The government should focus on the overall stability of the country's economy instead of setting big gross domestic product (GDP) growth targets in the upcoming national budget, said the Centre for Policy Dialogue (CPD).
“Bangladesh’s economy has not recovered from the crisis that started during the Covid period and stretched further by the Ukraine war. As the external sector crises became visible, the non-domestic sector fragilities that have existed for decades have also created various challenges in the economy,” CPD Research Director Dr Khondker Golam Moazzem said speaking at an event held at the think tank's office on Sunday (2 June).
“Compared to the previous year, revenue collection, fiscal contraction, government borrowing from the banking system, liquidity pressure in commercial banks, increase in daily commodity prices, foreign transaction pressure and foreign currency reserve crisis have intensified in the current financial year,” he added.
At this time, he also said Bangladesh Bank has taken several initiatives such as lifting the interest rate cap, releasing the exchange rate to the market, and adjusting the prices of oil, gas and electricity on the terms of the International Monetary Fund (IMF), however, not much benefit has yielded from it.
Commenting on the projected GDP growth will be the result of giving some importance to the reforms suggested by the IMF, he said, "Unfortunately, the macroeconomic targets in Bangladesh are always set big."
“Although the target of 7.5% growth in the current financial year has been set, Bangladesh Bank set 6.5% as the target in the monetary policy statement. Projections by global organisations including the Asian Development Bank, the World Bank and the IMF were even lower,” he added.
Dr Khandkar Golam Moazzem also said it would be difficult to achieve the 5.8% growth that the Bangladesh Bureau of Statistics (BBS) has tentatively projected for the current financial year.
“As much as the GDP size and per capita income has increased, a large portion has gone to the rich,” he said, adding inequality is increasing as the real incomes of the poor have decreased due to inflation”.
“Rate of employment growth is slower relative to the growth in the size of GDP, the size of the labour force in the informal sector is increasing,” he further said urging to investigate the reasons for the decrease in the contribution of the manufacturing sector to the industrial growth.
Commenting on the revenue collection in the current fiscal year's budget, Golam Moazzem said, “There was a huge growth of 13% in revenue collection in the first seven months till January, which was negative during the same period in the previous year.”
“Although there is a big growth in this sector, to achieve the target for the whole year, 63% growth must be ensured in the last five months,” he said, saying the big target will not be possible to be meet within the small time frame.
He also said the target set by the IMF for revenue collection will not be met.
According to Dr Moazzem, the reduction of incentives in exports, increase in the price of electricity and fuel, various restrictions on imports, but the government expenditure is not acceptable.
“On the one hand, the bond is being paid for fertiliser import and electricity. Short-term loans are being taken at higher interest and principal repayments. On the other hand, austerity measures are being talked about in the private sector. The government is breaking its own system,” he said, adding the private sector is suffering due to the government's excessive debt from the banking system.
He urged the government to increase the budgetary financial consistency to deal with the existing crisis.
“Emphasis should be placed on curbing tax evasion, digitising the tax structure and curbing money laundering, as well as reducing wastage in expenditure.,” he said.
He also said government officials should not be allowed to buy expensive luxury cars or travel abroad unless it is an absolute necessity.
Corruption can be reduced by making the procurement system more transparent, the economist said.
According to the CPD, the country's economy is now going through a major transition period.
To ensure protection from this pressure, major reform initiatives must be implemented to ensure transparency in every sector, including revenue, financial management, project implementation and government procurement, it added.
CPD has recommended giving special importance to people lagging behind in the upcoming budget.
In this regard, Dr Moazzem said that the allocation for the poor in the social sector should be increased.
"Major government allocation should be ensured in education, social infrastructure and health of the backward people, not just in food distribution," he further said.
