Growth target for next fiscal ambitious: WB

The World Bank said Wednesday that the 7.3 per cent gross domestic product (GDP) growth target in the next fiscal would be ambitious if the private investment, infrastructure development and political stability are not ensured.
"If the government wants to achieve 7.3 per cent growth in the next fiscal, it would need enhancement of its private investment-GDP ratio by 5.0 percentage points more," said Dr Zahid Hussain, lead economist of the World Bank.
The World Bank (WB) Dhaka office organised an analysis of the Bangladesh's Tk 2.50 trillion new national budget for the financial year (FY) 2014-15. The proposed budget is 16 per cent higher than that of the revised budget for FY2014.
"Although the growth target is ambitious it's achievable if the government can develop infrastructure, ensure political stability, attract private investment and restore business confidence," said Dr Hussain.
In the wake of slowed export growth, weak private investment and vulnerability in financial sector due to increasing non-performing loan, the growth target is ambitious, he added.
The WB economist said he would be happy if Bangladesh could achieve 6.5 per cent economic growth in the next fiscal considering the present situation.
WB Country Director in Bangladesh Mr Johannes Zutt said political stability is obviously very important for improving businesses confidence.
"Business always looks for level-playing field, favourable business climate and adequate infrastructure," he said replying to a question at the budget analysis programme.
Dr Zahid Hussain said, "By 2021, 10 per cent economic growth is not impossible. The country needs to add only 0.20 to 0.30 percentage points of GDP growth every year with the existing ones."
He said Bangladesh's proposed Tk 2.50 trillion national budget is smaller compared to the "development needs" of the country while bigger than the "implementation capacity" of the government.
"Considering the needs of the development the expenditure target in the budget is relatively low. On the other hand, if you take into account the execution capacity of the government, the sum is larger," said Mr Zahid Hussain.
He said, "We have analysed the data of 112 countries which have per capita income level similar to Bangladesh in FY'13. It shows that Bangladesh needs to expand its public expenditure-GDP ratio to 30 per cent and the revenue-GDP ratio to 23 per cent to achieve the desired 7.3 per cent growth in the next fiscal."
At present, Bangladesh's expenditure-GDP ratio is only 18.3 per cent and the revenue-GDP ratio is only 13.3 per cent.
The lead WB economist said Bangladesh does need an investment for infrastructure development of 7.38 per cent to 10.02 per cent of GDP in next 10 years.
He said if the government wants to achieve 7.3 per cent GDP growth in the next fiscal it would need to develop infrastructure, improve electricity supply, ensure best use of land and develop manpower.
The WB economist said the proposed budget is promising one both in terms of expenditure and revenue but lacks time-bound road map in some areas, including enactment of VAT law, economic zones and PPP (public private partnership).
Johannes Zutt, the WB Bangladesh chief said: "Many challenges, particularity resource mobilisation and effective ADP implementation, lie ahead to implement it."
Dr Zahid Hussain said excepting FY2011, revenue target is under achieved in the last five years. Consistent large gaps in external financing, domestic financing overshoots when external financing undershoots, the bank said in its analysis, he said.
The WB welcomed reduction of subsidies in different sectors, including BPC, by 18.2 per cent, and said declining trend of subsidy is good for the economy.
But share of non-development capital expenditure increased to 10.4 per cent of total expenditure, compared with 8.7 per cent in revised FY14 budget, which cause concern, it said.
Dr Hussain said in the name of capital expenditure the government's initiatives of recapitalisation of the state-owned commercial banks and injecting money to the state-owned enterprises to recover from the year-on-year losses is not good news for the economy.
As non-development expenditure, the government set aside Tk50 billion for recapitalisation of corruption-hit state-owned banks. In this connection, the WB analysis said the budget speech is short on improving governance in public sector banks.
Further gradual capital injections need to be conditional on actions to improve governance and maintaining prudent credit growth limits is necessary to improve state-banks governance.
If exemplary punishment is not taken against loan defaulters, the culture of loan default will continue and the non-performing loan will rise further, said Dr Hussain.
About the development budget, the WB economist said the government should have strong feasibility study and economic analysis before taking any projects.
He laid emphasis on boosting the capacity of the Planning Commission in a bid to ensure prefect project approval after a proper scrutiny.
Mr Hussain has suggested the government for undertaking economic and financial reforms including enactment of the PPP law, prudent VAT law, improve governance in the state-owned commercial banks and the enterprises, automatic financial reporting, revenue board modernisation plan, best use of the lands and setting up of special economic zones.