Finance and Planning Adviser Dr AB Mirza Azizul Islam Tuesday brushed aside the concern that loans to the private sector may be affected in the coming fiscal 2008-09 due to enhanced government borrowing from the banking sector.
"I don't see any serious threat or any threat at all to private sector credit disbursement due to this rise in bank borrowing," he said while speaking as the chief guest in a post-budget dialogue in a city hotel.
He said: "We borrowed Tk 20 billion more than the target from the banking sector during the first nine months of the current fiscal from July-March but the private sector credit growth rose over 17 per cent."
So there is no link between the government borrowing and growth of private sector loans, said the finance adviser.
The finance and planning adviser unveiled nearly Tk 1.0 trillion national budget for the coming fiscal 2008-09 on June 9 last and set a Tk 134.98 billion bank borrowing target for implementing it.
Country's leading think-tank Centre for Policy Dialogue (CPD) organised the dialogue on "State of Bangladesh Economy and Budget Responses 2008-09," where a cross section of experts including economists, politicians, business leaders, academics and bureaucrats took part.
Former adviser to the caretaker government Professor Wahiduddin Mahmud was the special guest at the dialogue chaired by Member CPD Board of Trustees Mr M Syeduzzaman.
Speaking at the dialogue the finance adviser was, however, concerned over poor implementation of annual development programme (ADP), which for the next fiscal has been set at Tk 256 billion.
"Poor implementation capacity is one which cannot be improved overnight," he said adding, "Long term investment is required to upgrade the public sector capacity and its management in this regard."
Refuting the critics who termed the proposed budget as only a short-term measure, Dr AB Mirza Azizul Islam said that it did not forget about mid-term prospects.
"When a patient goes to a doctor with pain the doctor initially will try to minimise the pain first and then will go to deeper diagnosis," he said justifying short-term measures.
Agriculture and rural development, energy and power, transportation, health and education and human resources development are among the issues aimed at mid-term measures, he said.
As private sector plays a pivotal role in the national economy measures like reduction of customs duty, corporate taxes and capital machinery, extension of tax holidays have been proposed in budget, the finance adviser said.
He, however, opined against fiscal incentive measure saying it is not an effective tool for industrial growth.
The finance adviser also defended the deficit financing of Tk 305.80 billion and gross domestic product (GDP) projection of 6.5 per cent as realistic.
The interest payment on bank borrowing would be increased, but it would not hamper the economy, as the interests on the domestic borrowing would be circulated within the economy through investment by other means.
External borrowing is only 10 percent of the domestic borrowing and the net external borrowing is less than the amount of the revised budget.
The finance adviser said that the government has enough indication that the net foreign borrowing would be more than what is anticipated for the next fiscal.
To ensure food security the government has set a target to build a stock of 3.20 million tonnes of food grains through internal procurement and import, said the finance adviser.
The country would have adequate food stock by the year-end, he added.
The finance adviser also defended the fertiliser price hike saying that the price of fertiliser has skyrocketed in the international market.
"Despite this hike the government will have to continue shouldering subsidy in fertiliser," he said.
Professor Wahiduddin Mahmud underscored the necessity for a balance in government measures between those of short-term and long-term ones.
He said the prices of essentials especially of rice is not in the usual post-harvest decline this time as the traders are opting for food stocks instead of selling now to attain maximum profit in future.
The government will have to build adequate food stocks to sell it at subsidised prices to the poor, he said.
"If we depend on commercial importer for food the prices would rise," he added.
Mr M Syeduzzaman put emphasis on upgrading of efficiency of the manufacturing sector and development of infrastructure for developing the national economy.
"If we want to see the country in a middle income nation by next 10-12 years we will have to ensure efficiency in manufacturing, infrastructure and information and communication technology (ICT) sectors," he said.
Gano Forum president Dr Kamal Hossain underscored the necessity for upgrading the management and project implementation capacity of the government as he said the country is in deficit in every sector.
He also urged the government to leave a lesson for the next political government about what the caretaker government experienced during the two-year period regarding the deficiencies.
Dr Kamal also urged the government to provide food to those who cannot pay for food.
"It is not a charity but ensuring rights," he said.
Bangladesh Garment Manufacturer and exporters' association (BGMEA) president Anwar-ul-Alam Chowdhury Parvez urged the government to invite international tender to build up infrastructure on build, operate and transfer (BOT) basis.
"Large investors in the European Union, Middle East and Malaysia are keen to invest in the country's infrastructure sector," the BGMEA president said.
"The country's growth potentials is extremely high," he said.
But to ensure this growth political stability, skilled manpower, improved infrastructure and reduction of cost of doing business are necessary, he said.
Former agriculture secretary Abdur Razzaq sought a comprehensive plan after formation of a taskforce to ensure the country's food security.
Former education minister Osman Faruq former state minister for foreign affairs Abul Hasan, International Monetary Fund (IMF) Resident Representative in Bangladesh Jonathan C Dunn, Workers Party president Rashed Khan Menon and managing director of ACI Anisuddowla also spoke among others on the occasion.
