Cut budgetary targets: CPD
"> Debapriya Bhattacharya, distinguished fellow of Centre for Policy Dialogue, speaks at a programme at the CPD office in Dhaka yesterday. Second from right, Mustafizur Rahman, executive director, also spoke. Photo:StarThe Centre for Policy Dialogue (CPD) yesterday called for this year's budgetary targets to be downsized given the weakening of certain key macroeconomic fundamentals.
“It appears that the relative stagnation in economic activities observed in fiscal 2012-13 may continue in this fiscal year as well,” the private think-tank said in its report titled, “Bangladesh economy in FY 2014: Three months after the budget, three months before the elections”.
The need to readjust the fiscal parameters will be no less an important task, along with maintaining fiscal discipline in fiscal 2013-14, it added.
“There is little indication that investment demand has picked up in the early months of the ongoing fiscal year.”
Private sector credit growth is “stagnating” at 11.3 percent as of August 2013 – much lower than the target of 16.5 percent (for end of June 2014).
Performance of the banking sector has been deteriorating, with the industry's non-performing loans rising to nearly 12 percent on June 2013 from 7.2 percent a year ago.
State-owned commercial banks are facing severe capital shortage, as well.
“Despite having over Tk 80,000 crore of excess liquidity in the banking sector, lending rates and spread do not decrease,” said Debapriya Bhattacharya, distinguished fellow of CPD.
The private think-tank said the growth in revenue collection between the July-August period of the fiscal year stood at 16.2 percent, which is well below the annual target of 25.3 percent. “Large Taxpayer unit has also missed its first quarter targets for income tax and VAT collection.”
Import duties have seen negative growth of -1.5 percent in August, indicating continued depression in the import situation. It found the planned expansion of total public expenditure in fiscal 2013-14 to be “rather ambitious”: 27.7 percent growth target is envisaged over actual expenditure is fiscal 2012-13, when the actual growth of expenditure last fiscal year was 14.3 percent over actual expenditure in fiscal 2011-12.
Taking into account the first two months' progress, CPD predicts the allocation for annual development programme (ADP) would not be fully utilised.
The government's borrowing from bank and non-bank sources have shot up in the July-August period of the year, while net foreign aid disbursement was negative in July. “Government's reliance on banks for funds will increase this year,” said Bhattacharya.
Seeing inflation moved up 0.6 percentage points to 7.4 percent in September 2013 from June 2013, the think-tank tipped it to overshoot the government's target of 6-6.5 percent for fiscal 2013-14 and go up to 7 percent.
CPD identified critical infrastructure bottlenecks as well, and the economy would not be able to utilise its full potential without resolving them.
Still, there are some strong areas in the economy: export growth, foreign investment and the balance of payment situation are on a favourable condition. “To summarise, the economy has both upside opportunities and downside risks in a period of democratic transition,” the report said. “The incumbent policymakers would need to redefine the fiscal goal posts, promote credit expansion in private sector, maintain support to the crop sector and contain potential inflationary pressure.”
Mustafizur Rahman, executive director of CPD, also spoke on the occasion.