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Press reports on the media briefing on CPD’s recommendations for the National Budget for FY2016, held at Brac Centre Inn on 5 April 2015.
Published in The Financial Express
Turmoil takes 0.5pc toll on country’s GDP
CPD for appropriate fiscal measures in next budget
FE Report
Waves of political violence ate up some 0.5 per cent of country’s gross domestic product (GDP) or an estimated amount of Tk 49 billion from January to mid-March of the current fiscal year, according to estimates done by a private policy think tank.
The Centre for Policy Dialogue (CPD) revealed its study findings based on some major selected sectors like agriculture, poultry, shrimp and frozen foods, apparels, plastic, transport, tourism, banking and insurance, wholesale and retail trading, real estate, education and labour-related fields.
The private think tank suggests the upcoming national budget should address the issue of economic losses through appropriate fiscal and budgetary supports.
The CPD made a set of recommendations, pointing out the key challenges in the upcoming budget for fiscal year (FY) 2015-16, at a press briefing at city’s BRAC Centre Inn Sunday.
In its study titled ‘navigating the troubled waters’, the CPD presented an overall outlook for the upcoming budget in line with the economic trends in the current FY.
Independent Review of Bangladesh’s Development (IRBD) team of CPD conducted the study and prepared the research paper on the economics of confrontational politics.
Towfiqul Islam Khan, research fellow and coordinator of the CDP IRBD 2015 team, presented the keynote at the programme.
Professor Mustafizur Rahman, Executive Director, and Dr Debapriya Bhattacharya, distinguished fellow, and Dr Khondaker Golam Moazzem, additional research director of the CPD, also spoke at the meet.
“A loss of almost half-a-percentage-point equivalent of the GDP, as our preliminary estimates show, is a substantial dent on the economic prospects of the country,” Towfiqul Islam said in the keynote paper.
A total of 81 days blockade and 67 days of strike disrupted supply chains, severed the rural – urban and domestic and international market links, the CPD noted.
Slowdown in remittance flow, falling economic growth in the EU and sluggish demand for Bangladesh RMG products on the US market, significant decrease in export growth and higher appreciation of the taka against the euro have been pointed out as ‘fault line’ appearing in the global economy.
“All this makes the effort to break out from the six-percent GDP-growth trap a more challenging task,” the study report says.
The CPD analysis recommended for the government to address some key areas in the FY 2016 budget. The dos include more regulative efforts towards domestic resource mobilization, invigorating and incentivizing private investment, smooth functioning of the supply chains and removing the obstacles to higher growth of human- resource export.
Implementation of different reform initiatives of the government is not satisfactory, the policy think tank noted and aired the fear that it may cause difficulties in complying with the conditions tagged with the World Bank and the International Monetary Fund (IMF) programmes.
“It is also expected that future direction of economic policies in Bangladesh will be influenced by the ongoing reform programmes under IMF-ECF arrangements and the budgetary support programme with the World Bank which is under negotiation,” the CPD said.
The research organization foretells that total revenue collection, both tax and non-tax, may fall short of target by an aggregate amount of Tk 250 billion in the current FY.
It said the National Board of Revenue (NBR) could miss its target for a third consecutive year.
“The large amount of revenue shortfall was likely to be offset by unutilised budgetary allocation,” the keynote says.
The government is advised to set revenue-earning target and revise the current one more realistically.
A discrepancy between revenue earning data reported by the NBR and the finance ministry has been pointed out in the analysis.
To increase revenue collection, the CPD suggested giving focus on non-tax revenue collection, execution of modernization plan, settling pending court cases through Alternative Dispute Resolution (ADR), curbing tax evasion, emphasis on wealth-tax collection, strengthening transfer pricing cell, implementing new VAT and SD law within the scheduled time in FY 16.
A major challenge, according to the CPD, would be implementation of the forthcoming pay scale for government employees.
The Pay Commission estimated an additional financial requirement of Tk 229.53 billion for the new pay scale, 63.7 per cent higher than the figure earmarked for FY15, the CDP mentioned.
“It is important that, while finalizing and implementing the new pay scale, the government takes note of the fiscal viability and may consider phased implementation,” the policy analyst said.
It noted that political unrest and “illiberal political environment” made the private investors shy.
“Effective settlement of political issues is needed to be resolved to boost investment,” said Dr Debapriya Bhattacharya.
He noted that investors are quite ‘uncomfortable’ as administration and state machinery are serving interest of some parties and being used to protect their interest.
“There are inconsistencies in institutional reform. No significant development is visible on banking sector reform, Public Private Partnership (PPP) initiative, strengthening local government, decentralization of budget, subsidy management, pricing method of power and gas,” he said.
Responding to newsmen’s query, Dr Debapriya said different estimations on economic loss for political unrest had been made by different sectors–both public and private–but methods of those estimations should be explained to make it realistic.
Earlier, Prime Minister Sheikh Hasina gave an estimation of Tk 1.20 trillion losses in the economy due to political unrest while 16 business associations reported a daily loss of Tk 22.78 billion.
Mustafizur Rahman said the GDP growth would be negative 2.5 per cent in case of Tk 1.20 trillion reported economic loss. It is around 3.0 per cent of the size of current GDP.
The CPD paper said central bank may consider providing rescheduling facilities for repayment of agriculture credits, particularly concerning non-crop cultivation, and create window to provide low-cost credit facility to the vehicle owners.
Global trends, including declining fuel price, would provide more fiscal space for the FY16 budget as demand for subsidy to Bangladesh Petroleum Corporation (BPC) would be reduced. CPD estimates Tk 30 billion savings in FY 16 due to rock-bottom oil prices.
It recommends that the government revisit incentives for national saving certificates, strengthen the monitoring of ADP and frame meaningful district budgets.
CPD fellows, however, pointed out several positive economic indicators, above all else.
The positives include macroeconomic stability due to exchange rate against the US dollar, foreign-exchange reserves, inflationary trend and budget-deficit situation.
Published in Dhaka Tribune
CPD suggests budgetary support for unrest-hit sectors
Tribune Report
Eleven sectors of the country’s economy have suffered Tk4,900 crore loss in two and half months during the political unrest, said Centre for Policy Dialogue.
The upcoming national budget should address the issue of economic loss providing appropriate fiscal and budgetary supports, said the think-tank at a press conference yesterday, organised to present its budget recommendations.
CPD said the loss had been estimated from January to mid-March period, which could slash GDP expectation by fifty percentage points in the FY2014-15.
It suggested formation of a dedicated fund taking corrective measures to help various sectors and stakeholders adjust losses during the political turmoil.
CPD thinks low oil price is a hope for the government as the situation will help to curb the inflation rate and reduce the government subsidy.
According to it, the central bank can consider providing rescheduling facilities for the agricultural loans.
“Despite having good macroeconomic situation, we did not notice vibrancy in private sector investment,” said Debapriya Bhattacharya, distinguished fellow of CPD.
He found two causes behind the slow private investment – one of which was political unrest and the other was the lack of leadership needed for policy and institutional reforms.
CPD senior research fellow Towfiqul Islam Khan presented the budget recommendations at the event.
“Notwithstanding the deterioration of the political environment, particularly during the third quarter of the current fiscal year, Bangladesh economy continues to enjoy relative macroeconomic stability in the form of low inflation, manageable fiscal deficit, stable exchange rate and favorable balance of payment position,” CPD stated.
It said some of the key areas that FY2016 budget would need to address include more regulative efforts towards domestic resource mobilisation (including non-tax revenue), invigorating and incentivising private investment, smooth functioning of supply chain and removing the obstacles to higher growth of human resource export.
“Remittance flow is positive amid the political unrest, and it is a good sign for Bangladesh that we are getting opportunity to export manpower to Saudi Arabia again,” said Towfiqul.
“But the problem is declining oil price as it can hamper growth (in the oil-rich countries), casting shadow on manpower export.”
Before setting the revenue earning targets for FY2015-16, the revision of the current fiscal targets need to be realistic, said the research fellow.
He said the discrepancy between revenue earning data reported by the National Board of Revenue and the Ministry of Finance needs to be taken into consideration.
CPD suggested the NBR taking the central role in mobilising most of the incremental revenue, widening tax net and exploring new sources.
It also suggested reviewing the existing and proposed tax incentives and ensuring proper use of Alternative Dispute Resolution (ADR) to realise dues.
CPD urged the government to prioritise implementation of the NBR modernisation plan and emphasise the collection of wealth tax surcharge.
Published in New Age
Tk 4,900cr of GDP lost for political unrest: CPD
‘Illiberal political climate along with uncertainty hurts pvt investment’
Staff Correspondent
The country lost 0.55 per cent of the gross domestic product or Tk 4,900 crore due to the political unrest during January to mid-March in the current fiscal year, the Centre for Policy Dialogue said on Sunday.
At a press briefing held at the BRAC Centre Inn in the capital, the research-based independent think-tank also said that the major structural problem in the economy in this moment was lack of buoyancy in the private sector investment despite the positive trend in some major macroeconomic indicators.
‘The main structural problem in the economy is that private investment is not picking up due to the recently evolved illiberal political environment along with the existing political uncertainty,’ CPD distinguished fellow Debapriya Bhattacharya said.
Investors feel uncomfortable to make investment in such illiberal political situation where they remain doubtful about enjoying basic human rights particularly business-related rights from the state machinery including judiciary, Anti-Corruption Commission, Human Rights Commission and administration, he said.
Debapriya said lack of leadership, capacity, coordination and continuation of implementation of economic policies and institutional reform measures were also responsible for the bad situation in the private investment.
The CPD organised the briefing to present its recommendations for the next national budget for the fiscal year of 2015-2016.
It said the objective of the next budget should be supporting the economy to shift towards a higher economic growth trajectory coming out from the 6-per cent GDP growth trap and maintaining macroeconomic stability.
According to the CPD projection, shortfall in the total revenue (tax and non-tax) collection might stand at Tk 25,000 crore in the current fiscal year.
Regarding estimation on economic losses due to the political violence, the think-tank, however, said that the estimation was partial and conservative as it conducted analysis only on 11 major sectors.
‘If it was possible to capture all possible sources of losses, this would obviously raise the estimate of losses,’ it said.
The research organisation, however, differed with different estimations provided by the government and various business organisations claiming that those estimations were not realistic as it was not clear which methodology was followed to make those estimations.
The prime minister, Sheikh Hasina, earlier in parliament said that the country incurred a loss of Tk 1.20 lakh crore due to the political unrest while 16 business associations reported a daily loss of Tk 2,278 crore to the CPD.
These are high estimations and not realistic, Debapriya said.
‘We found the losses conducting the analysis following a methodology, if there is any conflict between CPD’s estimation and others’ estimation, they should clear the issue,’ he said replying to questions from reporters.
Economy incurs losses due to loss of assets amid political unrest but all assets are not destroyed as some portions can be adjusted, he said.
Such high estimates of losses may arise from errors of double counting as almost all the sectors are interrelated, CPD stated.
‘The GDP growth will be negative 2.5 per cent if we accept the losses at Tk 1.20 lakh crore which is around 3 per cent of the size of current GDP,’ CPD executive director Mustafizur Rahman said.
In the estimation, losses of assets and production both may be included, he said.
Debapriya said that there were some strong sides including downtrend in inflation and bank interest rate, stability in exchange rate, control in budget deficit and subsidy, positive situation in balance of payment in the economy.
He criticised the government’s dependency on undertaking reform measures in line with the conditions of International Monetary Fund and World Bank saying that the government could bring reforms by its own capacity through domestically-owned and nationally-designed.
‘The government loses policy space while implementing reforms on prescriptions of IMF or WB,’ he said.
The government should carefully analyse the conditions on receiving funds for budget supports in the name of extended credit facility or development support credit from IMF or WB as there are many hidden conditions in such funding, he said.
According to the CPD analysis, the apparel sector incurred the highest amount of loss — Tk 1,318 crore — due to the political violence followed by tourism sector Tk 825 crore, land transport sector Tk 744 crore, shrimp sector Tk 741 crore, poultry sector Tk 606 crore, wholesale and retail trading Tk 448 crore, agriculture sector Tk 398 crore, plastic sector Tk 244 crore, and banking and insurance Tk 398 crore.
The CPD said the economic losses of real estate, education and labour-related issues were not estimated in the analysis but the impact was formidable in the long-run.
It said that the losses of assets due to the political unrest were not included in the analysis rather it included the losses which were supposed to be included in the GDP.
Along with expediting implementation of reform measures, the CPD recommended that the government should set a realistic revenue collection target, emphasise on revenue mobilisation and increase tax net, prioritise non-tax revenue mobilisation, implement the proposed pay scale for government employees in phases to avoid fiscal pressure, strengthen monitoring of ADP implementation, revisit incentives for national savings certificates, and strengthen the district budget and local government.
CPD additional research director Khondaker Golam Moazzem and research fellow Towfiqul Islam Khan also spoke at the briefing.
Published in The Daily Star
Political unrest hurts investment, growth
Causes a loss of around Tk 4,900cr in two-and-a-half months, says CPD analysis Causes a loss of around Tk 4,900cr in two-and-a-half months, says CPD analysis
Staff Correspondent
Political unrest and illiberal democratic environment in the country have dented private sector investment in recent months, said Centre for Policy Dialogue (CPD) yesterday.
The think-tank said sluggish reform activities, especially the institutional ones, have also hurt the confidence of the investors.
“A kind of discomforting environment prevails in the country,” Dr Debapriya Bhattacharya, distinguished fellow of CPD, told a news briefing at BRAC Centre Inn in the capital.
Bhattacharya added such an environment impacts the economy as investors fear they would not be able to work freely and independently.
CPD held the briefing to launch its analysis on the current and the upcoming fiscal years. Towfiqul Islam Khan, research fellow of CPD, presented a paper on the analysis titled “Navigating the Troubled Waters”.
According to the think-tank, political unrest from January to mid-March of the current year has caused a gross domestic product (GDP) loss of 0.55 percent or Tk 4,900 crore, meaning that if the country’s GDP stands at 6 percent at the end of the current fiscal year, it would have been 6.55 percent if there were no political unrest.
The CPD said it is a conservative estimate as it has analysed only 11 major sectors, missing value addition worth Tk 4,900 crore due to this year’s political instability.
“If it was possible to capture all sources of loss, that would obviously raise the estimate,” said the CPD budget analysis.
Informal sector was also out of this estimate, it added.
“We have assessed the loss of GDP [value addition] only, not the loss of assets,” said Prof Mustafizur Rahman, executive director of CPD.
The analysis found that the apparel sector has the highest loss with Tk 1,318 crore, followed by tourism sector with Tk 825 crore, shrimp and frozen food with Tk 741.4 crore, poultry sector with Tk 606 crore, wholesale and retail trading with Tk 448 crore and perishable vegetables with Tk 398 crore.
The other five sectors — banking and insurance, transport, plastic, real estate and education — have lost the remaining of the Tk 4,900 crore in GDP.
CPD also suggested that the government provide incentives to the affected sectors in the upcoming budget.
“A dedicated fund can be set up to take corrective measures to help various sectors and stakeholder groups undertake the adjustments,” it said, adding that the central bank could create a window to provide low-cost credit facility to vehicle owners.
It also asked the government to provide incentives towards supply chain management, particularly in building warehousing facility and cold storage for perishable items, among others.
In its review of the outgoing fiscal year, the CPD found that the country’s economy continues to enjoy relative macroeconomic stability in the form of low inflation, manageable fiscal deficit, stable exchange rate and favourable balance of payment position despite a slide in political environment.
Falling oil prices in the international market were also helping the government save money earmarked for subsidy, it observed.
There were some downside risks as well, said the think-tank. Of those risks, shortfall of revenue by Tk 25,000 crore from the target, slowdown in remittance, falling economic growth in Europe and euro exchange rate, sluggish demand for apparel products in the US were some fault lines that affected Bangladesh’s economic growth.
“Actually, revenue income did not fall, rather the target was set high,” observed Towfiqul Islam Khan.
Additional Research Director Khondaker Golam Moazzem, among others, also spoke at the programme.
Published in The Daily Star Business
CPD questions budgetary support from World Bank
Star Business Report
The Centre for Policy Dialogue is not in favour of the government’s move to seek budgetary support from the World Bank, as the amount is not significant and it would come with a host of conditions which would undermine the policy-making independence.
The need for budgetary support from the World Bank remains unclear, as the past two national budgets did not face any major resource constraints, the think-tank said, adding that the amount that is being sought, $500 million, is not significant.
CPD made the observation at an event in Dhaka to unveil its expectations from the upcoming budget, due in June.
At present, negotiations are on the way between the government and the World Bank to receive Development Support Credit (DSC).
In order to receive the credit, the government has already agreed to undertake a set of policy reforms, said Finance Minister AMA Muhith in the last week of February.
The policy reforms would encompass nine areas including public fund management, banking, energy, transport, ICT, public-private partnership and migrant workers; and they would be implemented in three fiscal years, starting in 2015-16.
“The CPD has always maintained that reforms, whilst much-needed, must be domestically-owned and nationally-designed.”
If there is any shortfall in resources, funds may be mobilised from development partners including the WB, according to the CPD.
“Regrettably, both in case of International Monetary Fund-support and WB DSC, reform agendas are being imposed as conditionalities for receiving funds,” CPD said.
This undermines both the national cause of policy making independence and also the prospects of implementation of these reforms, said the CPD.
Most of the reforms identified by the government and the WB are related to adoption of new laws, rules and action plans, and timely implementation of various projects related to infrastructure and ICT and other sectors.
While both sides have common positions with regards to a number of areas including PPP, setting up of special economic zones and infrastructure projects, there are differences in opinion over time-bound action plan to strengthen the financial sector and undertaking energy sector reforms.
As part of the reforms, the WB is also interested in including other tax-related issues including customs act and direct tax.
The multilateral lender is at one with the IMF over the introduction of a unified VAT rate instead of the existing multiple rates and automatic adjustment of energy price with international market. The research organisation said if the government and the WB reach an agreement in the coming months, the next budget will need to address a long list of reform-related issues.
The issues which are included in the first year’s proposed activity list include formulation of an apex body to coordinate activities of different government agencies functioning in Dhaka city, prepare urban transport policy, finalise an action plan to integrate with regional and global markets.
A time-bound action plan will have to be drafted in to strengthen state banks along with preparation of a public fund management strategy and a formula for revenue sharing with local government.
It also has to update the telecom policy, design a strategy for increasing efficiency of existing thermal plants, revise the energy policy and prepare a strategy for reducing the cost of remitting funds from abroad.
“This is a long list and the needed activities will need to be reflected in fiscal 2015-15 budget if the support is approved in the coming months. The government will need to carefully examine the proposals before these are finalised,” said the CPD.
Meanwhile, the think-tank is of the belief that the budgetary and fiscal measures for the next fiscal year should take into cognisance the global economic outlook for the near-term future.
The potential channels of transmission of the implications of the emerging scenario will need to be considered in designing the budget.
It said developments in the global markets have important consequences for the Bangladesh economy when the budget is being prepared. Thus, care must be taken to mitigate the effects of the shocks arising from the fluctuations. It said lower international oil and commodity prices will provide additional policy spaces.
The CPD said Bangladesh, a net importer of crude oil, stands to make formidable gains from low oil prices, as the plunge in the petroleum prices is providing opportunities to oil-importing countries to reduce subsidies associated with its import.
For Bangladesh, it is important that subsidies are diverted to Bangladesh Power Development Board in fiscal 2015-16, keeping the electricity prices unchanged, it said.
The government also needs to make the best use of the opportunity and complete the annual development projects related to electricity-production within the planned deadline to cut over-reliance on the high-cost liquid to generate power, said the CPD. In general, the lower commodity prices should result in lower inflationary pressure in the domestic market.
“Hence, the government will have some policy space for using expansionary fiscal and monetary policy instruments, which can then be used to catalyse private investment and promote economic growth.”
The think-tank said the upcoming budget should proactively pursue ways to generate new jobs in the domestic market by promoting private investment as overseas employment may remain subdued in the near future.
It called for prudent exchange rate management next fiscal year, as the current trend in the international currency market can reverse in the coming months.
The budget should also make allocations to promote trade facilitation measures in line with the Bali package of the World Trade Organisation.
It also said garment exports to the US are struggling, while shipment to the EU market is facing greater competition. The upcoming budget needs to consider these trends while coming up with fiscal proposals including incentives.
Published in The Independent
Blockade hits GDP by 0.55pc: CPD
UNB
Production sector of Bangladesh experienced a loss of Tk 4,900 crore due to recent political turbulence that has taken place from January 5 to mid March, a study by Centre for Policy Dialogue (CPD) revealed yesterday, reports UNB. CPD came up with the study findings at a pre-budget discussion titled ‘Navigating the Troubled Waters: An Outlook for the Upcoming Budget’ organised at the city’s BRAC Centre.
CPD estimated that the GDP of the country would endure a reduction of 0.55 percent during the ongoing fiscal year (FY) 2015 as a result of the loss in the production sector.
CPD research fellow Towfiqul Islam Khan presented the keynote at the programme.
The study considered data of 16 major business organisations and trade-bodies that came up with their own estimation of losses at different times during the political unrest.
81 days of blockade and 67 days of hartal had severely disrupted day-to-day economic activities, resulting in losses to various sectors while the prolonged periods of blockade had also disrupted supply chains that disconnected rural and urban market as well as domestic and international market, the study said.
In the agricultural sector, the farmers counted a loss of Tk 398 crore from January 5 to mid March; in the meantime, the farmers either sold their perishable goods at a very low price to the wholesalers or their vegetables got spoiled in the fields.
CPD also observed that farmers’ repayment of agricultural credit in January 2015 was 18.9 percent lower compared to the same period of 2014, the largest shortfall in the current FY.
Poultry sector had faced losses of Tk 606 crore as supply chain of eggs, chicken meat and one-day chicks got largely disrupted; on the other hand, export in shrimp & frozen food sector was reduced by 15 percent, that amounted to a loss of Tk 741.4 crore.
Citing Bangladesh Garment Manufactures & Exporters Association (BGMEA) data, CPD said 41 factories in the apparels sector have reported about different types of losses including cancellation of work order, additional charge for delayed shipment, vandalism of transports carrying apparel shipments and being compelled to sell at highly discounted rate.
Transport sector had faced a loss of Tk 85.44 crore as 1,405 vehicles including bus, truck, and railway compartment were either vandalised or torched. CPD also informed that the loss of the sector is so high related to other sectors, yet the actual amount would be more than the estimated one. The garments sector had faced a total loss of Tk 1,318 crore, the study found.
A significant number of foreign nationals cancelled their arrivals into Bangladesh due to political unrest that affected the tourism sector, costing the sector Tk 675 crore, while the overall loss in the sector would be Tk 825 crore.
CPD also pointed out that the education sector of the country was severely affected, though it is difficult to measure the loss in the sector in economic terms.
At the end of the research presentation, Towfiqul Islam said if it was possible to capture all the sources of losses, it would obviously raise the estimate of losses.
Noted economist and CPD research fellow Dr Debapriya Bhattacharya, executive director of CPD Prof Mustafizur Rahman, and its additional research director Khondaker Golam Moazzem were also present at the programme.
Published in the BSS
Revenue generation, investment major challenges for FY16: CPD
BSS
Expediting revenue generation and private sector investment would be the major challenges to achieving higher economic growth in the next financial year 2015-16 (FY16), said a leading think-tank, Centre for Policy Dialogue (CPD).
CPD came up with the observation while briefing media about its recommendations for the upcoming national budget for FY16, held Sunday at Brac Centre Inn.
“Among the persistent shortcomings, private sector investment remained lackluster for the political environment’s failure to facilitate investment and policy incentives. The downward slide must be improved through inclusive politics”, said CPD Distinguished Fellow Dr Debapriya Bhattacharya.
He cautioned that the economy might continue to stumble in achieving the anticipated growth should there be no effective measurers for policy and infrastructural reform at most government institutions.
Finance Minister Abul Maal Abdul Muhith is expected to place the next budget at the Jatiya Sangsad (JS) on June 4, targeting over 7.0 percent GDP (gross domestic product) growth.
Dr Bhattacharya said “domestically-owned and nationally-designed” institutional reform, private sector investment and project implementation with better management should be addressed with strong commitment to take the GDP above the 6.0 percent growth cycle.
He also advised reformative measures for making public private partnership (PPP) an effective tool for boosting private investment as well as economic growth.
CPD Executive Director Professor Mustafizur Rahman said the CPD analysis on budget and fiscal measures particularly focused on macroeconomic backdrop in the run-up to the upcoming national budget, economic losses arising from political violence in early 2015, implications of key global developments and IMF’s ECF and World Bank’s proposed development support credit.
CPD Research Fellow Towfiqul Islam Khan presented the keynote paper on the budget recommendations besides the analysis of economic loss to the recent political unrest.
He said as the National Board of Revenue (NBR) would miss its revenue target, the government must take effective measures to increase revenue generation, particularly in view of the forthcoming pay-scale for government employees.
Among other specific policy recommendations, Khan said that the government should address the issue of economic losses through appropriate fiscal and budgetary support.
He said the political unrest during January to mid-March this year caused a loss of Taka 4900 crore or 0.55 per cent of GDP, but the country’s economy continues to enjoy relative macroeconomic stability in the form of low inflation, manageable fiscal deficit, stable exchange rate and favourable BoP (balance of payment) position.
Published in Daily Sun
Political turmoil costs country Tk 4,900cr
Says CPD study
Staff Correspondent
The country has incurred a loss of Tk 4,900 crore or 0.55 percent in GDP (gross domestic product) in the current financial year due to the January-March political turmoil, according to a study of the Centre for Policy Dialogue (CPD).
As a result, GDP growth will fall by half or a slight more percentage point in the fiscal. Say, if economy would spur, growth might be 6.0 to 6.5 percent. “But growth would now cut by 5.5 to 6.0 percent,” CPD explained.
The government’s target is 7.3 percent growth in the current FY against the assumptions of the World Bank, IMF, ADB and local economists.
GDP is now estimated above Tk 13 lakh crore, CPD quoted an official statistic.
“Our analysis provides a minimum estimate of economic losses incurred by the major sectors. As estimated, the total loss from political unrest would be to the tune of Tk 4,900 crore or 0.55 percent of the GDP of the FY2015,” said Towfiqul Islam Khan, team leader of CPD analysts.
He presented a report styled ‘Navigating Troubled Waters: An Outlook for the Upcoming Budget’ at Brac Centre Inn in the capital on Sunday.
The CPD estimation did not cover all the wealth and capital losses from the January-March political unrest, Towfiq mentioned.
“In this quick study, we have used the ‘gross output changes’ method,” he said. “The amount of loss would obviously rise if it has been possible to capture all possible sources of losses.”
As per the premier’s claim in parliament, economic loss from political unrest was Tk 1.20 lakh crore, which is nearly 10 percent of GDP.
Every year, CPD critically analyses public expenditure and resources mobilisation and utilisation plans of governments and places recommendations for next budgets.
Opposing government’s stance on borrowing $500 million development support credit from the WB to make up a budget shortfall next fiscal, Towfiq said there is no need for such borrowing now.
“Such a small amount of borrowing from the WB implies a large number of conditions, which in many cases brings no dignity for the country. I think there’s a consensus within the government and the spirit on establishing good governance that may bring more positive outcome towards equitable development and reduce poverty and corruption.”
During a question-answer session, CPD’s distinguished fellow Debapriya Bhattacharya supplemented: “Economy shows stability in six areas—strong foreign currency reserves and exchange rates, downward inflation, low bank interest rates, less subsidy requirement for a fall in petroleum prices on global market, budget deficit management and healthy balance of payment.”
“The government will benefit from poor petroleum price on international market in the next fiscal, which will ultimately help reduce subsidy and curb inflation as the government may not need to hike power prices.”
Debapriya said, “Right now, the big challenge is to raise private investment and accelerate ADP (annual development programme) implementation.”
A planning ministry data shows only 38.5 percent of the original ADP was spent during the July-February period.
He said the country would not achieve its target growth without increasing private investment as such investment implies employment and production. “Preconditions of a friendly investment climate imply political stability, independent judiciary, free anti-corruption body and sustained law and order.”
The CPD fellow said public-sector reforms like subsidy management, PPP materialisation, ADP implementation, overhaul of banking sector, strong local government and execution of district budgets are not taking place properly.
The government should not go for gross rebate of interest payment to businesses, Debapriya noted. “Poor, ultra-poor, distressed persons and those who genuinely have no capacity to pay interests on bank loans…may be exempted from such burdens, but not the businesses.”
Towfiq said, “The government will take an additional Tk 22,000 crore for a wage rise for public servants. It’s a big amount when the government is repeatedly failing to achieve revenue targets.”
Even, the revenue target may fall short of Tk 25,000 crore, he added.
The government should us alternate dispute resolution to realise outstanding taxes worth Tk 25,782 crore remaining unpaid for years. “It should lessen a mismatch between available resources and implementation agendas.”
CPD Executive Director Prof Mustafizur Rahman and Additional Research Director Khandaker Golam Moazzem also spoke.
Published in New Nation
Political unrest
Tk 4,900 crore production loss
Staff Reporter
The National Economy has suffered severe production losses to the tune of Tk 4,900 crore due to the political turmoil from January to mid-March this year, according to the Centre for Policy Dialogue (CPD). The loss is equivalent to 0.55 per cent of GDP.CPD came up with the estimation at a media briefing on its recommendations for the upcoming National Budget for the fiscal year 2015-16 held at BRAC Centre Inn in the city on Sunday.”As political unrest continues, major sectors have incurred a loss equivalent to Tk 4,900 crore or 0.55 per cent of GDP from January to mid-March this year,” said CPD Research Fellow Towfiqul Islam Khan while presenting a keynote.In his keynote, Khan presented an analysis of economic loss covering major sectors including agriculture, poultry, shrimp, apparels, plastic, transport, tourism, banking and insurance, wholesale, retail trading, real estate and education.At the media briefing, the CPD also presented an analysis of the current state of the national economy. CPD Executive Director Prof Mustafizur Rahman said, “Our analysis particularly focused on macro-economic updates in the run-up to the upcoming National Budget, economic losses arising from political violence in early 2015, implications of key global factors and IMF’s ECF and World Bank’s proposed development support credit.”He mentioned that despite deterioration of political situation, Bangladesh economy continues to enjoy relative macro-economic stability in the form of low inflation, manageable fiscal deficit, stable exchange rate and favourable balance of payments (BoP) position.Coupled with the domestic issues, a few negative developments in the global economy could have implications for Bangladesh economy. These include receding remittance flow, falling economic growth in the EU, sluggish demand for Bangladesh RMG products in the US market, significant decrease in export growth and higher appreciation of the BDT against the Euro vis-à-vis Bangladesh’s export competitiveness.Talking about the persistence slowdown of the National Economy, CPD distinguished fellow Dr Debapriya Bhattacharya said that among the shortcomings, private sector investment remained lacklustre for the political environment’s failure to facilitate investment and policy incentives. “The downward slide must be improved through inclusive politics,” he noted.He cautioned that without undertaking policy and infrastructural reforms at most government institutions, the economy may continue to stumble in achieving the anticipated growth, which now remains somewhat stalled around 6.0 per cent.However, the expected reform agenda supported by the IMF and World Bank development support credit, may curb the government’s autonomy over policy space, Dr Bhattacharya said. “Reforms must be domestically-owned and nationally-designed,” he added.Dr Bhattacharya shed light on how, without reform measures, effectiveness of public private partnership remains doubtful, ADP projects continues amidst mismanagement, banking sector suffers irregularities and district budgets lacks engagement with the local context. He also urged more clarity regarding the import data for suspected anomalies and reforms in the upcoming Seventh Five-year Plan.As the National Board of Revenue (NBR) is likely to miss its revenue target, the government must increase revenue generation, particularly in view of the forthcoming Pay Scale for government employees and assess its fiscal viability, said CPD analysis. Among other specific policy recommendations, the CPD urged the government to address the issue of economic losses through appropriate fiscal and budgetary support. CPD Director Anisatul Fatema Yousuf and its Additional Research Director Dr Khondaker Golam Moazzem, among others, were also present, at the briefing.