Harnessing growth potential

Prospects now seem to be bright for better performance of the country's economy. The World Bank (WB) has noted Bangladesh's return to stability after last year's turbulence. It has positively assessed the economic situation of the country; the growth rate of gross domestic product (GDP) at 6.2 per cent in the current fiscal would be higher than that of the previous fiscal. The growth is attributable to continued macroeconomic stability, boost of domestic consumption from remittance earnings and rise in aggregate demand from public infrastructure investments.

The WB has identified the country's industrial sector as the primary driver of its GDP growth. High rate of inflation, brought about partly by political unrest of late 2013, has now come down to a stable level. Export growth, despite the adversities of otherwise difficult exogenous and endogenous factors, has helped reduce trade deficit. The country's foreign exchange reserve has continued to rise though remittance receipts have declined by 1.6 per cent. However, private sector credit growth has remained subdued and investment as a percentage of GDP is yet to show any remarkable rise. Here lies the crux of the problem that has made it difficult for the country to harness its full growth potential.

Meanwhile, international agencies have recorded the country's remarkable progress in poverty reduction. Employment growth and wage hike have increased the income of the bottom 40 per cent of its population. But to achieve inclusive growth in the near-term, the country needs to sustain and accelerate the pace of its GDP growth, ensure a steady rise of remittance inflows, create adequate number of jobs, contain inflation, and make progress in improving the quality of service delivery in health and education. Some international agencies, including the WB, have already hinted at their greater collaboration in different projects in areas of physical infrastructural facilities, human resources development and social sectors.

Against this backdrop, the finance minister's own assessment of the country's development performance merits attention. He, as a FE report from Washington said last Monday, is both optimistic and concerned over the country's GDP growth rate. He is optimistic about attaining the 7.2 per cent GDP growth target for fiscal year (FY) 2014-15 but has expressed his dissatisfaction over the earlier growth stagnancy at around 6.0 per cent. All concerned would now expect that the government would put in hard efforts to set things on the right track, so that the country could at least move onto 7.0 per cent-plus GDP growth.

One notable aspect of this year's WB/IMF joint annual meeting in Washington has been that a panel meeting gave Bangladesh an opportunity to share its experience in tackling 'outflow' of resources or flight of capital from the country. To broaden the domestic resource base a country must plug leakages through illicit capital flight, which amounted to US$1.17 billion from Bangladesh in 2011. Such flight of capital accounted for about 11 per cent of its gross tax revenues, and about 78.5 per cent of gross foreign aid receipts. The Bangladesh Bank, in close cooperation with the National Board of Revenue (NBR), is now putting its endeavours to reduce such outflow of capital. Cooperation and support by all concerned at the international level is also critically important to help curb such capital flight.