Expectations from the Eighth Five Year Plan
The Eighth Five Year Plan (8FYP) of Bangladesh is going to be finalised and approved soon. The duration of the Seventh Five Year Plan (7FYP) ended in June 2020. However, due to the Covid-19 pandemic the 8FYP has been delayed. The General Economics Division of the Planning Commission (GED) had to revisit and revise the targets and strategies in view of the pandemic. Once the final 8FYP is approved at the National Economic Council it will be implemented during 2021-25.
Available documents indicate that the 8FYP titled "Promoting Prosperity and Fostering Inclusiveness", focuses on a pro-poor growth strategy. This strategy includes seven themes. These are labour-intensive, export-oriented manufacturing-led growth, agricultural diversification, dynamism in cottage, small and medium enterprises, modern services sector, ICT based entrepreneurship, and overseas employment.
Priorities, themes and strategies of the 8FYP are well-recognised. However, in the end, the implementation of the plan is what matters. During the sixth five-year plan (6FYP) the actual average growth rate of gross domestic product (GDP) was 6.3 percent. This increased to 7.1 percent during the 7FYP (2016-2020). As a result, per capita GDP grew by 4.9 percent between 2011-15 (6FYP) and by 5.7 percent (provisional estimate) during the 7FYP. Besides, progress has also been made in case of poverty reduction. However, a number of objectives on macroeconomic management could not be achieved.
The 8FYP aims to have 8.5 percent GDP growth by 2025. There are also targets for many indicators including inflation, public and private investment, employment, poverty reduction, revenue mobilisation, allocation for Annual Development Plan (ADP), and sectoral performances including education and health.
During the implementation period of the 8FYP, the government will face a number of challenges. The four specific ones are the following: Covid-19 pandemic, graduation from the least developed country (LDC) category, the implementation of the Sustainable Development Goals (SDGs) and climate change vulnerability. The development approach of the proposed 8FYP which has highlighted six core themes also include these four. The achievement of the 8FYP targets will hinge on how effectively these challenges are confronted.
First, Covid-19 has deteriorated economic and social conditions. The pandemic has put pressure on the economy which has resulted in a rise in poverty and inequality. Informal workers, the urban poor, migrant workers, small businesses and women are among the most affected segments. Before the outbreak of the pandemic in Bangladesh some of the macroeconomic indicators were under pressure. The economy experienced a further dip following the lockdown between May and April. Fortunately, Bangladesh has managed to improve from that critical situation in recent times. Exports and remittances have improved and foreign exchange reserve is at a comfortable situation. Inflation is also relatively low. However, the economy is still not out of the woods since the pandemic is ongoing and vaccination has not yet started here.
Therefore, while working towards achieving the economic indicators, during the first phase of the 8FYP, policymakers will also have to work towards controlling the pandemic and ensure health safety of the people. Without reducing the health risks, economic objectives cannot be fulfilled since people are behind the wheels of the economy. We do not know whether and when vaccines will be available to the entire population of the country. Even if adequate vaccines are obtained, vaccination of the whole nation will take a long time. Therefore, those who will remain outside the coverage of vaccination should be under strict health protocol till they are vaccinated. Dedicated resources for both vaccination and strengthening medical facilities such as test and treatment will be needed for this.
In case of economic recovery from the Covid-19 pandemic, government measures will have to be further strengthened. The government has taken monetary policy measures to support affected sectors. The liquidity support under the stimulus packages provided by the government has been very useful for the industries and businesses. However, the support has not reached the affected micro, small and medium enterprises (MSMEs). Women MSMEs have faced more difficulties to access the support. Fund related problems faced by the MSMEs are not unique to pandemic related support. Banks are less interested to provide loans to them due to risk factors and high operational costs. Constraints for accessing funds by them should be removed through proactive policies since the MSMEs are the engine of growth and sources of employment.
Bringing the economy back to the pre-pandemic level will also require much greater fiscal interventions. In order to bring people out of poverty—both the pandemic-induced new poor and the pre-existing ones—there should be more public expenditures. Fiscal stimulus provided in the form of various social safety nets including cash support is not adequate. Large investment is required in areas such as health, education and technology. This is the time to introduce bold steps such as universal health insurance and universal pension schemes.
Second, Bangladesh will graduate from the LDC category in 2024. Therefore, Bangladesh will have to prepare for a smooth graduation and minimise the impact of the removal of various trade benefits and international support measures. In order to compete in the global market, the country has to improve on social, environmental and labour related compliances.
Third, at the end of the 8FYP, only five more years will be left for the implementation of the SDGs. Bangladesh's achievement in many areas including poverty reduction, gender parity in primary education and reduction in maternal mortality have come under threat due to the pandemic. Taking these improvements back up to the pre-pandemic situation and then improving them further will be a humongous task. This will not only require strong commitment and resources but also policy reforms in areas such as education, labour market, gender, tax system, public expenditure, investment, international trade, and accountability of the institutions.
Fourth, despite Bangladesh's resilience to various shocks including natural disasters, dealing with the impact of climate change will be beyond its capacity given the nature and scale of the impact. The Intergovernmental Panel on Climate Change (IPCC) has provided scientific evidence on this. Bangladesh will have to negotiate at the global level to receive funds for climate change adaptation. During the 8FYP period Bangladesh needs to invest in green energy, green building, green transportation and green agriculture.
The 8FYP has a lot of significance compared to the previous plans since this is going to be initiated at a time when Bangladesh will be celebrating its golden jubilee of independence. We expect that this plan will achieve its targets much better than the previous plans.
Let this plan also change the yardstick of achievement from GDP growth to inclusivity and distributive justice.
Dr Fahmida Khatun is the Executive Director at the Centre for Policy Dialogue.
Views expressed in this article are those of the author and do not necessarily reflect the position of her organisation.