It also said the Annual Devel-opment Programme (ADP) for this fiscal has 174 unapproved and new investment projects which would lead to the old problem of thinly-spread allocations.

This also does not convey the right message about the government's avowed objective of scaling down the number of ADP projects to a more manageable level.

The bank's views were expressed in its current Periodic Economic Update.

"Bangladesh remains one of the few countries in the region that continue to levy various supplementary duties over and above customs tariffs," it said while commenting on defusing the trade liberalisation.

"Driven by the need to raise revenues and 'to help protect local industry and to help curb import of luxury and comparatively unnecessary importables', the supplementary duty (SD) rates on imports for FY04 have increased significantly.

"End-use based tariff concessions have increased, IDSC has increased from 3.5 per cent to 4 per cent, and Regulatory Duty will continue as it is. The move to the three-tier customs duty (CD) system -- a move towards greater simplicity and transparency of tariffs -- did not happen."

The WB finds a mixed signal with regard to the policy stance on domestic protection and the removal of anti-export bias.

"While a reduction in the top rate of CD signifies scaling down of nominal protection, there are instances where downward adjustment of CDs has been neutralised by an upward adjustment of SD, not to mention rampant use of SD specifically for protection.

"Supplementary duty on cement imports has increased to provide higher protection to domestic cement industry. However, cement is already heavily protected. Most analysts worry that too many cement factories are in the pipeline, with financing from domestic banks. This will create over-capacity in the industry, leading to declining profits and increased probability of default to the banking system," said the WB.

The bank also said measures proposed to revamp the Bangladesh Railways (BR) by procuring new coaches, rebuilding railway tracks and repairing railway stations, without addressing issues of internal management and external accountability of the BR, need a more rigorous assessment. "Much will depend on how effectively the government will implement the proposal to turn BR into a corporate body."

The WB said the ambitious 16.2 per cent FY04 revenue growth target, which is appropriate for a country with one of the lowest revenue-GDP ratios in the developing world, needs to be leveraged with sufficient measures.

It lauded the government for a number of measures that it said will improve the fiscal situation next year. It also praised the government's expenditure allocation pattern.

The budget deficit and domestic financing of this fiscal are consistent with the medium-term macroeconomic framework in the government's poverty reduction strategy.

"Achieving the FY04 deficit target without risking fiscal sustainability will depend on the effectiveness of expenditures and on whether the underlying assumptions with regard to increased revenue mobilisation and concessional external financing are satisfied," the bank said.

Acceleration in policy reforms would be critical for achieving the projected increase in net foreign financing from 2.3 percent of GDP in FY03 to 2.8 percent in FY04.