The World Bank on Wednesday said the country’s proposed national budget for the fiscal year of 2014-2015 was bigger than the government’s implementation capacity.
The multilateral lending agency, however, said that the budget had some positive aspects as the government included some commitments to eradicate poverty and increase growth.
The WB said that the proposed budget of Tk 2,50,506 crore was not that much large considering the development needs of the country.
But the size of annual development programme is too large taking the government’s implementation capacity into consideration, it said.
At a post budget press conference, the WB officials also said that achieving the proposed gross domestic product growth target at the rate of 7.3 would be challenging for the government under the existing investment condition.
The WB also raised question about the government projection of GDP growth for the current fiscal year at 6.12 per cent saying that there was no justification of such higher growth taking the overall economic and political situation in the year into consideration.
The organisation, however, termed the growth rate satisfactory which the country achieved despite adverse situation compared with other developing countries.
‘Size of the budget is not big enough relative to Bangladesh’s development needs where it needs to raise its investment in infrastructure development to 10.2 per cent of GDP from the existing 7.38 per cent. On the other hand, it is bigger compared to implementation capacity of the country,’ WB lead economist Zahid Hussain said at the briefing held in its Dhaka office.
He said that the government would have to increase the investment ratio by 5 percentage points within a year to achieve the proposed GDP growth target which has never happened in the history of the country.
‘It will be a great achievement for Bangladesh if its economy grows by 6.5 per cent in the next fiscal year under the assumed situation like weakness in investment, problems in readymade garment sector, migration, remittance through which the country will go,’ he said.
It is expected that the GDP growth would increase a little bit as the country’s situation has remained stable, he said.
‘But the government should ensure that private investment would not be hampered due to its excessive borrowing from the banking sector,’ he said.
Growth can be achieved by increasing production capacity and utilising the existing production capacity, he said adding that Bangladesh needed to increase private investment to boost production capacity.
He, however, said that it was useless to debate on the figure of GDP growth.
‘Rather, the country should work on how to enhance its growth from the current rate through improving investment situation and production capacity.’
Bangladesh should increase the share of investment in GDP composition by reducing the high dependency on consumption based GDP. Otherwise, growth will not be sustainable where consumption contributes more than 80 per cent, he said.
The WB also identified inadequate infrastructure, shortage of land, electricity and other utilities as impediments to private investment.
It also said that political stability was needed for the implementation of the proposed budget particularly annual development programme for the next fiscal year.
Zahid said that economy grew by 6.01 per cent in comparatively normal political situation in the FY 2012-2013 while the government predicted that the economy would grow by 6.12 per cent in the current fiscal year, first half of which was disastrous due to political unrest in the country.
‘We have no explanation on how the economy grows by 6.12 per cent along with recovering the losses caused by unrest,’ he said adding that Bangladesh Bureau of Statistics could give proper explanation.
Zahid said that the government should take action against loan defaulters and dissolve the board of directors of BASIC Bank to prevent scam in the state-owned banks.
The government should also ensure governance in the state-owned banks and automate financial reporting in those banks.
On undisclosed money whitening facility, he said that they were not clear till now about the legal step of ‘black money’ legalisation facility.
The beneficiaries of the scope of black money whitening facility are so much powerful that finance minister cannot do anything in his will, he said.
The WB said that the growth strategy and fiscal strategy the government targeted to achieve by 2021 was implementable.
But the implementation of the ADP set for the next year will be difficult, it said.
The body also expressed concern over increasing the share of non-development capital expenditure particularly the allocation for recapitalisation of the state-owned banks and rising share of interest payments.
It also said that public private partnership programme also became unfulfilled promises as the government is yet to frame legal framework while the implementation record of PPP projects remained very poor.
World Bank country director Johannes Zutt said that the government should ensure economic governance along with political and policy stability for attracting private investors.
-With New Age input
