The financial year 2013–2014 begins today against the backdrop of a slowing economy and looming concern over the election-centric political confrontation that may further dent the economy.
Economists on Sunday told New Age that that the government would face tough challenges in the new financial year in maintaining macro-economic stability such as high inflation, achieving the GDP growth, revenue target and export earning amid recent spates of political violence.
The budget for the FY 2013-2014 will be implemented from today. The parliament passed the budget on Sunday.
Although the Tk 2,22,491-crore budget with a deficit of Tk 55,032 crore aims at containing inflation within 7 per cent, economists fear that inflation, which was 7.98 per cent in May, might not come down to the level targeted in the budget.
Former BB governor Salehuddin Ahmed said the government might fail to bring down inflation target of 7 per cent if the existing political unrest continued in the months to come.
Violence caused by the political unrest usually disrupts the supply chain of goods which pushes up inflation, he said.
He feared that the export earning might decrease in the coming days as the United States had recently suspended the Generalised System of Preferences for Bangladesh.
Besides, the credit growth in the private sector is now maintaining a nosedive situation which will also hit the government targeted GDP growth of 7.2 per cent, he said.
The government should pick up the credit growth in the private sector to attain its expected GDP growth for this new financial year, he said.
Central Bank data showed that the credit growth in the private sector had stood at 12.68 per cent in April — much below from the central bank target of 18.5 per cent for January-June term of 2013.
According to the Bangladesh Bureau of Statistics, the provisional GDP growth is 6.03 per cent for the FY 2012-13 against the government target of 7.2 per cent.
Dhaka University economics professor MA Taslim said the government borrowing from the banking source would increase significantly in the new financial year if the government maintained its targeted expenditure in the period.
The National Board of Revenue has said that it will not be able to earn the government target of Tk 1,36,090 crore resulting that the government will have to depend on the bank borrowing.
Moreover, the government will try to implement new projects in accordance with its election commitment which will increase the bank borrowing, he said.
The government has set a bank borrowing target of Tk 25,993 crore for the FY 2013-14 to manage its deficit financing.
Under the circumstances, money supply to the market will be increased significantly ahead of the national elections that will push up inflation, Taslim said.
It is not possible to bring down inflation to 7 per cent in this government’s period, he predicted.
Bangladesh Institute of Development Studies research director Zaid Bakht said the government would face major challenges to achieve the GDP growth of 7.2 per cent as the investment rate in the private sector was at a very low in the last few months.
The unrest political situation has massively discouraged the private sector investment which will create a crisis to achieve the GDP growth, he said.
The government should increase its own investment, but the process also faces a crisis, he added.
The government has recently started to implement new projects to fulfil its election commitment by keeping the old projects in stuck which will also put an adverse impact on attaining the GDP growth, Zaid said.
He said the recent scams in the banking sector had discouraged the private investment as the banks adopted a cautious policy to sanction loan.
The export and the import sectors are now facing a tough situation as majority of the banks have maintained large margin for opening of letters of credit, he said.
-With New Age input
