACCA(1969/70 = 100)

Index Sept. Sept. Dec. Sept. Dec. Sept. Dec.1971 1972 1972 1973 1973 1974 1974

A. AGRICULTURAL PRODUCTS

General 117 176 169 218 216 414 4oo(50) (24) (28) (90) (85)

Food 112 183 168 249 246 569 543(63) (36) (46) (128) (121)

Raw Material 125 165 172 171 172 186 189(32) ( 4) ( -) (-9) (10)

B. INDUSTRIAL PRODUCTS

General 139 274 267 244 274 408 585

(97) (-11) ( 3) (67) (114)Food 115 276 281 254 311 529 800

(140) (-8) (11) (108) (157)Fuel & Lighting 154 208 230 250 314 495 491

(35) (20) (36) (98) (56)Other Manu2actures 173 273 249 230 223 240 246

(58) (-16) (-10) ( 4) ( 10)

Note: Figures in parenthesis are percentage increases over the previous year.

Source: Bangladesh Bureau of Statistics

TABLE 9.4

WHOLESALE PRICES OF SELECTED COMMODITIES AT DACCA(in Taka)

Items Unit 1968-69 1969-70 July July Jan. Jan.1972 1973 1974 1975

1. Rice (fine) Md. 47.60 47.64 78.10 109.00 114.37 322.50

2. Rice (med.) Md. 44.46 414.67 68.60 105.25 109.75 310.00

3. Rice (coarse) Md. 41.43 40.43 61.50 96.37 104.25 192.50

4. Masur Md. 31.37 39.13 68.60 lO.50 198.13 185.00

5. Chillies (dry), sup.qlty. Md. 119.85 98.19 120.00 111.00 376.25 n.a.

6. Mustard oil (local) Md. 133.04 164.20 340.00 382.50 543.75 1,441.25

7. Cocoanut oil (imported) Md. 247.05 216.33 488.oo 620.00 994.17 1,500.00

8. Vegetables oil (Pakvan) 35 lbs. 59.79 66.84 123.70 198.75 271.00 n.a.

9. Tobacco leaf (Motihari,sup. quality) Md. 341.48 253.94 382.50 808.75 815.00 621.25

Source: Bangladesh Bureau of Statistics.

TABLE 9.5

RETAIL PRICES OF SELRETED CONSUMER GOODS AT DACCA(Average prices in Taka)

July Jan. July Jan. July Jan.Items Unit 1968-69 1969-70 1972 1973 1973 1974 1974 1975

Rice (medium) Md. 47.20 47.60 71.60 83.20 109.60 116.40 168.00 330.00(53) (40) (53) (183)

Masur (husked, whole) Seer 1.11 1.16 1.98 2.84 3.00 5.55 5.00 5.55(52) (95) (67) ( -)

Rohu, big (cut pieces) " 3.90 4.12 6.21 9.37 11.65 10.56 15.72 14.14(88) (13) (35) (21)

Potato(desi, nainital),medium 0.73 o.66 1.23 0.95 1.95 2.12 2.56 2.08

(59) (123) (61) ( -2)Mustard oil(local mill

1st qlty) 5.65 4.37 9.19 13.69 12.07 15.57 22.74 41.68(31) (14) (88) (168)

Chillies - dry II 3.51 3.06 3.45 2.53 3.40 10.20 23.27 n.a.(-1) (303) (584)

Gur-Cane (loose) 1.55 1.58 3.93 3.06 4.05 3.57 5.39 8.22( 3) (17) (33) (130)

Cocoanut-dry (med.) Per Unit 0.59 o.66 1.17 1.42 1.50 2.62 2.65 n.a.(28) (85) (77)

Firewood(gazari,split) Md. 5.56 5.87 8.48 12.50 12.72 14.4o 17.67 20.91(50) (15) (39) (18)

Kerosene-White 22 ouncebottle 0.37 0.35 0.52 o.86 0.95 1.58 1.25 1.40

(83) (84) (32) (-11)Saree-mill(50'sX70's,

medium) Piece 11.35 12.16 19.50 28.67 40.00 41.33 43.33 n.a.a/ (105) (44) ( 8)

Longcloth (med.) Yard 1.81 2.05 8.00 10.87 12.67 12.00 12.50 13.00(58) (10) (-2) ( 8)

Paper-Foolscap(white) Quire 0.73 0.75 o.87 1.00 1.50 1.25 2.71 n.a.(72) (25) (81)

Betel-leaf, med. Bira 1.10 1.04 2.95 4.33 2.41 2.61 2.16 n.a.(-18) (-40) (-10)

Tobacco (leaf)motihari Seer 10.18 8.98 16.85 24.27 28.36 22.02 23.23. 24.16

(68) (- 9) (-18) (10)

Note - Figures in paranthesis are percentage increase over the previous year.

a/ August 1972.

Source: Bangladesh Bureau of Statistics.

TABLE 9.6

AVERAGE PRICES OF RICE IN BANGLADESH(Medium Quality; in Taka per maund)

Wholesale RetailPrice a/ Price b/

1969-7C 43.12 45.60

1970-71 41.48 45.30

1971-72 56.31 61.20

1972-73 95.80 107.60

1973-74 113.31 120.40

1974-75

July '74 162.28 166.80

Aug. '74 188.36 202.40

Sept. '74 214.27 236.00

Oct. '74 264.44 289.00

Nov. '74 228.75 272.00

Dec. '74 223.06 239.60

a National average.b/ Simple average of 4 centres, namely, Dacca, Chittagong, Khulna and

Rajshahi.

Source: Bangladesh Bureau of Statistics.

TABLE 9.7

AVERAGE RETAIL PRICES OF RICE IN DACCA(Medium Quality)

Taka per Taka perseer maund

1969 1.21 48.35

1970 1.16 46.35

1971 1.29 51.54

1972:

January-March 1.31 52.34

April-June 1.69 67.53

July-September 1.99 79.51

October-December 2.11 8U.31

1973:

January-March 2.18 87.10

April-June 2.67 106.68

July-September 2.77 110.68

October-December 2.82 112.68

1974:

January 2.91 116.27

February 3.04 121.47

March 3.36 134.25

April 3.85 153.83

May 3.86 154.23

June 4.05 161.82

July 4.20 167.82

August 5.29 211.37

September 6.32 252.52

October 7.63 304.86

November 7.41 296.4o

December 6.77 270.80

1975:

January 8.25 330.00

Source: Planning Commission and Bangladesh Bureau of Statistics

TABLE 9.8

PRICES OF BUILDING MATERIALS AND WAGES OF CONSTRUCTION WORKERS(in Taka)

July July JulyItems Unit 1967-68 1968-69 1969-70 1972 1973 1974

Bricks-10" ... ... Per 1000 118.23 118.85 125.07 156.87 288.50 429.79(First Class)

Cement ... ... Per bag 13.10 12.68 13.08 35.30 37.66 118.25(A.B.C.)

Sand ... ... 100 cft. 36.97 38.62 39.23 39.33 108.67 84.88Coarse superior quelity

Iron Rods ... ... Per cwt. 74.77 72.73 81.31 102.19 154.10 271.86

C.I. Sheet ... ... Per bundle 173.65 99.58 193.16 303.67 495.00 1,029.0024 gauge

Mason ... ... Per day 6.87 7.01 7.16 7.93 12.87 14.88

Helper (jungali) ... Per day 3.44 3.74 3.51 5.08 6.37 8.73

Carpenters ... ... Per day 6.12 6.27 6.42 7.20 11.60 14.00

Source: Bangladesh Bureau of Statistics.

TABLE 9.9a/

AVERAGE WAGE RATE PER DAY

Dacca: Selected Industries(in Taka)

Industry January July January July January July1968 1972 1973 1973 1974 1974

1. Cotton Textile

Skilled 5.50 7.20 7.12 7.50 7.50 8.50

Unskilled 3.50 5.00 5.78 5.80 6.50 7.05

2. Jute Textile

Skilled 5.00 7.60 7.12 7.50 8.00 8.50

Unskilled 3.00 5.00 5.78 5.80 6.12 7.00

3. Match

Skilled 4.77 10.00 10.00 10.00 10.75 11.00

Unskilled 3.37 7.30 7.00 7.00 7.75 8.00

4. Mustard Oil

Skilled 4.69 7.60 7.87 9.00 9.44 10.00

Unskilled 2.92 5.00 6.62 6.50 7.37 7.50

a/ Exclusive of food, housing, medical facilities, etc.

Source: Bangladesh Bureau of Statistics.

TABLE ,10.

PRO WCTION ANDJEDPORT OF JUTE GOODS('000 long tons)

Period Production Export (Shipment)

Hessian Sacking Carpet Others Total Hessian Sacking Carpet Others TotalBackin- -Backing

1969/70 227.7 279.3 33.0 20.6 560O6 204.2 232.0 34.0 28.0 498.2/a1970/71 199.4 172.8 40O.5 26.9 439.6 172.6 146.1 -----63.2 ------ 381.91971/72 121.0 145.6 35.5 13.2 31502 7607 100.5 32.7 11.1 221.01972/73 155.1 210.4 53.8 27.0 446.3 163.1 169.8 50.0 28.7 411.61973/74 172.3 227.2 65.7 34.9 500.1 144.8 206.1 ----- 87.2 ------ 438.11974/75

July 15.4 22.5 6.1 3.6 47.7 8.6 21.8 5.7 3.8 39.9August 1-4.7 20.5 5.8 2.7 43.7 12.7 14.0 5.2 3.9 35.7September 12.5 18.5 5.1 2.7 38.7 7.2 13.5 2.4 .4 23.6October 10.6 16.1 4.4 2.7 33.7 18.8 27.1 3.8 1.5 51.3November 12.6 20.2 4.7 3.0 40.5 6.5 24.1 2.9 .4 33.9December 10.5 17.9 3.0 2.5 34.0 10.6 8.7 24 _ 22.4

July-Dec. 1974 76.3 115.7 29.1 17.2 3. 109.1 22.4 10.January 10.0 20.0 3.0 4.0 37.0 8.0 15.0 1.4 .6 25.0FebruaryMarchAprilMayJune

Jan-June 1975

/a Excludes exports of about 74,000 tons to West Pakistan.

Source: Bangladesh Jute Industries Corporation.

TABLE 10.2

EXPORT PRICES OF JUTE GOOIJB (FOB SIGHT)

(in Taka per long ton)

Hessian Sacking Carpet Backing(40"tDCX oz.} -(B. Twills) (7oz./3611)

lWa4 1 197 1974 t

July 3,799 5,878 2,522 3,455 4,889 6,300August 3,870 6,224 2,527 3,709 4,750 6,077September 3,978 6,380 2,539 3,962 4,750 5,755October 4,157 6,198 2,608 4,123 4,775 5,750November 4,265 5,625 2,638 4,112 4,775 5,750December 4,767 5,330 2,738 3,958 4,775 5,750January 5,591 5,100 3,036 3,900 5,250 4,950February 5,663 3,216 5,250March 6,666 3,504 5,250April 7,455 3,785 5,250May 6,523 3,385 6,150June 5,734 3,385 6,300

Source: Bangladesh Jute Indistries Corporation

TABLE 10.3

STOCKS OF JUTE GOODS AND RAW JUTE BY JUTE MILLS

Raw Jute Jute Goods('000 bales) ('000 long tons)

June 30, 1970 530.3 n.a.June 30, 1973 683.9 101June 30, 1974 691.1 114December 31, 197h 826.0 121

Source: Bangladesh Jute Industries Corporation

TABLE 10.4

FINANCIAL PERFORMANCE OF JUTE INDUSTRY

Cost of Sale Price Ratio ofProduction (Taka per ton) Production Cost Total(Taka per ton) to Sale Price Loss

Hessian (C) - (P) (C/ ) (in Taka million)1972/73 5,077 4,195 121.0 136.81973/74 5,401 4,369 123.6 177.7July-Nov. 1974 6,177 6,066 101.8

Sacking1972/73 3,095 2,729 113.4 77.01973/74 3,237 2,872 112.7 82.9July-Nov. 1974 3,560 3,872 91.9

Carpet Backing1972j73 5,733 4,656 123.1 58.01973/74 5,614 4,671 120.2 61.9July-Nov. 1974 7,362 5,925 124.3

Total1972/73 283.51973/74 332 2July-Dec. 1974 220.0

a/ provisional

Source: Bangladesh Jute Industries Corporation (BJIC)

TABLE 10.5

EXPORTS AND PRICES OF RAW JUTE

Shipments ('000 bales) Export Price.E/ (E.!ton) Domestic Pricet/ (Taka/Maund)

1972/73 1973/74 1974/75 1972/73 1973/74 1974/75 1972/73 1973/74 1974/75

July 143 202 169 112 114 144.32 5047 50.94 66.17

August 138 84 172 112 114 150 49.73 52.44 67.39

September 108 120 129 112 116 165 48.25 51.70 85.76

October 171 155 227 112 116 190 50.94 52.54 107.48

November 255 169 118 112 116 200 52.48 52.64 128.71

December 281 280 192 112 116 200 54.29 52.90 106.80

January 310 280 112.7 116 54.52 53.64

February 203 313 114.05 116.32 55.10 54.80

March 337 196 115 119 55.33 56.31

April 285 317 115 124.9 56.37 57.52

May 268 254 115 133.15 55.72 61.12

June 327 - 292 114 138.8 55.77 67.32

Simple

Total 2,826 2,662 Average 113.15 120.01 53.25 55.32

a/ BWD Grade (FOB chalua/Chittagong).b/ Combined average price for white & tossa jute in the internal markets.

Source: Jute DivisionBangladesh Jute Export Corporation.

TABLE 10o6

STATISTICAL POSITION OF RAW JUTE

(Million bales)

1972/73 1973/74 1974/75

1. Carryover 1.26 2.11 2.15

2. Production 6.51 6.00 4.20

3. Total Availability (1+2) 7.77 8.11 6.35

4. Mills Consumption 2.49 2.91 2.80

5. Growers' Consumption 0.15 0.25 0.20

6. Total Domestic Requirements (4+5) 2.64 3.16 3.00

7. Estimated Loss & Unaccounted 0.20 0.15 0.20

8. Total Domestic Use (6+7) 2.84 3.31 3,20

9, Exportable Surplus (3-8) 4.93 4.80 3,15

10. Estimated Exports 2.82 2.65 1,60

11, End Season Stocks (9-10) 2,11 2v15 1,55

Acreage under jute 2.21 2.02 1.40(mln. acres)

Source: Ministry of Jute and Bureau of Agricultural Statistics

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