News and Update: Court asks Bangladesh govt to explain Policy Support Instrument (PSI) talks with IMF

Shahiduzzaman, NewAge, September 18, 2007

The High Court on Monday asked the government to explain within two weeks why it should not be prevented from pursuing a Policy Support Instrument deal with the International Monetary Fund. The High Court bench of Justice Nazmun Ara Sultana and Justice M Abu Tarique issued the rule after hearing a public interest litigation writ petition filed by a Supreme Court lawyer, M Mesbahul Islam. The rule was issued on principal secretary to the chief adviser, cabinet secretary and finance secretary.

The petition was filed on Sunday challenging the interim government’s authority to negotiate with the IMF a PSI deal feared to subject Bangladesh to intrusive policy advice without any financial assistance from the lending agency.

According to the constitution, the caretaker government has no power do deal with any policy matters, other than discharging routine works and providing the Election Commission with the necessary support for holding free and fair elections, the petitioner’s counsel, Abdul Wadud Khandaker told the court.

The caretaker government has no right whatsoever to negotiate or sign any agreement with the IMF or the World Bank as that does not fall under its work defined by the constitution, he argued. ‘In a flagrant violation of the constitution, the government has partially acted upon the prescription[s] of the IMF and the World Bank that has caused price hike of essential commodities and given rise to inflation,’ causing ‘colossal and irreparable damage’ to the national economy, he contended. ‘This has badly affected industrial production’.

‘The government has withdrawn fertiliser subsidies at the IMF’s insistence, which is suicidal as agriculture is the backbone of our economy,’ he said. The government’s current negotiation with the IMF on a PSI agreement has drawn wide criticism from leading economists of the country. Even the finance adviser to the interim government criticised it on September 14, the counsel mentioned.

Signing of a PSI agreement with the IMF will not only push the country’s economy to unpredictable consequences, it will also allow the global lending agency to interfere in matters relating to the country’s sovereignty, he said.

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