Muhith raps critics, defends growth target

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The 24th annual general meeting of UAE-Bangladesh Investment Company Limited (UBICO) in progress in the city recently. Chairman of the company Saeed Al Dhaheri and Managing Director Dr SM Akbar were present in the meeting.

FE Report
Finance minister Abul Maal Abdul Muhith Friday strongly defended the growth rate set for the next fiscal year and came down heavily on those who preached that the country could achieve higher growth despite an economic 'tsunami'.
"Those who said the country can achieve 7 to 8 per cent growth are fools. They are living in fools' paradise," the finance minister told a jam-packed post-budget press conference at the NEC auditorium.
He was responding to a question regarding the private think tank CPD that it will be difficult for the government to achieve the GDP growth which has been targeted in the budget at 6.7 per cent in the next fiscal.
"The government has successfully tackled the fallout of the global economic recession and we are much better off now," he said.
He added the country is not immune to economic meltdown impacts as the domestic economy is very small compared to the economies of developed countries.
"I want to believe the recession is over, but I don't have the nerve to pronounce it as we have an economy of $100 billion, whereas the US alone has the economic size of over $9 trillion," he added.
There are many factors which affect the economic downturn and Bangladesh is just a small player, Mr Muhith said.
The finance minister said the budget is not at all 'ambitious' as the amount is very much needed for the huge population of the country.
The minister asserted that increase in tax-GDP ratio by 0.7 per cent in one year is a big achievement of the government.
Official figure, however, reveals that the tax-GDP ratio at present is about 8.5 per cent.
When his attention was drawn to the achievement of the next year's ADP implementation, Mr Muhith said many doubt about the efficiency of the public sector but the situation is not so bad.
"We have an obsession with the public sector inefficiency and poor implementation capacity and we should get rid of it," he said.
"ADP implementation has increased by 40 per cent and it is a remarkable achievement in the history of Bangladesh," he pointed out.
"Efficiency is relative and it depends on many factors but the main thing is commitment," he said.
Planning minister AK Khandkar said, "Development is a team-work and one must have clear conception about the projects and their implementation."
The government has taken various measures to improve the implementation capacity of the public sector, he said.
The ADP implementation is over 70 per cent in July-May period and we are confident that the implementation will be close to the target," he said.
The government has revised the ADP target to Tk 285 billion for the current fiscal.
Elaborating on project formulation and implementation process, he said the planning ministry and other government agencies concerned in different phases evaluate and monitor the development.
"The prime minister is personally interested about the project implementation and in the last one and half years, she missed two or three ECNEC meetings," he said.
Energy adviser Taufiq-e-Elahi Chowdhury said the government has the capacity to tackle crisis and implement ambitious projects.
"The government has awarded contracts to generate 2,000 megawatt of power in the last one and half years," he said.
Justifying the subsidy to buy power from rental plants, he said the opportunity cost of per kilowatt hour is about Tk 40 to Tk 50 and "Tk 30 billion subsidy is nothing if the overall benefit is taken into consideration," he added.
The adviser said that power tariff will be increased to reduce subsidies.
The government has placed short, medium and long-term plans for the development of the sector, he said.
The finance minister said the use of CNG is good for environment but there must be a balance among different fuels.
"CNG price is one-fourth of octane price and it should be increased to a reasonable level," he pointed out.
About the public-private partnership (PPP), he said there is a risk in implementing the much-talked-about initiative "but the problems related to it have been overcome."
Mr Muhith made it clear that the provision of whitening of undisclosed money would be over after this month.
"We don't want any black money as some say the underground economy is about 50 per cent of the total economy," he said.
"We need to get rid of this black economy as this creates a lot of rich people who don't pay taxes," he added.
The minister defended the higher defence allocation as it needs to procure huge volumes of military equipment to replace the old ones.
"There were no major defence procurement in the last eight to nine years and it becomes necessary to give them the money to procure necessary equipment," he said.
The minister admitted that if the government borrowing from the banking system increases, the private sector will be crowded out.
"It will depend on the situation and how much money the government borrows," he added.
Bangladesh Bank deputy governor Ziaul Hasan Siddiqui said the central bank increased the cash reserve ratio to rein in private sector credit growth.
"The private sector lending is over 20 per cent and the central bank wants to pull it down to tame inflation," he said.
He, however, said it is not likely to hamper the economic growth as the Bangladesh Bank has instructed the scheduled banks not to lend in unproductive sector.
The finance minister said duty rate hike on low-priced car was made to discourage imports and support the local industry.
"Import of low-priced cars increased sharply during the current fiscal and we want to discourage that," he said.
A vehicle manufacturing industry is growing in the country, especially in the Jessore area and the government wants to patronise that, he added.
"The completely built unit (CBU) import will be discouraged through increasing the duty rate," he said.
The finance minister said tax on share premium is imposed as premium is a 'windfall profit for the company'.
"The government plays a balancing game by allowing the rich tax-dodgers to invest as they create employment opportunities, increase exports and create wealth for the economy," he said.
He said it is difficult to prove money laundering abroad as nobody gives information and even if anybody provides information, they do not testify, he said.
"The government has taken limited steps against money laundering."
Mr Muhith strongly said the Bangladesh Bureau of Statistics will be strengthened to get neutral data.
About the imposition of duty on refined and unrefined sugar, he said the sugar price is low in the international market and it will not have any impact on the domestic price.
The minister proposed to impose Tk 2,000 duty per tonne on unrefined sugar and Tk 4,000 on refined sugar.
LGRD minister Syed Ashraful Islam, commerce minister Faruk Khan, agriculture minister Matia Chowdhury, industries minister Dilip Barua, health minister AFM Ruhal Haque, information minister Abul Kalam Azad, economic adviser to the prime minister Dr Mashiur Rahman, adviser to the prime minister HT Imam, cabinet secretary, finance secretary, NBR chairman, ERD secretary, senior government and Bangladesh Bank officials were present at the press briefing.