Organised by Centre for Policy Dialogue (CPD) the media briefing was held at CPD Office, on Saturday, 25 January 2014.
For all press reports published on Sunday, 26 January 2014, click here [pdf ~8.0 MB]
For all editorials published on Monday, 27 January 2014, click here [pdf ~751 KB]
Editorials
Published in Dhaka Tribune
Dialogue essential for economic recovery
The political disputes which gave rise to violence must be resolved urgently
Tribune Editorial
In its review of Bangladesh’s macroeconomic performance, the Centre for Policy Dialogue estimates losses incurred by four key sectors due to recent hartals and blockades to amount to Tk49,018 crore. While some of this may be recouped, if left unrecovered, the sums lost amount to 4.7% of GDP.
This analysis supports the lower range of estimates projected by the World Bank’s recent report on Global Economic Prospects, which forecasts Bangladesh’s GDP growth for the current year to be 5.7%. The IMF and Bangladesh Bank have also forecast rates in the range between 5.5% and 6%.
These figures contrast with the finance minister’s view that growth will remain above 6% this year.
We welcome the compensatory measures which the government has been supporting to help offset losses suffered by export-oriented sectors. However other large sectors, notably agriculture and small and medium businesses still need more help to get back on their feet. The government needs to take more action to help all parts of the economy to recover.
In the long run, it is the opportunity costs inflicted by the political crisis which have the most negative impact. Flows of investment and the implementation of development projects have been slowed down and businesses are deterred from creating new jobs.
The government must work urgently to resolve the political disputes which gave rise to the violence. Renewed dialogue is essential to help bring the certainty and stability which the economy needs to stimulate new investment and allow the country to live up to its potential.
Press Reports
Published in The Daily Star
Economy under strain
CPD says economic growth may go below 6pc as political turmoil battered first half of fiscal year
Staff Correspondent
GDP growth could slide below 6 percent this fiscal year due to the lengthy spell of political turmoil in the first half which put serious strains on the economy.
“There might be some recovery but we will not be able to fully recoup the losses of the last six months,” Prof Mustafizur Rahman, executive director of the Centre for Policy Dialogue (CPD), said yesterday at the unveiling of the think-tank’s review of the macroeconomic performance in the first half of fiscal 2013-14.
CPD expects the economy to grow between 5.6 percent and 5.8 percent should there be no major supply disruption and political turmoil in the next half of fiscal 2013-14.
“It is disquieting to see that GDP growth acceleration, so critical to realising Bangladesh’s ambition of becoming a middle-income country and graduating from the LDC bracket, has been lost in recent years.”
GDP grew by 6 percent in fiscal 2012-13, down from 6.2 percent in fiscal 2011-12 and 6.7 percent in fiscal 2010-11, a record.
Rahman said it would be a “major challenge” to return to the higher growth trajectory seen.
The CPD projection, which is way below the government’s target of 7.2 percent, is in line with the World Bank’s 5.7 percent.
However, Finance Minister AMA Muhith last week said the growth would not be less than 6.3 percent.
Bangladesh has maintained its growth trend in areas of exports and balance of payments, while some indicators including import payments demonstrated signs of recovery, he said.
Concurrently, economic performance of a number of indicators continued to deteriorate in the first half of fiscal 2013-14 including inflation, ADP implementation, remittance inflow and foreign aid utilisation. “Any major breakthrough in the area of private investment is yet to be seen.”
He said the disruption in the last six months “seriously” affected the service and the retail sectors.
CPD Distinguished Fellow Debapriya Bhattacharya said the current government, however, has the leeway to take the economy back to the right track.
“The macroeconomy is enjoying stability, which may not be giving a jump to investment, but the economy is not going through any major ups or downs.”
Although the income is sliding, the budget deficit is “acceptable and within control”, which will give the government room to increase expenditure. “But the government will have to ensure productive expenditure.”
He said the excess $2 billion in the balance of payments would give the government flexibility to raise imports. “As a result, the exchange rate, the rate of interest and the inflation have, to some extent, remained stable.”
Besides, the prices of food, fertiliser and fuel are stable or on the declining trend in the global market. “So, it will not be impossible for the government to utilise the opportunity and take the country forward until the next budget.”
“Maybe, we will not be able to jump to 6 to 7 percent GDP growth, but it will be possible to keep the growth in the region of 5 percent.”
Published in The Daily Star Business
Recipe to bolster economy
CPD says fiscal targets will have to be readjusted as economy was battered by unrest
Star Business Report
The Centre for Policy Dialogue yesterday came up with a host of suggestions for the government to revive the economy battered by months of political turmoil.
The think-tank, which termed the budget surreal when Finance Minister AMA Muhith unveiled it last June, said by the middle of the fiscal year it has become obvious that the fiscal goalposts need substantive readjustment.
It said the size of the annual development programme has to be reduced as the top 10 ministries, which account for 80 percent of the total allocation, have failed to reach their spending target in the first half of fiscal 2013-14.
The issue of ensuring quality of public investment will remain paramount, said Mustafizur Rahman, executive director of CPD, while unveiling an analytical review of Bangladesh’s macroeconomic performance at his office.
Rahman said the government’s borrowing from non-bank sources has already increased. “It will be important to keep bank borrowing within budgetary target.”
Rahman appreciated the government’s emphasis on large infrastructure projects, but cautioned that they might not yield immediate growth impulse.
CPD Distinguished Fellow Debapriya Bhattacharya said, in simple terms the availability of resources has lessened.
“Tax collection has gone down and the flow of foreign aid has decelerated. Besides, the availability of non-tax resources is also low. As a result, the squeezing of expenditure has become inevitable.”
He said the government would have to reconsider its expenditure priorities such as subsidy, as the country would require a lower level of subsidy this fiscal year. Revising down the subsidy budget would help keep expenditure within the capacity.
Bhattacharya said the government would have to provide all-out support to ensure boro cultivation, particularly timely supply of agriculture inputs and electricity, in order to support the rural economy.
Higher credit growth for the agriculture sector has to be maintained. Besides, the rural people and the businesses that have been affected have to be given support.
“If we cannot revive the rural economy then our economy will become weak in terms of growth.”
The CPD said the government would have to take urgent steps to raise food stocks to the psychological comfort level of one million tonnes, as the current stock fell down to 0.951 million tonnes in December last year, which is 31 percent lower than that of December 2012 and 38 percent lower than that of December 2011.
Bhattacharya said the industries and the businesses would have to be given support from the government so they can recoup their losses.
The government has already announced a number of supportive policy measures for the private sector in view of its losses. The measures, however, are skewed towards the garment sector.
“The measures are fine. But it would not be economic justice if they only get the support while others are deprived,” he said, adding that agro-based industries, transport, small entrepreneurs and businesses were equally affected.
Bhattacharya said a relatively peaceful situation is prevailing in the country, which will help resume the operation of the industries which were closed or not fully operational.
“If we want to expand the economy, we will have to remove the policy uncertainty.”
The government will have to ensure total transparency and accountability about the mid-term projects being undertaken.
He said the government should hold discussions with social groups and organisations about major infrastructure projects, as initiatives such as river training and land acquisition will displace many people.
“Discussions will have to be held with the entrepreneurs and the businesses. Above all, the government will have to sit with the political rivals. If we do not do so, the uncertainty over major projects might persist in the longer run.”
He said if any question over the durability of the government prevails then it would affect the investment climate.
“The uncertainty over political arena might not vanish completely until an all-inclusive, fair and transparent election is held. If the political uncertainty lingers then there will be confusion about long-term investment.”
He also called for expanding the network of the social safety net programmes. “But we have to ensure efficient uses of resources and check leakage.”
The CPD said the non-performing loan, which stood at 12.8 percent in September last year, was a matter of concern for the financial sector and warrants special attention from policymakers.
Citing recent scams in the banking sector, the research organisation said the central bank recapitalised the state-run commercial banks to the tune of Tk 4,100 crore in 2013 at the expense of taxpayers.
Rahman said the government should set up a special fund for helping affected sectors in the forms of incentives instead of imposing the burden on the banking sector.
CPD Research Director Fahmida Khatun and Additional Research Director Khondaker Golam Moazzem were also present.
Published in The Daily Star Business
Garment factories’ profits erode
CPD analyses impact of shutdowns, blockades on apparel manufacturing
Star Business Report
The average losses incurred by a garment factory due to the most recent spell of shutdowns and blockades would cross $600,000, the Centre for Policy Dialogue said yesterday.
The think-tank came to the inference based on the findings of an impact assessment survey conducted by the Bangladesh Garment Manufacturers and Exporters Association on 42 units between December 1 last year and January 11.
“Whilst no comprehensive damage assessment is available, it is highly conceivable that the sector has suffered significant cost escalation and profit erosion,” the CPD said.
The BGMEA survey found the total loss incurred by the 42 units is $26.1 million.
“In some instances, business deals could not be stuck and orders got cancelled and shifted because of the uncertainties,” the CPD said.
It also said that transportation cost experienced a significant rise during the blockade: the payment for a truck which previously varied between Tk 12,000 and Tk 15,000 increased to Tk 45,000 to Tk 60,000.
The exporters were forced to choose the expensive air shipments to meet the deadlines set by the international retailers. Air shipment volumes increased 38.7 percent to 157,000 tonnes during the January-November period of 2013 from a year ago.
Currently, the number of active woven garment factories in the country will cross 4,000 while the number of active knitwear factories will cross 1,500 while the number of spinning mills is 395, according to textile and garment-related trade bodies.
Published in The Daily Star Business
Political turmoil costs four sectors Tk 49,000cr: CPD
Star Business Report
Nationwide shutdowns and blockades in the last six months have cost transport, garment, agriculture and tourism sectors a combined Tk 49,017 crore, the Centre for Policy Dialogue said yesterday.
The loss is equivalent to 4.7 percent of the gross domestic product (GDP) of fiscal 2012-13, said CPD Distinguished Fellow Debapriya Bhattacharya at the launch of the think tank’s Analytical Review of Bangladesh’s Macroeconomic Performance in FY2013-14 study.
In one of CPD’s earlier studies, it was estimated that 1 percent loss of the country’s capital stock leads to 0.9 percent loss of GDP.
“We still maintain the stance.”
He said the CPD came to the conclusion following an assessment of the magnitude of economic loss caused by the political turmoil through a meticulous study of the news reports published in the print media.
The study focused on four major sectors such as export-oriented clothing and textiles, agriculture and agro-based industries (vegetables, agro processors, poultry, frozen food, agro machineries, jute), land transport (rail and road) and tourism.
The reported losses included loss of assets, operational and income person-days of work, Bhattacharya said.
“However, one needs to be mindful that this loss does not represent the loss of value addition. The present exercise attempted to estimate the monetary value of the foregone capital and income for these four sectors,” he said.
The estimate shows that due to the 55 days shutdowns and blockades from July to December 2013, land transport incurred the highest amount of loss, amounting to Tk 16,688 crore, followed by agriculture and agro-based industries Tk 15,829 crore, clothing and textiles sector Tk 13,750 crore and tourism sector Tk 2,750 crore sector.
The CPD study left out small production and businesses despite being hit hard by the opposition-enforced shutdowns and blockades, as the think tank could not collect sufficient data to capture the losses they encountered.
“We think that the small businesses have been affected seriously. Had we managed enough data we would have seen that the sector topped out list,” Bhattacharya added.
The economist said the study would help policymakers identify the sectors which have suffered the most should they decide to compensate them.
Published in The Daily Star Business
Battle for higher GDP growth to dominate monetary policy
BB to announce tomorrow its stance for January-June
Rejaul Karim Byron
The central bank will face two daunting challenges — maintaining a healthy GDP growth and containing inflation — in its new monetary policy to be announced tomorrow for the second half of the current fiscal year.
In the face of severe political violence throughout the first half, the government has already decided to revise down the growth target to 6.3 percent. In this backdrop, economists said Bangladesh Bank will have to take a cautious stance and focus more on growth rather than inflation.
The government at the beginning of the current fiscal year had set the economic growth target at 7.2 percent though the central bank and development partners projected the rate to be between 5.5 percent and 6 percent due to political turmoil and low investment.
Bangladesh’s economy suffered a loss of Tk 49,000 crore or 4.7 percent of gross domestic product (GDP) due to political turmoil in the last six months, according to estimates by Centre for Policy Dialogue.
The central bank in its monetary policy announced in July last year projected that the private sector credit growth would be 15.5 percent by the yearend. But the growth till November last year was 11.13 percent, down from 11.04 percent in June.
On the other hand, inflation has been rising gradually in recent months. The rate went up 0.02 percentage point in December, on an average, over the previous month and stood at 7.53 percent.
CPD’s Executive Director Mustafizur Rahman said the next monetary policy should lay more emphasis on growth rather than stability as the fundamentals of the economy are more or less stable.
He said, though there was slight inflationary pressure on the economy it would not be wise to adopt a contractionary policy. He said there is nothing to worry if import in the balance of payments (BoP) increases slightly to stimulate growth.
He also said the central bank may lower some policy rates which will create pressure on the banks to cut lending rates.
Rahman, however, said the central bank should remain alert so that the local currency does not appreciate further.
The stimulus packages for the garment sector should be designed in such a way that benefits both small and big factories equally, he said.
While allowing the private sector to borrow from foreign sources, the BB should look into the maturity period and interest rate on the loan so that the foreign exchange reserves do not feel extensive pressure during repayment, the CPD executive director said.
Zahid Hussain, lead economist at World Bank’s Dhaka office, said the near term outlook is lower growth and somewhat higher inflation due to supply side disruptions caused by prolonged political agitation and violence.
A cautious monetary policy stance is warranted under this outlook. Reserve and broad money growth will have to remain restrai-ned and in line with projected nominal GDP growth rate, Hussain said.
He said exchange rate may come under depreciation pressure when earnings from exports begin to slow and if remittance decline experienced in the first half is not reversed, he said.
Foreign exchange market intervention should be used to ensure orderly depreciation if such pressure arises. Greater exchange rate flexibility than allowed of late is warranted. Sterilisation should be used to avoid excessive monetary tightening if reserve buffers are used to smooth exchange rate volatility, Hussain said.
Revenue growth of the National Board of Revenue has slowed to around 14.5 percent through November. Excess liquidity in banks provides room for financing the cash flow shortages the government may be facing as a result of the growing revenue shortfall, notwithstanding the shortfall in ADP expenditures as well.
Published in New Age
Economy loses Tk 49,017cr due to political violence: CPD
GDP will grow by 5.6-5.8pc in FY14
Staff Correspondent
Four major economic sectors of the country in the first half of the current fiscal year incurred losses of Tk 49,017.92 crore, which is 4.7 per cent of the GDP of the last fiscal year, due to political violence, Centre for Policy Dialogue said on Saturday.
The independent think-tank said transportation (rail and road), agriculture and agro-based industries, export-oriented clothing and textiles and tourism incurred the losses during 55 days of hartals and blockades from July 2013 to January 2014 enforced by the opposition political alliance during the run-up to the national polls held on January 5.
It also projected that the country’s economy would grow by 5.6 per cent-5.8 per cent in the current FY 2013-2014 as some key economic indicators including revenue collection, public expenditure, private sector investment, annual development programme implementation and control in inflation would fall behind the targets.
‘The gross domestic product in the FY 2014 will be between 5.6 per cent to 5.8 per cent as there will be no major supply-side disruption and uncertainty in the rest of fiscal year,’ CPD said in its analytical review of Bangladesh macroeconomic performance in the FY 2014 (second reading) released on Saturday.
According to the CPD estimates made by the think-tank analysing media reports, transportation (rail and road) incurred the highest amount of loss with Tk 16,688.65 crore followed by agriculture and agro-based industries with Tk 15,829 crore, readymade garment sector with Tk 13,750 crore and tourism sector with Tk 2,750 crore.
The local think-tank also said that it could not acquire enough data to calculate losses incurred by the small-scale domestic market-oriented industries and businesses though the sectors were hit hard.
Referring to its earlier studies, the CPD said that one per cent loss of the country’s capital assets leads to 0.9 per cent loss of GDP.
The CPD said that the budget for the FY 2014 needed to be revised due to a continued deterioration in performance of some of the major economic indicators including revenue earnings, ADP implementation, remittance inflow and foreign aid utilisation in the first half of the fiscal year.
In its review, the research organisation observed that the GDP acceleration, so critical to realising its ambition of becoming a middle income country, appeared to be lost in recent years.
CPD distinguished fellow Debapriya Bhattacharya at a briefing said considering the economic damages during the first half of the fiscal year, the CPD advised to adopt some policy measures including restructuring the fiscal framework, support to boro harvest and rural economy, compensatory measures for the affected sectors and ensuring policy predictability for attracting investment.
The briefing was organised at the CPD office in the city on the occasion of the release of the review report.
Debapriya said, ‘The government should prioritise the development projects which would accelerate the demand for investment in the economy.’
The government has also some advantages proceeding from positive trend in export earnings, balance of payment and stability in the international markets, but proper utilisation of these advantages will depend on political stability in the country, he said.
CPD executive director Mustafizur Rahman said, ‘The government should compensate small industries and rural economy-based sectors along with big export-oriented industries such as RMG to offset the losses they have incurred during political violence.’
The government should implement the scheme taking fund from alternative sources instead of bank borrowing to avoid additional pressure on the banking sector, he said.
The CPD projected a lower production of boro rice and suggested that the government should ensure continuous electricity supply during irrigation, adequate diesel and fertiliser supply in timely manner to ensure a positive growth in boro production.
It also said that ensuring adequate food stocks would be a challenge for the rest of the fiscal year as the stock declined to 9.51 lakh tonnes against the standard level of 10 lakh tonnes.
The National Board of Revenue will fall short of the revenue collection target by Tk 18,000-Tk 20,000 crore in the current fiscal year, the CPD forecasted.
It also predicted that the government would also not be able to spend its targeted expenditure in the FY 2014 due to low ADP implementation, lower foreign aid financing and failure in revenue mobilisation.
Published in New Age
CPD sees no political stability without inclusive polls
Staff Correspondent
The Centre for Policy Dialogue on Saturday said that political uncertainty was unlikely to end completely unless there was an inclusive and acceptable election.
A prolonged political uncertainly would continue to affect investment and in such a situation, the acceptability and duration of any government would remain questionable, it said.
The CPD, an independent think-tank, stressed the need for dialogue between the government and opposition political parties along with other players outside the ruling quarters for smooth implementation of development projects and bringing back confidence of investors and entrepreneurs.
‘It seems political uncertainly would not be completely over unless an inclusive, fair and acceptable election takes place,’ CPD fellow Debapriya Bhattacharya told reporters at a briefing organised to release its analytical review of Bangladesh macroeconomic performance in FY 2014 (second reading).
Investors would remain doubtful about investment if policy predictability was not ensured, he said.
Debapriya said that an effective and morally strong government was needed for restoring political stability and overall democratic development and fulfilling the aspirations of the people.
According to the CPD study, road and railway transportation, agriculture and agro-based industries, export-oriented clothing and textiles and tourism had incurred a loss of Tk 49,017.92 crore which was equivalent to 4.7 per cent of the GDP of last fiscal year due to political violence centring the national elections in the first half of the current fiscal year.
The CPD termed the current political environment a ‘ceasefire’ between contending political camps. ‘Such a situation may restore the operational efficiency of economic capacities but will not be enough to induce expansion of capacities to attain a higher economic growth, new investment and more employment,’ Debapriya said.
Adopting policy decision and its implementation would face problems if the uncertainly continued, he said.
Dialogue with local communities, policy-oriented civil society, private sector and political opposition was important in taking policy decisions and its implementation, he said.
Without greater predictability on the political front, a significant upturn of private investment – both local and foreign – could not be expected, the CPD said.
Creation of more democratic space for the ‘non-state actors’ might have positive influence on energising economic activities, it said.
CPD executive director Mustafizur Rahman said they expected such political consensus which would help the economy grow.
Published in Dhaka Tribune
Political violence causes Tk49,000cr loss: CPD
Tribune Report
Considering the losses, the Gross Domestic Product is apprehended to moderate at a range between 5.6% and 5.8% this fiscal year
The losses due to recent hartals and blockades in four sectors would be Tk49,018 crore, which is 4.7% of the GDP of the last fiscal, says an independent estimate released in Dhaka yesterday.
Considering the losses, the Gross Domestic Product is apprehended to moderate at a range between 5.6% and 5.8% this fiscal year.
The damages in terms of money were calculated taking into consideration 55 hartals and blockades enforced between July 2013 and January 2014 – before and after the general election held on January 5.
The land transport (rail and road) sector incurred losses of Tk16,689 crore, highest among the four sectors as estimated by Center for Policy Dialogue (CPD).
It was followed by agriculture and agro-based industries that faced losses of Tk15,829 crore, clothing and textiles Tk13,750 crore and tourism Tk2,750 crore.
The civil society think tank released the report based on partial and uncorroborated estimates at a press briefing on Analytical Review of Bangladesh’s Macroeconomic Performance in Fiscal Year 2014 at its office.
“We need to be mindful that the estimated loss does not indicate net loss as some of the losses are recouped through various adjustment measures overtime,” stated the report. “However, they do provide some insights about the magnitude of the incurred losses during the recent spate of political violence.”
The research organisation scanned print media to generate an assessment about the magnitude of the political violence related to economic losses.
“There will be no major supply side disruption and uncertainty arising out of political turmoil over the rest of fiscal year,” said the report, defending CPD’s economic growth projection.
In a sharp contrast, Finance Minister AMA Muhith projected this fiscal’s GDP to be not less than 6.3%, much lower than the target of 7.2% while Bangladesh Bank estimated it to be between 5.7% and 6%, International Monetary Fund 5.5%, the World Bank 5.7% and Asian Development Bank 5.8%.
“The possible slowdown would be due to rising concerns in terms of macroeconomic stability,” said Mustafizur Rahman, CPD executive director.
He said a number of indicators like inflation, ADP implementation, remittance inflow, investment and foreign aid utilisation continued to deteriorate in the first half of FY14. “Most of the macroeconomic correlates showed either disquieting or stagnating trends as the economy suffered from political volatility.”
To stimulate the growth, he recommended a package of policy measures – restructuring the fiscal framework, support to Boro harvest and rural economy, compensatory measures for the affected sectors and ensuring policy predictability.
The government has so far taken initiatives like cash subsidy, loan rescheduling and reduction of tax at source to offset the losses suffered by the export-oriented sectors.
“But the most important agro sector and small and medium businesses that were equally affected due to the political violence is yet to receive any package,” said CPD Distinguished Fellow Debapriya Bhattacharya.
The currently plasticised “seize fire” or “peace clause” approach by the contending political camps is useful and might restore the operational efficiency of the economic capacities, but will not be enough to induce expansion of capacities to attain a higher economic growth and more gainful employment, he said.
“The long-term investment prospect will remain uncertain as long as credible, fair and participatory election is not held.”
Without greater predictability in the political front, he said one may not expect any significant upturn of private investment both local and foreign in the country. “Creation of more democratic space for the non-state actors may have positive influence on energising the economic activities.”
Published in The Financial Express
Political stability needed to attract investments
CPD estimates political unrest related losses at Tk 490b
FE Report
The private think-tank Centre for Policy Dialogue (CPD) said Saturday a conducive political environment aiding democratic governance was needed for taking the level of investments to a higher plane.
“Although various economic factors might contribute to the emergent scenario, it is the political factor which appeared to be the critically important determinant,” said the CPD in the second edition of its review report on Bangladesh’s Macroeconomic Performance released on the day.
CPD executive director Professor Mustafizur Rahman and distinguished fellow Dr Debapriya Bhattacharya briefed the media Saturday on the review report.
Private and public investments in the country had been severely affected by the political impasse over the last few months as registration of investment proposals from local enterprises declined by 27 per cent and those from foreign entrepreneurs fell by 10 per cent during the last calendar year (CY).
Dr Debapriya said until or unless a free, fair and participatory national election was held, the political uncertainty would linger and would affect long-term investments.
“Discussions with all groups outside the government and the major political party are imperative to rebuild business confidence and restore operational efficiency of economic capabilities,” he said.
CPD executive director Prof Mustafiz suggested rebuilding the image of the country for attracting more investments and laying emphasis on allocation of higher funds to priority projects for the sake of quality public expenditure.
The local think-tank in the report has forecasted that the growth in Gross Domestic Product (GDP) will range from 5.6 to 5.8 per cent in the current fiscal year (FY) due to the political turmoil during the past few months.
“In view of available information on various sectors and assuming that there will be no major supply-side disruption and uncertainty arising out of political turmoil during the remaining part of the FY 2014, it is likely that the GDP growth rate in the FY 2014 will be between 5.6-5.8 per cent,” said the CPD analysis.
“Bangladesh has lost its momentum to move to the higher growth trajectory following a record 6.7 per cent GDP growth in 2010-11. So, it will be a major challenge for the government to return to such a higher growth rate,” Prof Mustafizur said.
The CPD in its macroeconomic review suggested four things — restructuring the fiscal framework, support to Boro farming and rural economy, compensatory measures for the affected sectors and ensuring policy predictability to achieve the economic growth.
Dr Bhattacharya said the government should not support only the ready-made garment sector, it should provide some fiscal benefits to the small and agriculture sector which was also broadly affected by the political turmoil.
“The RMG owners can raise their voice. So they can obtain the fiscal benefit from the government. The small industries and sub-sectors in the rural economy which couldn’t raise their voice but were affected severely by the recent political violence should be taken into consideration by the government immediately,” he added.
He also said there was a big gap in vegetable prices between the growers’ level and the retail level and suggested restoration of the interest of farmers by providing agricultural credit on easy terms and conditions on an urgent basis.
The CPD distinguished fellow said agricultural activities and agro-based industries were worst-affected areas during the political turmoil in the last few months followed by the transport and export-oriented manufacturing sectors.
Quoting the CPD’s macroeconomic review, Professor Mustafizur Rahman said some of the strong areas including export earnings and balance of payments (BoP) saw a good trend in the first half of the current fiscal while some of the other areas including import payment showed signs of recovery.
“Economic performance of a number of indicators continued to deteriorate in the first half of the FY 2014 including inflation, ADP (Annual Development Programme) implementation, remittance inflow and foreign aid utilisation,” he said.
The analysis for the first half of the current fiscal also confirmed that the economy in the FY 2014 did not manage to make any significant shift from arrested growth towards a higher growth trajectory, Prof Mustafiz said.
The CPD has cautioned the government about lower food stocks in the country. The stock in December 2013 was 0.951 million tonnes, 31 per cent lower than that in December 2012 and 38 per cent down from that in December 2011.
The local think-tank has seen the soaring volume of non-performing loans with the commercial banks, downward capital adequacy, high excess liquidity and the low private sector credit growth as bad indicators of the economy.
It said excess liquidity in the banks has risen by 73.8 percent at the end of November 2013 over the corresponding period of November 2012; however, in case of DFIs a negative growth is observed for the same period as regards excess liquidity situation.
“Low private sector demand for credit due to political uncertainties and also the ceiling imposed on banks’ investment in the share market by Bangladesh Bank have contributed to high liquidity in the banking system. Though credit to the public sector has increased by 15.56 percent in November 2013 compared to 8.9 percent in Fy2012, credit to the private sector in creased by 11 percent as of November 2013 as opposed to the target of 16.5 percent for FY2014,” the report said.
Lower credit to the private sector is a reflection of low appetite on the part of the private sector which is the result of both recent political turmoil and long standing problems of weak infrastructure and other bottlenecks, the CPD report said.
The CPD, however, sees an impressive performance in the area of export earnings. The growth in shipment of Bangladeshi products might be static in near future as the external demand was increasing due to the economic rebounding in the US and in the European countries.
The CPD finds the level of private and public sector investments poor and suggested rebuilding the country’s image for attracting investors and laying emphasis on high priority projects in the area of infrastructure development.
It also recommended restructuring the government’s fiscal income and expenditure in the current fiscal as the revenue collection recorded a shortfall of Tk 85 billion in the July-November period from the actual target and the net foreign aid inflow to the country was lower.
Prof Mustafizur Rahman found the negative remittance growth as the big challenge for the economy, as it usually helps boost consumption in the rural economy.
The rural economy which was the worst affected area during the last political turmoil across the country should have been in more focus of the government so that it could recoup the losses, he said adding the current Boro crop farming should be given the highest priority.
Dr Debapriya said: “The macro-economy is enjoying stability, as there are no major ups or downs in the economy. The budget deficit is acceptable and within the control, which will give the opportunity to increase expenditure. But we will have to ensure quality expenditure.”
“The surplus US$ 2.0 billion in the current account balance will give the opportunity to the government to raise imports. The exchange rate is stable and the prices of food, fertiliser and fuel are stable or on the declining trend in the global market.”
So, it would not be impossible for the government to utilise the opportunity and take the country forward until the next budget, he said.
The economist called for a rethink on subsidy spending so that the expenditure remains within control.
Dr Debapriya said it was important to expand the social safety net programmes. “But we have to ensure efficient use of resources and check leakage.”
The CPD in its review has estimated the losses caused by the political turmoil in some major areas of the economy. The total loss is estimated at Tk 490.18 billion which is equivalent to 4.7 per cent of the GDP.
The land transport sub-sector incurred the highest loss of Tk 166.88 billion, followed by the agriculture and agro-based industries with Tk 158.29 billion, export-oriented clothing and textile sector Tk 137.50 billion and the tourism sector Tk 27.50 billion, it said.
Published in The Independent
Tk 49k crore lost in 6-month unrest
CPD projects 5.6-5.8pc growth rate
Bangladesh has suffered severe economic losses and distress from July 2013 to January 2014 as a result of political strikes and blockades, Centre for Policy Dialogue, a civil society think tank, said on Saturday.
The total losses during this 6-month period are estimated at Tk. 49,017.92 crore, an amount which is equivalent to 4.7 per cent of the gross domestic product (GDP) (FY2012-13), it revealed at a media briefing at the CPD office, organised to release the report titled ‘Analytical Review of Bangladesh’s Macroeconomic Performance in FY2013-14 (Second Reading)’ at the CPD hall at Dhanmondi. The think tank also predicted that the country’s GDP growth rate would be from 5.6 to 5.8 per cent in the 2013-2014 fiscal year if there is no political uncertainty and major supply-side disruption in the remaining period of this fiscal.
About this loss due to blockades and political strikes, Dr Debapriya Bhattacharya, distinguished fellow of CPD, said, “The government has good scope to make sure the economy recovers within the next six months. Also, a number of external factors is in favour of the government.”
“The exchange rate of the BDT against the USD is stable, underwritten by surpluses in both the current account balance and the overall balance. International prices of food, fertilisers and fuel are either showing a declining trend or are stable, while the global outlook in 2014 anticipates stronger economic growth,” he added.
Dr Debapriya Bhattacharya said the government will have to pay attention to the rural economy as well as place emphasis on the boro harvest to ensure buffer food stocks. He further said policy uncertainties have to be removed and transparency ensured.
Dr Bhattacharya also recommended that the political feud be defused to ensure an investment-friendly environment.
According to the CPD, an important sector that has been hit hard is the small production and business sector. “Regrettably, we could not acquire sufficient data to capture losses suffered by these sectors,” he said.
According to CPD data, the estimate shows that due to 55 days of strikes and blockades, among the four sectors reviewed, the land transport (rail and road) sub-sector incurred the highest amount of loss (Tk. 16,688.65 crore), followed by the agriculture and agro-based industries (Tk. 15,829 crore), export-oriented clothing and textiles (Tk. 13,750 crore) and tourism (Tk. 2,750 crore) sectors.
While there is a lot of casual discussion about the economic losses incurred by the country as a result of political violence, there is hardly any rigorous and reliable estimate of such losses, CPD observed.
In one of its earlier studies, CPD had estimated that a 1 per cent loss in the country’s capital stock leads to a 0.9 per cent loss in the GDP.
With a view to generating an assessment of the magnitude of the economic losses related to political violence, a meticulous scan of the print media was undertaken to collate the reported numbers, the CPD added.
The focus of the media scan was on four major sectors, namely export-oriented clothing and textiles, agriculture and agro-based industries (vegetables, agro processing, poultry, frozen food, agro machinery, jute etc.), land transport (rail and road) and tourism, Dr Debapriya Bhattacharya explained.
“The reported losses included loss of assets (stock), operational flows and income flows (person-days of work). However, one needs to be mindful that these losses do not represent the loss of value addition.”
The present exercise attempted to estimate the monetary value of the capital and income for these four sectors that was lost or foregone.
While the CPD acknowledged that the estimated figure was partial and uncorroborated, Bangladesh has to be mindful that the estimated losses do not indicate net loss, as some of the losses are recouped through various adjustment measures over time, the CPD also said.
However, they do provide some insights into the magnitude and sectoral concentration of the losses incurred during the recent spate of political violence, it noted.
The CPD said the vegetable sector has experienced significant adverse impact as a result of the recent political turmoil.
The CPD also said an incentive package is required on an urgent basis for the poultry sector as it has suffered significant losses because of the recent political turmoil. Bangladesh Poultry Industries Co-ordination Committee estimates that the sector has incurred a loss of around Tk. 4,000 crore between October and December 2013. In addition, around 36,000 poultry farms have been closed due to lack of capital and feed. Estimates carried out by the committee show the losses of the poultry feed manufacturing industry to be around Tk. 1,000 crore, losses of the breeders of day-old chicks to be around Tk. 382 crore, losses of the egg producers to be around Tk. 630 crore, losses of commercial poultry or chicken producers to be around Tk. 975 crore and loss of producers and suppliers of medicines to be about Tk. 158 crore.
Results of the regression analysis indicate that a democratic system with political competition is one of the prerequisites for ensuring higher levels of investment in Bangladesh.
The CPD further said the confrontational politics in FY2013 and in the first half of FY2014 has severely affected the manufacturing sector of Bangladesh in terms of production, investment, sales and employment, both related to domestic as well as export market-oriented industries.
Barring a few large sectors, the majority of the manufacturing sectors have been severely affected because of this. The impact was more acute for domestic market-oriented industries, particularly for the small-scale industries.
Though various economic factors might have contributed to the scenario, it was the political factors which appeared to be the critically important determinant, the CPD said, adding, “A conducive political environment, underpinned by democratic governance, was needed for taking investment to a higher plane.”
About the projection of GDP growth rate, CPD executive director Prof. Dr Mustafizur Rahman said in his presentation, “In view of available information on various sectors and assuming that there will be no major supply-side disruption and uncertainty (arising out of political turmoil) over the rest of FY 2014, it is likely that the GDP growth rate in FY 2014 will be between 5.6-5.8% for FY 14.” In his presentation, Prof. Mustafizur Rahman said it is disquieting to see that the GDP growth acceleration, so critical to realising Bangladesh’s ambition of becoming a middle income country and graduating from less developed country (LDC) status, appears to have been lost in recent years.
At the same time, one also needs to keep in mind that the GDP growth estimate may not fully reflect the losses incurred due to the observed violent political situation during the first half of the fiscal year, he pointed out.
Published in Daily Sun
CPD counts GDP growth down to maximum 5.8pc
Staff Correspondent
After the World Bank (WB) had lowered its forecast for economic growth this fiscal, the Centre for Policy Dialogue (CPD) Saturday came up with almost same growth forecast at maximum 5.8 percent in the context of the months-long political turbulence that caused serious setback to economic development.
Citing a prolonged political turmoil over the recent polls, the Centre in its half-yearly macroeconomic review said the country’s economy is likely grow between 5.6 percent and 5.8 percent in 2013-14 FY.
The independent think tank also observed that the economic uncertainty won’t go until a free, fair and inclusive national election is held.
“The investment confidence would remain low if the political uncertainty is not over,” it said.
“Bangladesh has lost its momentum to move to higher growth trajectory following a record 6.7 percent GDP growth in 2010-11. So, it will be a major challenge for the government to return to such higher growth rate,” said Prof Mustafizur Rahman, executive director of the CPD, during a press conference in the capital.
The downward reviews of the GDP growth by the World Bank and the CPD are much lower than the government’s estimate of ‘no less than 6.3 percent’.
Sticking to its previous projection, the World Bank recently reiterated that Bangladesh’s gross domestic product (GDP) growth is likely to slow down to 5.7 percent this fiscal.
Finance Minister AMA Muhith strongly reacted to the WB forecast, saying that the current economic indicators suggest that the growth rate would be no less than 6.3 percent.
The latest prediction by CPD, however, hinges on no major supply disruption and political uncertainty in the next half of the current fiscal year.
According to CPD’s estimate, based on news reports, the country lost 4.7 percent of GDP or some Tk 49,017 crore because of political violence during the first half of the current fiscal year.
Frequent strikes, blockades, and political violence for the last six months have eaten up Tk 16,688 crore from transport sector, Tk 15,829 crore from agriculture and agro-based industrial sector, Tk 13,750 crore from apparel sector, and Tk 2,750 crore from the tourism sector, it said.
At the year-end, revenue collection shortfall could be some Tk 20,000 crore, which could put huge pressure on budget implementation and lead to a higher public borrowing, CPD said in its outlook.
“The apparent calm situation prevailing in the country right now will not be enough to remove the uncertainty among the investors,” Dr Debapriya Bhattacharya, distinguished fellow of CPD, said.
He said putting an end to policy uncertainties would be the key to expanding national economy in the coming days.
“To tackle the situation, the government will have to restructure fiscal targets, downsize the ADP, extend support to boro harvest and rural economy, provide compensation to the affected sectors and ensure policy predictability,” CPD Executive Director Mustafizur Rahman said in the press conference.
“By the middle of the current fiscal year, it has become obvious that the fiscal goalposts need substantive readjustment,” he said.
CPD, however, said the country’s macro-economy is enjoying stability, as there are no major ups or downs in the economy.
It said the budget deficit is also acceptable and within the control, which will give the opportunity to increase expenditure, but the government has to ensure “good expenditure.”
Stable or falling prices of food, fertiliser and fuel globally also gives an window of opportunity for the government to streamline the economy in the coming days, observed the CPD.
“So, it will not be impossible for the government to utilise the opportunity and take the country forward until the next budget,” Debapriya Bhattacharya said, also recommending: “At the same time, subsidy cuts and widen social safety net schemes”