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MDTA meeting on MTMF March 31, 2003 The new MTMF • Policy outcomes are somewhat less ambitious • Policy actions are somewhat more ambitious • Has been agreed with IMF staff Growth is lower, inflation is higher Growth and Inflation 8 7 Percent 6 5 4 3 2 1 0 FY01 FY02 real growth new FY03 FY04 real growth old FY05 FY06 CPI inflation new FY07 FY08 CPI inflation old A sharper increase in revenues Government revenues and taxes 14 Percent of GDP 12 10 8 6 4 2 0 1 2 3 revenue new 4 5 revenue old 6 tax new 7 8 tax old A smaller ADP Total government expenditures and ADP 20 Percent of GDP 18 16 14 12 10 8 6 4 2 0 1 2 expenditure new 3 4 expenditure old 5 6 ADP new 7 8 ADP old Less need for financing Budget deficit 6 Percent of GDP 5 4 3 2 1 0 1 2 3 4 budget deficit new 5 6 budget deficit old 7 8 More credit for private sector in outer years Credit to private sector 18 Increase in percent 16 14 12 10 8 6 4 2 0 1 2 3 4 credit to priv s new 5 6 7 credit to priv s old 8 After recovering, imports and exports grow at lower rates Imports and Exports 15 Increase in percent 10 5 0 -5 -10 -15 1 2 export new 3 export old 4 5 import new 6 7 import old 8 Reserves pick up more quickly, but grow at slower pace Reserves in months of imports 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 1 2 3 4 reserves/imports new 5 6 7 reserves/imports old 8 Comments made in subgroups on previous MTMF • Growth and inflation targets are ambitious— which sectors are going to drive growth? Growth of credit to private sector seems insufficient to support growth targets. • Exports seems to grow too quickly with weaknesses in RMG/phasing out of MFA. • What would engender increase in FDI? • Can increase in ADP spending be absorbed? • What is the relation between the PRS and additional foreign financing foreseen? Suggestions for MDTA inputs to JSA • Could be framed as questions to be answered in the development of MTMF toward full PRSP. • More emphasis is needed on the role of FDI. How much is needed to support growth target? What policy actions (including on non-economic governance) are needed to achieve higher FDI? • Which economic sectors are going to drive growth? How do expenditure framework and other actions in policy matrix support this? • What type of policy regarding trade, import tax, and the exchange rate would yield this pattern of imports and exports? • How will Bangladesh achieve export growth in FY06 when MFA is phased out?