Uncoordinated monetary and fiscal policy along with the government’s lack of foresight will cause a nosedive in the GDP growth to 5.75 per cent from the
target of 7.2 per cent, said local think-tank Unnayan Onneshan.
In its April issue of Bangladesh Economic Update released on Saturday, Unnayan Onneshan said the gap between savings and investment increased at a high rate over the time because of lack of infrastructure development by the government and the private sector.
‘Lack of foresight in operating fiscal policy and increased cost of loanable funds due to a contractionary monetary policy has suppressed investment demand,’ it said.
The UO said the saving–investment gap might reach at 5.14, 5.47 and 5.81 per cent of the nominal GDP in FY 2012-13, FY 2013-14 and FY 2014-15 respectively which might create further pressure on the growth trends.
The revenue collection target also fell as the large enterprises are contributing less because of the political instability, it said.
The revenue collection target is Tk 1,39,670 crore for the current financial year which leads to a 21.57 per cent acceleration of the target growth of revenue income.
‘In the first seven months of the FY 2012-13, collection of revenue earning was only 40.11 per cent of the total target,’ it said.
In February total tax revenue collection under the National Board of Revenue decreased by Tk 259.91 crore than that of the same period of the previous fiscal year.
The UO said subsidy payment for quick rental system might create an outsized budget deficit.
‘The first five months (July-November) of the current FY2012-13 witnessed deficit balance at 0.31 per cent of the GDP which was negative 0.83 per cent in the same period of the previous year,’ it said.
It also said that unprecedented government borrowings projected for the FY 2012-13 might dry up the liquidity, crowded out private investment and forced the rate of interest to go up further.
The Annual Development Programme also failed to create necessary multiplier effects. ‘The practice of expending large share of the ADP in the last two or three months of each fiscal year continues to remain unabated,’ it said.
Only 44 per cent of the ADP was implemented during July to February of the FY 2012-13. In addition, the revised ADP stood higher (Tk 57,120 crore) than the original size of Tk 55,000 crore.
‘The IMF policy prescriptions have resulted in high rate of interest, adversely affecting the level of investment. The rate of weighted interest advances of all banks was 13.8 per cent on year closing day of 2012 whereas this rate was much higher in the private banks (14.69 per cent). During the same time, the spread between the rate of deposit and the rate of lending averaged at 5.33 per cent,’ it said.
The local think-tank also said the capital market, which is going through a prolonged depression, is facing a lack of confidence of the investors.
‘The absence of confidence has persisted as the government has failed to bring the perpetrators of two crashes to book and the regulatory regime is yet to enforce zero-tolerance on the activities of the cartels,’ it said.
-With New Age input
