"There has been good progress in several areas of macroeconomic and sector reforms. However, one of the affecting factors which may have negative impact on economy next year will be the law and order situation," he told a press briefing at his office.

He said taking the GDP growth to seven percent from the present level was essential for Bangladesh to cut poverty.

The main focus of the ADB operations in Bangladesh in 2003 was on improving key infrastructures and human development, with greater attention to addressing poverty and governance issue, he said.

Referring to the macroeconomic situation, he said inflation continued to rise and hit 5.6 percent in September. As the country is expecting good harvests, the trend is likely to be moderate, he added.

"The Aus crop was good and the prospect of Aman, the second largest crop, is promising. The GDP growth rate in FY2004 is expected to rise to 5.7 percent, up from 5.3 percent in FY2003 as both domestic and external demands recover," he added.

Exports rebounded to 10.4 percent growth during July-October period of the fiscal year while imports rose by 21.8 percent compared to the same period of FY03, he said.

Imports of industrial raw materials and capital goods showed notable growth, he said, adding it augured well for increased domestic industrial activity.

"The taka has been successfully floated and the government has embarked on an ambitious programme to overhaul the banking sector, which includes giving greater autonomy to the central bank and strengthening the banking system," he said.

Referring to ADB's future initiatives, he said the country strategy and programme (CSP) update for 2004-06 envisaged an annual average lending level of $402 million to Bangladesh for the next three years.

It exceeds the $391 million a year programmed in the last CSP update for 2000-05.

The proposed lending programme consists of 17 projects totaling $1.2 billion over the three-year period, comprising $690 million from ADB's Asian Development Fund and $515 million from its ordinary capital resources, he added.

Shibuichi said a record high lending level of $532 million by the ADB in 2003 for Bangladesh included the participatory livestock development project, power sector development programme, primary education development programme and road network improvement and maintenance project.

"The newly approved power sector development programme will help Bangladesh continue its power sector reforms and improve the quality of electricity supply through a loan package totalling $286 million."

The ADB has started preparing a new CSP for Bangladesh, he said, adding the major challenge for 2004 would be to prepare the CSP in a consultative process in parallel with the government's preparation of a full-blown poverty reduction strategy.

The last CSP for Bangladesh was prepared in 1999.

ADB economist Rezaul K Khan and senior officials were present at the briefing.