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Macroeconomic Performance During Adjustment: The Case of Bangladesh

Author:Salma Chaudhuri Zohi

The present study attempts to look into the impact of structural adjustment on macroeconomic performance covering the period up to 1992/93. The "before-after" approach is the most widely used approach and hence has been used for the analysis of this paper. The analysis suggests that the structural adjustment policies in Bangladesh has been implemented gradually, with policy changes introduced in phases. The review of macroeconomic performance suggests that the nature of structural adjustment pursued may be termed as "corrective": it improved the fiscal and external balances but at the cost of reduced public investment and stagnant GDP growth at around 4 per cent during the adjustment period. The decline in public investment appears to have affected private investment. Bangladesh had only meagre foreign investment. Desirable structural adjustment policies should lead to expansion of tradable output. But contrary to the expectation, the output growth in the tradable sector was significantly lower than that of non-tradable. The share of expenditure in GDP remained at around 15 per cent. Although the share of social sectors as a whole increased slightly, that of the health sector has fallen during the adjustment period. The structure of export changed from traditional to non-traditional. Export growth was larger than the target due to expansion in readymade garment and knitwear. Under the MFA, Bangladesh has guaranteed access to the US market and under the GSP, Bangladesh has unrestricted duty-free entry into the countries of the European Union, which gave it a competitive edge over other exporting countries. The phasing out of preferential access by the year 2005 is a matter of great concern. In order to survive beyond 2005, there is an urgent need to set up backward linkages domestic textile industries.

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