Bangladesh economy towards autarky
Masih Malik Chowdhury | Friday, 27 June 2008
THE question is whether or not the economy of 150 million pairs of working hands can attain that goal. Have not the incumbent and the recent past governments led us to uncertainties? It is a sordid commentary on our state of affairs that even after three and a half decades of independence, the idea would remain unrealised.
The recent picture of Bangladesh economic performance is a matter of concern. The GDP grew or is projected to grow in the outgoing fiscal year (FY) at the rate of about 6.0 per cent. This rate is 5.5 per cent in the World Bank estimation, 6.0 per cent from the ADB in estimation, and 6.2 per cent according to the Bangladesh Bank projection. The price spiral, together with unemployment and the huge requirement of investment, not matched by domestic savings, are some of the problems surrounding us. The government has not been able to manage the macro-economy, as it is apparent from its large public borrowings and policy vulnerability. The staggering government debt indicates that the banks possibly find it safer to lend to the government out of the colossal amount of idle and unused liquidity at their disposal in most part of the outgoing fiscal, though the scenario, of late, gives some contra signals. All these signal the government's poor economic performance. The huge public borrowings have squeezed the funds, the banks could lend to the private sector and sent the living index, inflation and unemployment to soar. The resultant squeezed imports did not match the demand condition under the market mechanism. These factors together with the revenue shortage due to smaller dutiable imports have left the economy in troubles. Indeed, everybody is waiting to see where the situation gets into, when an elected government (?) takes over. There are many apprehensions at large, vital among them is the prospect of holding the election. They are constantly adding momentum to these uncertainties.
In 2007, three successive natural calamities, including two floods and the catastrophic Sidr, took a heavy toll. The loss is estimated at US $600m for rice production alone. The calamities slowed down the GDP growth rate. Apparently, the inexperienced people running the government lack the sagacity and vision for meeting the prime constitutional obligations. The nation expects an elected government to replace the incumbent. Our friends and foes around also express similar views from time to time. The price spiral, inflation, plans apparently without a clear goal, selective action against corruption etc., are now talking points. Similarly hindrance to justice and lack of independent operation of judiciary despite its separation are also much talked-about issue. Despite the restrictions imposed by the state of emergency, the costs of living continue to soar affecting all. Our income does not support the cost.
Everyone appears to be waiting for a sustained policy framework from a popularly elected government to get out of the current situation. This government originally took the responsibility for three months. But due to circumstances beyond its control it has failed to meet the popular expectations. Its tenure is more of concern to the consumers, trade and businesses as they need sustained policies. The investment cycle is not working to provide the best employment opportunities or optimum returns. The oil-price surge, together with declining dollar value, also contributed to the economic woes.
The main task for the government was election and only election. Common perception is that it started well. Within months, as the public perception goes, lacking vision, it started to fail. Now its failures are the talking points. Incongruities of its policies and actions are also matters of concern. Following any change of government, the general people of this country expect a lot, much of which is utopian, only to be frustrated soon. They generally forget the immediate past sufferings expecting a better future. No government should exercise powers beyond its constitutional mandate. The reports on offshore bidding, leasing out of ports, rail communication with India speak of it. What about the import syndicates and what's happening now? No one knows. But the prices have soared to an unbearable level for which the regime is accountable. Where the benefits of the increased price have gone needs to be made public. Transparency is needed of the care-takers too.
The drive against wrong-doers is good. But lacking transparency it is facing questions. Things continue as before when also a regime of the day demanded accountability from the others.
VAT continues to be the major source of government revenue. VAT fetched Tk 81.86 billion in fiscal 2004-05, Tk 97.37 billion in fiscal 2005-06 and 108.63 billion in fiscal 2006-07.
From Tk. 231.21 billion in 2004-05 fiscal and Tk. 261.21 in 2005-06 fiscal the revenue increased to Tk. 284.87 billion in fist nine months nine months of fiscal 2006-07. It jumped by over 23 per cent in a couple of years despite a wide publicity of strains about macro-economic management. The government expenditure however increased or much higher during these three years. It was Tk. 539.03 billion, Tk 590.30 billion and Tk 697.40 billion during the three fiscals showing a rise of 29 per cent in 2006-2007 fiscal over 2004-2005. This reflected a 27 per cent rise in revenue earning and 44 per cent in development expenditure.
As proportion of GDP, revenue expenditure was 8.99 per cent in 2004-2005 and 8.81 per cent in fiscal 2006-2007 while this component for development expenditure was up by 5.06 per cent to 5.56 per cent between fiscal 2004-2005 and 2006-2007. AS the GDP rose significantly, the reduction in revenue expenditure was not proportionate. The domestic financing component of the ADP increased from Tk. 205 billion in 2004-2005 to Tk. 260 billion in 2006-2007 fiscal, reflecting a fall in dependence on exogenous resources from 2.4 per cent of GDP to 1.8 per cent of GDP. With the right vision of a popularly elected government, despite all hurdles and limitations or the quality of macro-economic management, it can be safety said that in 2007-2008 fiscal, dependence on domestic finance would have increased with a corresponding fall on dependence on foreign funds.
The overall budget deficit in relation to GDP was 4.2 per cent, 3.9 per cent and 4.5 per cent respectively in FY 2004-2005, FY 2005-2006 and FY 2006-2007. This was financed from local sources by 1.8 per cent, 2.2 per cent and 1.9 per cent of GDP during the above fiscals. External resources provided 2.4 per cent, 1.7 per cent and 1.8 per cent of the GDP for meeting the budget deficit during the aforementioned years respectively. It is thus obvious that our domestic resources have been increasingly financing the deficit. The trend continued over the last decade. The public borrowing during 1996-1997 to 2005-2006 fiscals increased from Tk. 26.54 billion to Tk. 97.44 billions and nine months of 2006-2007 fiscal, it was Tk. 65.66 billion. Thus, a large part of the budget deficit met from local resources in the recent times.
GDP and Sector Wise Share: The GDP in billion taka was Tk. 370.70 billion, Tk 415.73 billion and Tk 467.50 billion during the three fiscals of 2004-2005, 2005-2006 and 2006-2007. The population was 140.6 million in 2006-2007 up from 137.0 million in 2004-2005 fiscal. GDP per capita was $482 in 2006-2007 from $441 in 2006-2007. At current price, GDP grew at 11.44 per cent in 2004-2005, 11.21 per cent in 2005-2006 and 12.45 per cent in 2006-2007 fiscals over respective the previous years.
Autarky is economic self sufficiency. Is Bangladesh far away from it? To let the wheel move for autarky, our own efforts and policies along with coherent resource allocation and reallocation for the optimum benefit are needed. With that end in view, the vision needs to be set, with a time-frame. However, political leadership is needed, because politicians are the artists for the masses.
The GDP was Tk. 4674.97 billion in fiscal 2007 up from Tk. 4157.28 billion in fiscal 2006, Tk. 3707.07 billion in fiscal 2005. The deficit in the budget balance was 4.2 per cent, 3.9 per cent and 4.5 per cent of GDP in FY 2004-2005, 2005-2006 and 2006-2007 respectively. In terms of GDP size, only 2.4 per cent, 1.7 per cent and 1.8 per cent of resources came from foreign sources, to finance the budget fiscal. These figures, in percentage terms compute to amounts that are not substantial. The ADP allocation in these years were half spent and the rationality of these allocations has been questioned. The government activities and performances have been unsatisfactory so far as ADP execution is concerned. Non implementation or failure of project executions have never been duly attended to, nor monitored. On the contrary, the public expenditures soared. Thus, a curtailment of public expenditure, increase in ADP execution of projects on the basis of original, not revised, budget allocation, controlling misuses, containing consumption by accountability of government administration, transparency and accountability in provision of various public services, procurements etc., are likely to pave way for autarky. The arithmetic works well for it. But will the government take up the challenge? Can we not plan for us and our country, with our resources to start with? The new elected government will surely have to attend to it, if the incumbents fail. We can't afford to waste time any more.
The writer, a former treasurer, Bangladesh Economic Association, is senior partner, Masih Muhith Haque & Co., Chartered Accountants, and can be reached at e-mail: [email protected]
The recent picture of Bangladesh economic performance is a matter of concern. The GDP grew or is projected to grow in the outgoing fiscal year (FY) at the rate of about 6.0 per cent. This rate is 5.5 per cent in the World Bank estimation, 6.0 per cent from the ADB in estimation, and 6.2 per cent according to the Bangladesh Bank projection. The price spiral, together with unemployment and the huge requirement of investment, not matched by domestic savings, are some of the problems surrounding us. The government has not been able to manage the macro-economy, as it is apparent from its large public borrowings and policy vulnerability. The staggering government debt indicates that the banks possibly find it safer to lend to the government out of the colossal amount of idle and unused liquidity at their disposal in most part of the outgoing fiscal, though the scenario, of late, gives some contra signals. All these signal the government's poor economic performance. The huge public borrowings have squeezed the funds, the banks could lend to the private sector and sent the living index, inflation and unemployment to soar. The resultant squeezed imports did not match the demand condition under the market mechanism. These factors together with the revenue shortage due to smaller dutiable imports have left the economy in troubles. Indeed, everybody is waiting to see where the situation gets into, when an elected government (?) takes over. There are many apprehensions at large, vital among them is the prospect of holding the election. They are constantly adding momentum to these uncertainties.
In 2007, three successive natural calamities, including two floods and the catastrophic Sidr, took a heavy toll. The loss is estimated at US $600m for rice production alone. The calamities slowed down the GDP growth rate. Apparently, the inexperienced people running the government lack the sagacity and vision for meeting the prime constitutional obligations. The nation expects an elected government to replace the incumbent. Our friends and foes around also express similar views from time to time. The price spiral, inflation, plans apparently without a clear goal, selective action against corruption etc., are now talking points. Similarly hindrance to justice and lack of independent operation of judiciary despite its separation are also much talked-about issue. Despite the restrictions imposed by the state of emergency, the costs of living continue to soar affecting all. Our income does not support the cost.
Everyone appears to be waiting for a sustained policy framework from a popularly elected government to get out of the current situation. This government originally took the responsibility for three months. But due to circumstances beyond its control it has failed to meet the popular expectations. Its tenure is more of concern to the consumers, trade and businesses as they need sustained policies. The investment cycle is not working to provide the best employment opportunities or optimum returns. The oil-price surge, together with declining dollar value, also contributed to the economic woes.
The main task for the government was election and only election. Common perception is that it started well. Within months, as the public perception goes, lacking vision, it started to fail. Now its failures are the talking points. Incongruities of its policies and actions are also matters of concern. Following any change of government, the general people of this country expect a lot, much of which is utopian, only to be frustrated soon. They generally forget the immediate past sufferings expecting a better future. No government should exercise powers beyond its constitutional mandate. The reports on offshore bidding, leasing out of ports, rail communication with India speak of it. What about the import syndicates and what's happening now? No one knows. But the prices have soared to an unbearable level for which the regime is accountable. Where the benefits of the increased price have gone needs to be made public. Transparency is needed of the care-takers too.
The drive against wrong-doers is good. But lacking transparency it is facing questions. Things continue as before when also a regime of the day demanded accountability from the others.
VAT continues to be the major source of government revenue. VAT fetched Tk 81.86 billion in fiscal 2004-05, Tk 97.37 billion in fiscal 2005-06 and 108.63 billion in fiscal 2006-07.
From Tk. 231.21 billion in 2004-05 fiscal and Tk. 261.21 in 2005-06 fiscal the revenue increased to Tk. 284.87 billion in fist nine months nine months of fiscal 2006-07. It jumped by over 23 per cent in a couple of years despite a wide publicity of strains about macro-economic management. The government expenditure however increased or much higher during these three years. It was Tk. 539.03 billion, Tk 590.30 billion and Tk 697.40 billion during the three fiscals showing a rise of 29 per cent in 2006-2007 fiscal over 2004-2005. This reflected a 27 per cent rise in revenue earning and 44 per cent in development expenditure.
As proportion of GDP, revenue expenditure was 8.99 per cent in 2004-2005 and 8.81 per cent in fiscal 2006-2007 while this component for development expenditure was up by 5.06 per cent to 5.56 per cent between fiscal 2004-2005 and 2006-2007. AS the GDP rose significantly, the reduction in revenue expenditure was not proportionate. The domestic financing component of the ADP increased from Tk. 205 billion in 2004-2005 to Tk. 260 billion in 2006-2007 fiscal, reflecting a fall in dependence on exogenous resources from 2.4 per cent of GDP to 1.8 per cent of GDP. With the right vision of a popularly elected government, despite all hurdles and limitations or the quality of macro-economic management, it can be safety said that in 2007-2008 fiscal, dependence on domestic finance would have increased with a corresponding fall on dependence on foreign funds.
The overall budget deficit in relation to GDP was 4.2 per cent, 3.9 per cent and 4.5 per cent respectively in FY 2004-2005, FY 2005-2006 and FY 2006-2007. This was financed from local sources by 1.8 per cent, 2.2 per cent and 1.9 per cent of GDP during the above fiscals. External resources provided 2.4 per cent, 1.7 per cent and 1.8 per cent of the GDP for meeting the budget deficit during the aforementioned years respectively. It is thus obvious that our domestic resources have been increasingly financing the deficit. The trend continued over the last decade. The public borrowing during 1996-1997 to 2005-2006 fiscals increased from Tk. 26.54 billion to Tk. 97.44 billions and nine months of 2006-2007 fiscal, it was Tk. 65.66 billion. Thus, a large part of the budget deficit met from local resources in the recent times.
GDP and Sector Wise Share: The GDP in billion taka was Tk. 370.70 billion, Tk 415.73 billion and Tk 467.50 billion during the three fiscals of 2004-2005, 2005-2006 and 2006-2007. The population was 140.6 million in 2006-2007 up from 137.0 million in 2004-2005 fiscal. GDP per capita was $482 in 2006-2007 from $441 in 2006-2007. At current price, GDP grew at 11.44 per cent in 2004-2005, 11.21 per cent in 2005-2006 and 12.45 per cent in 2006-2007 fiscals over respective the previous years.
Autarky is economic self sufficiency. Is Bangladesh far away from it? To let the wheel move for autarky, our own efforts and policies along with coherent resource allocation and reallocation for the optimum benefit are needed. With that end in view, the vision needs to be set, with a time-frame. However, political leadership is needed, because politicians are the artists for the masses.
The GDP was Tk. 4674.97 billion in fiscal 2007 up from Tk. 4157.28 billion in fiscal 2006, Tk. 3707.07 billion in fiscal 2005. The deficit in the budget balance was 4.2 per cent, 3.9 per cent and 4.5 per cent of GDP in FY 2004-2005, 2005-2006 and 2006-2007 respectively. In terms of GDP size, only 2.4 per cent, 1.7 per cent and 1.8 per cent of resources came from foreign sources, to finance the budget fiscal. These figures, in percentage terms compute to amounts that are not substantial. The ADP allocation in these years were half spent and the rationality of these allocations has been questioned. The government activities and performances have been unsatisfactory so far as ADP execution is concerned. Non implementation or failure of project executions have never been duly attended to, nor monitored. On the contrary, the public expenditures soared. Thus, a curtailment of public expenditure, increase in ADP execution of projects on the basis of original, not revised, budget allocation, controlling misuses, containing consumption by accountability of government administration, transparency and accountability in provision of various public services, procurements etc., are likely to pave way for autarky. The arithmetic works well for it. But will the government take up the challenge? Can we not plan for us and our country, with our resources to start with? The new elected government will surely have to attend to it, if the incumbents fail. We can't afford to waste time any more.
The writer, a former treasurer, Bangladesh Economic Association, is senior partner, Masih Muhith Haque & Co., Chartered Accountants, and can be reached at e-mail: [email protected]