Published in The Business Post on Sunday 14 June 2020
100pc pvt investment growth estimated glossing over coronavirus: Experts
Prospect of increasing private investment by 100 percent in the proposed budget for the fiscal year 2020-21 looks totally bleak as the estimation glossed over the local as well as international health-economic crisis.
Experts term Finance Minister AHM Mustafa Kamal’s projection of double growth in this sector a castle in the air as private sector investment rose merely by 6 percent in the last ten years when there was no coronavirus and no lockdown.
Such injudicious and inflated projection exposes the incapacity of the budgeting process. Moreover, if private investment target fails, other targets of the budget will falter too; and the questions over the sources of income are not clear, the experts opined.
A scrutiny of the budget speech reveals that in 2010-11 fiscal year the ratio of Gross Domestic Products and private investment was 22:16 and the ratio rose to 23 to 54 in 2018-19, registering 6.22 percent growth. In the outgoing fiscal, the target was fixed at 24.2 only to be halved to 12.72 percent due to coronavirus pandemic. Now the experts are giving an askance look at the finance minister who is eyeing GDP-private investment ratio of 25.3 percent in the next fiscal— a100 percent growth in private investment.
Distinguished Fellow of the Centre for Policy Dialogue (CPD) Professor Mustafizur Rahman said investment target is not fixed taking the reality on the ground into account. Within a space of one year into an international health-economic crisis, how can investment be doubled? It is rather the fault in the expertise of the budgeting process. Without achievement of investment target, the aim of creating jobs, target of poverty alleviation and on top of all growth will be dwarfed.
As per the government target, the GDP size will stand at Tk 28 lakh 5 thousand and 700 crore. Of this, the contribution of private investment will be 12.72 percent or Tk 3 lakh 56 thousand and 885 crore. As per the feisty finance minister’s budget speech, at a growth rate of 8.2 percent, the total GDP outlay reaches Tk 31 lakh 71 thousand and 800 crore. Of the GDP bulk, private investment’s pie will be 25.3 percent or Tk 8 lakh 2 thousand and 365 crore that signifies new investment will crawl up to Tk 4 lakh 45 thousand and 480 crore which is two times more than the current fiscal year’s about.
Executive Director of South Asian Network on Economic Modelling Professor Selim Raihan said, “The target of both growth and investment in the next budget is unrealistic. In no way it can be implemented. Glossing over the global crisis government has fixed this target whimsically.”
The banking sector accounts for a major source of private sector investment but coronavirus has corroded the capacity of the commercial banks with dwindling income. Their income is decreasing instead of increasing, prompting them to cut their workforces and their salaries too. By this time, the government will take Tk 85 thousand crore and this same source will be exhausted providing Tk 1 lakh 3 thousand crore for the stimulus package announced to soften the blow of coronavirus, he added.
According to Bangladesh Bank, till April the total surplus liquidity in the banks was Tk 1 lakh 13 thousand crore; most of this amount lies invested in bill and bond.
Moreover, demand has dwindled drastically in local and international markets due to deadly disease Covid-19. Most of the banks are not in a position to disburse loan and loan disbursement in April has registered the lowest growth to 8.82 within living memory. To attain the investment target, banks need to disburse loan at a rate of 17 to 18 percent when they themselves are looking for policy concession and borrow from Bangladesh Bank. And these financial farms will be drained financially enough to fail in funding the private sector afresh.
Centre for Policy Dialogue Executive Director Dr Fahmida Khatun said budgeting is done in such a carefree way that coronavirus scare will be no more whereas no one knows when will the health-economic crisis will disappear. Just glossing over the pandemic, some targets are fixed and in some cases such as private investment, the target is doubled. So, the possibility of getting a loan from banks on the part of the private sector is bleak; and dependence on banks both to implement the budget and recover the economy is not pragmatic as banks are already drained financially due to a range of policies. Coronavirus is complicating their crisis denting the already debilitated banking sector with liquidity crisis which will affect extensively almost all the sectors.