Govt to launch public-private budgetary window next fiscal

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FE Report
A boost in public investments and increased foreign aid flow will help Bangladesh survive the impact of the worsening global economic downturn, top economic policy makers and economists said Saturday.
They also agreed that an export stabilisation fund instead of cash incentives would play an effective role in supporting export sectors, feared to be battered by the crisis.
"Next year will be extremely critical," finance minister AMA Muhith said about the effects of the crisis.
"Public investment has to be maintained at a reasonable level. The government will provide seed money to foster public-private partnership (PPP) for investments in infrastructure and other sectors. I'll also be seeking more aid from donors," he added.
But he insisted that he did not favour providing businesses with increased cash incentives.
His comments come at odds with the country's top trade body FBCCI, which sought a Tk 60 billion stimulus package from the government to bolster their ability to offset slowing exports and production.
Mr Muhith's immediate predecessor echoed the views, saying an export stabilisation fund rather than cash incentives should be a mechanism to help the export sectors in a more effective way.
"I've already sought budgetary support from the ADB (Asian Development Bank) and the World Bank. Also sought trade finance from the IMF, although it could not respond positively," Mr Muhith told a seminar in the city, organised by Centre for Policy Dialogue (CPD), a think-tank.
The finance minister noted that his government would launch a PPP budget in the next fiscal year, in addition to normal budget, to pool investments into infrastructure, human resources, education and housing sectors.
The current fiscal's budget, prepared by the past caretaker regime, has set aside an incentive package of Tk 10.05 billion.
But the minister said it would be "unrealistic if the government raises the incentive package."
"We can boost subsidies rather than cash incentives," he said, adding that subsidies could indirectly stimulate domestic demand and that the government would consider it.
He said the PPP model would be sponsored by the government and local and foreign investors would be allowed to participate in the process.
"We'll provide seed budget. And local and foreign investors will be invited to participate. It will not be restricted to the infrastructure sector, rather be diversified into human resources, education, health and housing," he told the elite audience.
Over the years, the finance minister noted that public investment, at 6.0 per cent of GDP, has remained static.
He pledged to maintain public expenditure at "a reasonable rate." "We've the lowest public expenditure in South Asia, even lower than Nepal."
Executive director at CPD Dr Mustafizur Rahman presented the keynote paper at the seminar, presided over by its chairman Prof Rehman Sobhan.
Mr Rahman said policy makers can consider pursuing a moderately expansionary monetary policy to stimulate domestic investment, providing fiscal incentives and stimuli to incentivise export-oriented sectors.
Mr Muhith agreed and said the central bank would go for an expansionary policy in view of the current crisis, worst since the 1930s.
The CPD executive chief said the upcoming G-20 meeting provides an opportunity to highlight developing countries' interests with respect to aid and debt cancellation.
While outlining the stabilisation fund, Mirza Azizul Islam said the fund, to be repaid in a 20-year period, should be overseen by a public-private body.
He also said businesses, which will avail the loans, should not be allowed to seek stay order by the High Court in case of default. "If the court order is allowed, the government will never be able to recover cash," he added.
Mr Islam said that credit growth should not reach more than 20 per cent as Bangladesh seeks to attain an eight per cent annual growth rate.
The former finance adviser also fired a broadside at banks for keeping spread between lending and deposit rates higher through "a cartel arrangement."
Economic affairs adviser to the Prime Minister Dr Masihur Rahman said the Bangladesh Bank can help bring down spreads between borrowing and deposit rates through refinancing programme.
He noted that even though inflation rate came down, lending rate did not.
"The problem is deposit rate is high. Banks can't cut the lending rate. Investors of savings certificates are mostly the middle-class, who feels bank savings are safer. On the other hand, investments in share market are risky," he said.
BNP leader MK Anwar said the meltdown has created opportunities for Bangladesh in the form of lower commodity prices in the international market. "This will give some space for subsidies."
He said Bangladesh should rethink cut in fuel prices amid freefall of petroleum prices in the international market.
"The international price of per litre diesel is Tk23, but we still charge Tk 44," he added.
He said the government must examine how to support exporters to help them stave off slowing exports.
Over the years, former finance minister M Syduzzaman said, Bangladesh has become a soft state.
"We can't afford to be a soft state. We must take at least one unpopular decision," he said.