World Bank's South Asia Chief Economist Dr Franziska Lieselotte Ohnsorge on Sunday in Dhaka said Bangladesh will not be able to become an Upper Middle Income Country (UMIC) with its low public investments.
"Bangladesh's debt is still in a comfortable level. But its public investment is still lower and controlled. The low investment in human capital development is remarkable here. Will this poor investment make the country's economic growth sustainable?" she said at a seminar on Sunday.
Bangladesh's public investment is around 13-14 per cent of the GDP, which is one of the lowest in South Asia.
Echoing the same voice with newly-appointed WB Chief Economist for the South Asia Department Dr Ohnsorge, Policy Research Institute (PRI) Executive Director Dr Ahsan H Mansur and SANEM (South Asian Network on Economic Modeling) ED Dr Selim Raihan said it is not possible to sustain the Bangladesh's economic growth and graduate to an UMIC.
The local think-tank SANEM and World Bank organised the seminar on "Fiscal challenges in South Asia" in Dhaka on Sunday.
WB economist Dr Ohnsorge said lower revenue base for Bangladesh is really a problem for its debt sustainability as well as the economic sustainability.
"Only tax administration reforms and automation are not enough to boost your (Bangladesh) revenue income, rather you need a political will," she added.
Citing the example of Sri Lanka, the WB chief economist said, "When your country will be on a low revenue base, you will be in a vulnerable situation with higher debt burden."
Bangladesh's tax-GDP ratio is one of the lowest in South Asia as it was recorded at 7.4 per cent in the fiscal year (FY) 2022-23 from 7.9 per cent in FY 2022.
WB Chief Economist for SA Ms Ohnsorge said the South Asian debt-GDP ratio is one of the highest in the globe with a record 86 per cent of its total regional GDP.
"Although Bangladesh debt is in a comfortable level, well below 40 per cent of the GDP, but your higher domestic resources mobilisation is important," she added.
SANEM executive director Dr Selim Raihan said it is now a crying need to "break the economy" so that the current grim situation does not aggravate further.
"If we ignore the problem keeping challenges under a carpet, and do not take proper policy in time, you will fall really into trouble. We have been suggesting the government over that last few years for taking correction measures, necessary reforms in the financial sector and in the macro-economy, but those are ignored," he added.
Actually, strong political will of the political leaders for the quick economic reforms is necessary at this moment rather than prioritising the national election, Dr Raihan, also an economics professor at Dhaka University, said.
"I do not want to compare Bangladesh with other countries like Sri Lanka, but the global experience that the island country has had a domino effect which smashes its economy within a shorter period. The UMIC becomes the low income country within a shorter period. So we need to learn from that effect," he added.
Dr Ahsan H Mansur said: "Bangladesh is very good in expenditure control but not the expenditure management. How long you will sustain with this low public investment?"
"Isn't Bangladesh's lower public investment is a cost of the lower tax-GDP ratio? How long you will invest to development human capital including education and health which is lowest in the world," he said.
"When the tax-GDP ratio will be lower over the years, you could fall into trouble in debt repayment," Dr Mansur said.
About the public financial management, the PRI executive director said there are huge laggings in the quality government investments here.
"The government investment is like-a lot of medicine in the store of the hospitals but the patients need to purchase those from outside the hospital," he added.
Dhaka Chamber of Commerce & Industry (DCCI) President Barrister Sameer Sattar as a panelist at the seminar said amid the current macro-economic scenario, the government needs to check its investment ensuring the spending for the quality projects only.
The DCCI chief stresses the need for expanding the tax-net and the tax payment system automated for ensuring higher revenue income.
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