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WB economist backs fiscal safeguard against recession

Star Business Report
A senior economist of the World Bank said yesterday Bangladesh must create additional fiscal space to stimulate demand focused on job creation to deal with fallout from the global Finan-cial crisis.
"This fiscal measure is necessary as part of a preparation to chase the decline in export and remittance income," Sadiq Ahmed, acting chief economist for World Bank’s South Asia region, told top bankers at a meeting in the WB's Dhaka Office.
Ahmed however said that there is nothing to get panicked.
"You have to prepare on the basis of the trends. No doubt, there are some dark clouds and let us get prepared." Ahmed said.
Of the other measures he advised to take are: Public spending should be re-prioritised to infrastructure, agriculture and safety nets and enhancing export competitiveness.
The economist stressed the need to carry out reforms
for a strong banking and financial sector.
Ahmed presented a paper titled "Impact of global financial crisis in South Asia" at the beginning of the discussion.
In the paper, he showed the short- and long-term impacts of the global crisis and, accordingly, made suggestions.
He said the financial meltdown slowed the growth of exports, investment, remittance and consumption.
"After several years of strong growth, remittance flows to South Asia are expected to slow down in 2009," Ahmed said.
"Industrial production will also godown."
But Ahmed sees an increase in agriculture productivity in South Asia, especially in Bangladesh, as a big challenge. He said the price of food that is at the lowest level might shoot backup.
"Although Bangladesh’s agriculture sector has
increased its productivity since 1971, it is still lower than in many other countries, "Ahmed said.
He said export sectors have to be given incentives to weather the crisis period.
The economist who wrote more than 30 books, policy research papers and articles on various development issues, also said the financial sector must be well-regulated.
WB officials at Dhaka office and senior bankers were present at the meeting.