CPD study on FY2015 budget and investors’ insecurity cited

The nation witnessed a phase of extensive political turmoil during the first half of the current fiscal (2013-14) centring around the general election held on January 05 last. The economy suffered badly due to the political turmoil. Estimates done by local and international organisations have forecast growth rates much lower than what the government had projected in the national budget for the fiscal. The ministry of finance, too, has lowered the projection about the growth rate of the economy but not to the extent the others have estimated. Since the January 05 parliamentary election, the political violence has subsided. But many tend to believe that the country has not come out of political ‘uncertainty’ which, according to them, is hurting its economy. One can hardly dismiss such an observation because of the inertia visible in areas of investment, both local and foreign. Banks are in a fix with their excess liquidity. A good number of them have started investing in government securities to ensure a respectable return. Entrepreneurs, old and new, are deeply frustrated by the overall business and investment climate.

While troubled politics has been taking a toll on the economy, a new trouble involving security of individuals and their assets has emerged. The problem appears to be even bigger than the political one. The rising incidence of abductions, killings and disappearances has truly given the citizens a deep sense of insecurity. What has intensified the worries of the people is the alleged involvement of a section of the law enforcers in criminal activities like abduction and killing.

None, probably, would dispute the fact that when individuals’ personal safety comes under threat, they tend to shy away from doing usual things and engage themselves in the bare minimum level of activities for reasons of survival. Potential investors would feel discouraged from putting in their money in any long-term investment for sustained growth of the economy. In the event of a prolonged political uncertainty and state of insecurity, those who have enough resources might also prefer transferring funds abroad or ‘safe havens’ to keeping the same within the country. The economists at the Centre for Policy Dialogue (CPD) at a press briefing, held last Sunday, raised their serious concern about all such issues. They expressed the fear that the sense of insecurity would also affect consumption and savings significantly and pose a major challenge to the financing of the national budget in the next fiscal.

It is the job of the politicians to resolve the politically contentious issues to help the nation overcome problems relating to any kind of political uncertainty – real or perceived. But it remains an equally important job for the government of the day to ensure physical safety and security of individuals and their assets or property. Resolution of major problems in areas of politics, governance and law and order is essential to help boost confidence of the investors in particular. The country badly needs to raise the investment-GDP (gross domestic product) ratio to, at least, 30 to 35 per cent within the shortest possible time to spur growth and help alleviate poverty. It is expected the government would do the needful in such a trying time.