Govt spots challenges to higher economic growth
Slow implementation of development projects, low investment and sluggish growth of revenue are the three major challenges the government faces in steering the economy to a higher growth trajectory.
The challenges were identified at a high level budget preparatory meeting at the finance division yesterday, with Finance Minister AMA Muhith in the chair.
The meeting of the fiscal coordination council and the resource committee of the government discussed the revised budget of the current fiscal year and the new budget.
The meeting set the economic growth target for fiscal 2016-17 at 7.2 percent and inflation target at 5.8 percent.
As per the provisional data of Bangladesh Bureau of Statistics, GDP will grow at 7.05 percent in the current fiscal year against the government's target of 7 percent, riding on the rise in salaries for about 14 lakh government employees.
The government also hopes to achieve the ongoing fiscal year's inflation target of 6 percent, thanks to low commodities prices in the global market.
Officials present at the meeting said both GDP growth and inflation targets in the current and upcoming fiscal years would be achieved because of low prices of oil and other commodities.
After the meeting, Muhith told reporters that they would finalise the targets next month. The meeting also discussed the latest macro-economic situation of the country.
Finance ministry officials said the meeting expressed concern after BBS provisional data showed that private investment decreased by 29 basis points in the current fiscal year.
In the last few years, private investment to GDP ranged between 21 percent and 22 percent.
A number of officials who attended the meeting said high interest rate is an obstacle to increasing private investment. The rate of interest on savings instruments and deposit pension scheme has to be lowered so banks' lending rates also come down.
They said the shortage of land and a lack of electricity and gas connections are main obstacles to investment growth.
The meeting expressed dissatisfaction over the implementation of the annual development programme. The officials said the allocation increases every year but the ministries and divisions are unable to spend the budget.
A minister said the government will have to find out the reasons behind the slow implementation of the ADP.
A foreign consultant might be appointed on how to fast-track ADP implementation, he said.
Another minister called for finding out the reasons behind the slow growth of revenue collection. If the revenue earning target is ambitious, the target should be made realistic, he said.
An official of the National Board of Revenue said they are preparing an action plan outlining the sources that will categorically show how they will contribute to revenue earning.
The official said the plan has to be implemented following an approval from the cabinet.
Muhith said the NBR's revenue generation target is 30 percent higher in the current fiscal year than that in the previous year.
“It seems that the target will not be achieved,” he said.
For the current fiscal year, the NBR's revenue collection target might be revised down to Tk 150,000 crore, which was Tk 176,370 crore when the budget was presented.
In the next fiscal year, the NBR revenue target might be set at about Tk 200,000 crore, which again would be 34 percent higher than the revised target.
In the meeting, the finance ministry proposed Tk 264,500 crore as the revised budget for the current fiscal year, which is 10.36 percent lower than the original budget.
The subsidy on electricity and fuel was around Tk 9,000 crore in the current fiscal year, but the financial support will be withdrawn completely from fuel. More than Tk 3,000 crore is being slashed on subsidy in these two areas.