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Our Bureau

Sharp interest rate adjustments likely

Hyderabad , May 5

Viewing that a further hike in global oil prices could not be ruled out, the Union Finance Minister, Mr P. Chidambaram, has advised the Asian economies to be `watchful'.

According to him, the Asian region must recognise that the risks to global and regional economic expansion have not lessened. Apart from possible oil price hikes, a widening of global payments imbalances remains a possibility, which increases "the risk of sharp adjustments in exchange and interest rates."

Addressing the Board of Governors of Asian Development Bank (ADB) here on Friday, he urged the Asian policy makers to continue to "pursue sound macro-economic policies and continued structural reforms to sustain growth and weather potential economic shocks."

Continued growth

Setting aside the risks, he said, "However, it appears that the region's overall economic expansion will continue in the foreseeable future. Within the context of a strong global economy, continued recovery in the global electronics market and fast growth in some of our member countries such as China and India, developing Asia is projected to expand by 7.2 per cent for 2006 and 7 per cent in 2007."

Challenges ahead

According to him, despite rapid progress, the Asian region faces a daunting challenge in the provision of quality infrastructure. The importance of infrastructure in sustaining economic growth and improving the lives of the poor is well recognised, he said.

Stating that governments alone would not be able to meet Asia's huge infrastructure investment needs, he said, "While the space for the private sector can and must be enlarged, the primary responsibility of developing infrastructure and providing infrastructure services must remain that of the Governments."

While a number of important policies and strategies came under the ADB review during the year, the private sector development strategy review was completed and a new strategic framework was submitted to the Board of Governors. "The new framework seeks to create an enabling environment for private sector investment and to mobilise finance for private sector development," Mr Chidambaram, who is also the Chairman of ADB Board of Governors, said.

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