Govt should cut spending,borrow less : Mirza Aziz

FE Report Former finance advisor Dr Mirza Azizul Islam Friday expressed his surprise over abnormal rise in government's bank borrowing and slow implementation of the Annual Development Programme (ADP) this fiscal. "Government is borrowing from banking sector but the rate of ADP(annual development programme) execution is slowing down. This is really a puzzle," he said. He however suggested that the government reduce its borrowing from banking sector and curtail its expenditure. Dr Islam was speaking at a seminar on Bangladesh at 40: Changes and challenges held at Jahangirnagar University (JU). Faculty of business studies organised the seminar. He said high bank borrowing by the government will lead to sharp rise in inflationary pressure on the economy. He said government usually finances the deficit by borrowing from the banking system, domestic private and international sources. The former adviser said the certain pressures have emerged in recent months in the form of deterioration of trade balance, fall in the growth of remittances, slow disbursement of external aid and some degree of liquidity shortage in the banking system. These pressures calls for expeditious reforms in macroeconomic management, he added. Mr Mirza said the country's aid dependency has fallen in recent years. "This is a good sign, but there is aid worth 13 billion US dollars in the pipe line. We have failed to utilise this fund due to our poor capacity," he added. Speakers at a business session of the seminar were critical of the government's statistics on the country's rate of poverty which now officially is shown at 31 per cent. They were also critical of the government's statistics relating to reduction of Gini Co-efficient. Gini-Coefficient is a measure of income inequality and its reduction means that income inequality has declined. According to government statistics, Gini Coefficient has dropped to 0.45 in 2010 from 0.5 in 2005. Former vice chancellor Mustahidur Rahman said: "I don't see reasons for the Gini coefficinet to come down in 2010." He said high inflation during 2007-08 forced the country's at least 4.0 million people to go below the poverty level. "In this circumstances, how can the co-efficient reduce?" he asked. He also said I also don't know how the poverty rate has fallen to 31 per cent from 40 per cent. Centre for policy Dialogue (CPD) distinguished fellow Dr Debapriya Bhattacharya said the country's there was actually no improvement in poverty level, especially in case of extreme poverty. Eminent economist Binayek Sen said this is also an important question what percentage of inequality will be chosen as 'sustainable' level.