Debate 1.
Centre for Policy Dialogue, the local think-tank, Friday termed a 6.7 per cent growth target for 2011 financial year “ambitious”, saying the government will require more investments to achieve that.

“Growth target for FY11 has been ambitiously set at 6.7 per cent, particularly in the context of uncertainty regarding industrial sector – if achieved it will be the highest in recent past,” said Dr Mustafizur Rahman, executive director of CPD.

“Attaining the target of 6.7 per cent economic growth for FY11 will be challenging – a growth rate between 6.0 and 6.5 might be a more realistic outcome,” Dr Mustafiz told a post-budget briefing in the city.

Finance Minister AMA Muhith Thursday presented a Tk 1.32 trillion budget with higher growth target, although budgetary deficit widened to 5.0 per cent of gross domestic product (GDP).

He said investment target for the next financial year suggests private investment rate in terms of economic output should pick up, but much will depend on how fast the government executes projects under public-private partnership (PPP).

The CPD’s views came as the economy slowed down for years, with one-sixth of the growth disappearing since 2007. The Bangladesh Bureau of Statistics (BBS) said Bangladesh’s growth dipped to 5.5 per cent in June – the lowest in seven years.

The policy think-tank said it would be challenging to attain a significant performance in the agriculture sector, but hoped the target is achievable if the policy support is continued and there strike no disasters.

Referring to the manufacturing sector, Dr Mustafiz, also a visiting professor at Yale University, noted that a 9.0 per cent growth can only be attainable if the recent positive growth experienced by the export sector sustains in the next year.

He said inflation target for 2011 fiscal may not be attained – maintaining that the inflation at 6.5 per cent will be challenging.

Mismatch between fiscal and monetary policy is likely to be continued, he said, adding projected figures for monetary aggregates do not reflect the required credit flow as is planned for financing fiscal deficit.

Mr Mustafiz said total investment target of 26.4 per cent of GDP in the next fiscal year by doubling growth of investment could be challenging with major role played by Annual Development Programme (ADP).

“Poor state of ADP implementation in major infrastructure-related ministries during FY 10 has raised concerns as regards higher utilisation of fund under these ministries in the FY11,” he said.

The CPD, in its budget analysis, said the government should put emphasis on preparing action plans for top 100 projects included in the ADP selected by the Planning Commission and power and infrastructure projects should get priority.

It feared about the squeeze in flowing credit to the private sector as the proposed budget relies heavily on bank borrowing to cover the budget deficit – a 81 per cent hike from the revised budget of the outgoing fiscal.

The CPD hailed the government’s move to keep the individual incomes from the capital market as wise, saying otherwise it could discourage people from investing in stock markets.

“The present move to impose tax on a few types of income of the share market would prepare the individual investors to face such imposition of tax on their incomes in future,” he said.

It, however, lambasted the proposal to levy a 3.0 per cent tax on the premium value of shares of companies, fearing it could act as disincentive for companies to be listed with the capital market.

Debate -2
.. Krishi Bank chairman and a former deputy governor of the Bangladesh Bank, Khondkar Ibrahim Khaled thinks that the proposed budget is not ambitious at all.

“In fact, it should be far more ambitious,” he said suggesting the budget could well be about 20 percent of the GDP.
The current outlay is equal to about 17 percent of the economy.

Khaled made the comment at a post-budget discussion session on Saturday organised by Unnayan Samannay, which was founded by the central bank’s current governor Atiur Rahman, and is currently headed by his wife.

The comments came two days after the main opposition BNP termed the budget too ambitious.

The BNP had suggested in their comments that the budget lacked substance and would not be much effective in generating economic growth.

Finance minister AMA Muhith on June 10 proposed a net outlay of Tk 1321.70 billion for the next fiscal year beginning July 2010.

Khaled, also an emeritus fellow of the non-governmental organisation that organised the discussion, stressed for more allocation to develop the state-owned Bangladesh Petroleum Exploration and Production Company Limited (BAPEX).

“There is no alternative to increasing gas production for power generation.”

BAPEX, a company under Bangladesh Oil, Gas & Mineral Corporation (Petrobangla), is charged with the exploration and drilling of fossil fuel, mostly natural gas.

Khaled said emphasis was given on public welfare rather than pure capitalist economy.

He pointed out that the rural areas received more attention in terms of budgetary allocation compared to the urban areas as in the previous budgets.

This was a positive shift in the government’s policies, he said.

The government has increased the target for disbursement of agricultural loans, which he thought would benefit poor farmers, he said.

The budget proposes to allocate Tk 67.42 billion for agriculture and Tk 120 billion has been fixed as farm loan target for the next fiscal, up from Tk 110 billion in the outgoing fiscal. Tk 40 billion has been proposed as subsidies.

Analysts think that execution of ADP (annual development programme) would be challenging.

Khaled said only a few projects had been added

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Bangladesh budget debates

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