Published in New Age on Thursday, 5 June 2014.
Economic woes mount for unrest, uncertainty
Jasim Uddin
The government announces the national budget for the fiscal year 2014-2015 of around today against the backdrop of severe economic constraints in the outgoing fiscal year in which political unrest in the first half and uncertainties in the second half dragged down the key economic indicators.
Weakness and mismanagement of economy and anarchy in the banking system also destabilised the economy in the FY14. According to the latest data, in the current fiscal year, the country’s GDP growth declined further, private sector investment stagnated, revenue collection fell short of the target, ADP implementation limped including insignificant progress in infrastructure development, employment generation suffered and remittance grew negatively.
External sectors of the economy, however, showed somewhat stability as export earnings and foreign loan disbursement grew positively, and foreign currency reserve grew.
Economists and business leaders termed the economy in the outgoing fiscal year unstable and challenging in all aspects due to internal factors such as political unrest and uncertainties, and weakness in the fiscal management.
External factors affected the economy little despite withdrawal of GSP facility for Bangladeshi products in the US market in June last year as global economy remained stable over the year. They said that Bangladesh could not utilise the opportunity of uplifting economic development taking the advantage of political stability in the second half of the fiscal year and stability in prices of essential products in the international markets.
According to the Bangladesh Bureau of Statistics, the economy will grow by 6.1 per cent, 1.1 percentage points lower than the target of 7.2 per cent set by the government for the FY 2013-14. The Centre for Policy Dialogue said that the fiscal framework envisioned for the current fiscal year weakened to a considerable degree as domestic resource mobilisation lost its buoyancy and underperformed, the value for money spent by the government eroded, private sector credit not picked up and dependence on domestic resources in deficit financing rose.
The first half of the current fiscal year saw a significant disruption in production, transportation and service delivery due to political unrest and in the second half, despite the relative respite, uncertainties continued to adversely affect private sector investment, the CPD said in its latest report on the state of the Bangladesh economy.
‘Both the woes undermined the performance of key macroeconomic performance indicators and attainment of medium-term development targets of the economy,’ CPD executive director Mustafizur Rahman said on Sunday. He said that country’s economy suffered due to failing of the internal sectors despite positive trend in the external sectors of the economy. Investors refrained from doing long and medium-term investment because of lack of confidence amid the uncertainties in the political arena, he said.
Former caretaker government adviser Mirza Azizul Islam said that considering all aspects it could be said that the economy in the current fiscal year was not stable and comfortable. ‘Slow growth in the gross domestic product continued in the fiscal year mainly due to a fall in investment,’ he told New Age on Wednesday.
Though the BBS projected that the GDP growth would be at 6.1 per cent in the year but there are questions marks on the estimated growth as the economy experienced severe disruption in the first half that affected both the domestic and export-oriented activities, he said. Slower growth in value-added tax, customs duties and income tax shows that there were weaknesses in the base of growth, he said.
The National Board of Revenue has already fell short of target in revenue collection as it has revised its target downward to Tk 1,25,000 crore from the original target of Tk 1,36,090 crore, he said. Revenue collection may also fall short of the revised target by at least Tk 5,000 crore, he said. According to the latest data, the NBR in the first 10 months of the fiscal year managed to collect Tk 90,704 crore. The board will now need to collect Tk 34,296.82 crore in the last two months of the fiscal year to achieve the revised full-year target.
Former Bangladesh Bank governor Salehuddin Ahmed said that the country could not come out from the slow-growth trend because of the stagnation in investment and lower employment generation. ‘Some economic indicators including export earnings and reserve remain in better position but the economy suffered as the year was full of mismanagement in fiscal measures, anarchy in financial and banking sectors and prolonged affects of political instability,’ he said. Exporters Association of Bangladesh president Abdus Salam Murshedy said the outgoing fiscal year was very challenging for the businessmen.
‘Businessmen are struggling to survive and to recover the losses they incurred during the political volatility in the year and they could not go for any new investment due to restrained credit facility, exorbitant bank interest rate, lack of gas and power connection and ongoing political uncertainties in the country,’ he said. Salam, also a former president of Bangladesh Garment Manufacturers and Exporters Association, said that though growth in export earnings was good but that did not tell the whole story.
Growth in investment nosedived and substandard loans in banks increased. On the other hand, the amount of idle money skyrocketed. According to the Implementation Monitoring and Evaluation Division, the ADP implementation status remained dismally low as only 55 per cent of the revised ADP was implemented in the first 10 months of the fiscal year. Export earnings also saw a comparatively better performance in July-April of the fiscal year as it grew by 13.2 per cent in the period compared with that of the same period of the previous fiscal year.
According to the Bangladesh Bank data, overall balance of payments experienced a substantial surplus as it stood at $3,885 million in the July-March period. Revenue earnings by the NBR fell short of the target by more than Tk 3,070 in the July-April period. Despite the upward trend in the last four months, the inflow of remittance in the first 11 months of the FY14 decreased by 3.54 per cent to $12.92 billion from $13.40 billion in the corresponding period of the FY13. The country’s overall point-to-point inflation stood to 7.46 per cent in April against the target of 7 per cent for the year.