Thursday, April 25, 2024

Dipping growth, scams, unrest mar economy

The government announces the budget for the fiscal year 2013-2014 today against the backdrop of severe economic constraints in the outgoing fiscal year in which weakness and mismanagement in the economy, scams and malpractices in the banking sector and political
unrest have pulled down all major indicators.In the current fiscal year, the country’s GDP growth declined, import nosedived, private sector investment stagnated, implementation of annual development programme limped, revenue collection fell short of target and power and gas crisis continued to hamper business environment, employment generation and daily life of people.
The government’s tussle with the World Bank over corruption allegation in the proposed Padma Bridge and subsequent withdrawal of fund proposal by the multinational lending agency and the government’s initiative for alternative funding also remained a crucial issue in the country’s economy.
Economists and business leaders said almost all the indices of the macro-economy suffered in the outgoing fiscal year due mainly to some internal factors such as mismanagement by the government, malpractices in the banking sector and political uncertainty.
Unlike the previous year, external factors such as global recession put little impact on the economy, they said.
Although remittance inflow, foreign aid inflow, foreign currency reserve, export earnings and inflation showed positive performance in the current fiscal year than that of the previous fiscal year, all other major indicators along with the crisis in the capital market spoiled the advantages generated by the positive indicators.
According to the Bangladesh Bureau of Statistics, the economy will grow by 6.03 per cent, 1.2 percentage points lower than the target of 7.2 per cent set by the government for the FY 2012-13.
The Centre for Policy Dialogue said economy in the current fiscal year experienced a lower level equilibrium.
The CPD, country’s leading independent think-tank, also termed the FY13 as one of the worst years for the private sector investment.
‘The outgoing fiscal year was somewhat challenging as most of macroeconomic indicators were not positive at all. The indicators, except remittance inflow and export earnings, showed downward trend,’ a former caretaker government adviser, Mirza Azizul Islam, told New Age on Wednesday.
He said that there were also some domestic challenges mostly related to political uncertainty as political violence and hartals affected the economy.
‘GDP growth may slowdown further from the government estimation of 6.03 per cent because of downward trend in the macro-economy,’ he said.
In the current fiscal year, more than Tk 5,000 crore were embezzled through big scams, such as Hallmark Group-Sonali Bank and Bismillah Group-Prime Bank, Shahjalal Bank and some other banks scams, shaking the banking sector.
Investors did not go for new investment because of lack of credit, high bank interest rate, shortage of utilities including gas and power and political unrest, Mirza Azizul said adding that scam in the banking sector was one of the factors for the slowdown in the private sector credit growth.
CPD executive director Mustafizur Rahman said it was domestic factors that hampered GDP growth in the outgoing fiscal year.
‘There are many weaknesses and mismanagement in the macro-economic management in the outgoing fiscal year. Stagnation in private investment, scams and malpractices in the banking sector, high bank interest rate, shortfall in revenue collection, lower growth in agriculture contributed to lower GDP growth,’ he said.
According to BBS’s statistics, growth in agriculture sector, particularly crop sub-sector, remained dismal in the year as it grew only by 0.15 per cent and contribution of agriculture to the GDP growth also fell by 0.2 per cent.
He said, ‘Confrontation and uncertain political environment had also direct and indirect impact on the economic performance in the year.’
Mustafiz also said that financing the 6.15-kilometre Padma Bridge project remained lingering concern for the economy.
In June, 2012, funding the proposed Padma Bridge project was put on hold by the WB along with other lenders including Asian Development Bank, Japan and IDB over the allegation of corruption against government officials including the then communication minister Abul Hossain in selecting consultant for the $2.9 billion project.
The WB again revived the $1.2 billion loan agreement after the government agreed to send allegedly involved officials in the corruption on leave.
In January, 2013, the government, however, decided to call off the agreement with the WB.
The government is now working to construct the bridge with its own fund and has allocated Tk 6,852 crore in the ADP in the budget for the upcoming financial year.
According to Bangladesh Bank’s data, in the July-March period growth in import of capital machinery declined by negative 10.6 per cent, private credit
growth plunged by 12.7 per cent compared with that of the same period of the last fiscal year.
‘The steady fall in food inflation helped to ease overall inflationary pressure in the year due to stable price of rice, declining international commodity prices and stronger domestic currency but the sufferings of general people eased a little as price level of essential commodity has continued to remain high,’ Mustafiz said adding that consumers’ purchasing capacity eroded by 38 per cent in the last four years.
According to the BBS, point-to-point inflation declined to 7.8 per cent in April, 2013 compared with 10.6 per cent in the same month of previous fiscal year.
The government set a target to keep inflation at 7.50 per cent in the current fiscal year.
Former Bangladesh Bank governor Salehuddin Ahmed said this fiscal year was challenging and full of mismanagement and corruption in the financial sector, inefficiency, political interference and weak management by the government.
He, however, said the GDP growth was good but below expectation.
He said that scams in the banking sector increased cost of doing businesses and deteriorated investment environment.
Exporters Association of Bangladesh president Abdus Salam Murshedy said the outgoing fiscal year was very tough for the businessmen particularly export-oriented ones.
‘Businessmen are passing very tough time as they could not go for any new investment, even they could not expand their existing businesses, due to restrained credit facility, exorbitant bank interest rate, lack of gas and power connection and ongoing political unrest in the country,’ he said.
Salam, also a former president of Bangladesh Garment Manufacturers and Exporters Association, said that two major accidents, Tazreen fire and Rana Plaza collapse, along with workers unrest in the apparel sector created image crisis for the Bangladeshi export that has already been suffering due to global recession in major markets such as Europe.
According to the Implementation Monitoring and Evaluation Division, the ADP implementation status remained dismally low as only 54 per cent of the revised ADP was implemented in the first 10 months of the fiscal year, the lowest rate for this period in the tenure of the current government.
Export earnings also saw a comparatively moderate performance in July-April of the fiscal year in spite of adverse global scenario as it grew by 10.1 per cent than that of the same period of previous fiscal year.
According to Export Promotion Bureau, the export target will remain unattained this year as it needs to grow by 37.8 per cent in the remaining two months of the current fiscal year to attain the target of 15.3 per cent set by the government.
According to the Bangladesh Bank, overall balance of payments experienced a substantial surplus as it stood at $ 3,948 million in July-March period due mainly to lower trade deficit and falling import payments by negative 6.1 per cent in July-March and impressive inward remittance growth by 36 per cent in the period.
Revenue earnings by the National Board of Revenue may fall short of the target by Tk 3,000 to Tk 4,000 for the first time in last four years.
According to the NBR, it fell short of revenue collection by Tk 5,000 in the July-May period.

-With New Age input

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