Negative economic trends need correction
Sunday, 13 December 2009
Ehsanul Kabir
A superficial overview creates an optimistic picture of the country's macro-economy, in the backdrop of foreign currency reserve, swelling, comfortable balance of payments and reasonably good productivity in manufacturing and agriculture.
Viewed from the dimension of time, some of the rather satisfactory macro economic indicators, may not be a complete picture. The overall macro economy could be accumulating some disconcerting aspects, the strains of which could be felt, not immediately, but in mid- and longer-terms. And, of course, time is an unavoidable dimension for a micro economy.
The picture of normalcy could be broken unless the negative trends are detected early with due seriousness for correction. For example, the rate of investment has been a big and persisting challenge in recent years. Economic growth for generating jobs and income and poverty alleviation depends on investment. But, investment in real sectors has been lagging, ever since the emergency caretaker government had taken charge nearly three years ago. The situation has turned even worse under the present government. Investment by the private sector continues to be sluggish for reasons, ranging from energy insufficiency to the government's slow response in providing guidelines that could encourage the private sector to invest in infrastructure improvement. Where private investment is not up to the desired level, the public sector has to make up with extra investment. But, is that the ground reality?
The government's annual development programme (ADP) shows the extent of public sector investment in a particular year. But poor implementation often frustrates ADP promises. The government, according to available reports, could not even implement 25 per cent per cent of the Taka 300 billion ADP up till now of the current financial year. This rate of implementation is slower than realised under the unelected caretaker government. Only faster ADP implementation can ensure total implementation, without which the economy cannot get the investment pledged by the government. Foreign aid support to the economy is also dwindling.
The flow of foreign aid has not picked up much, notwithstanding a higher projection this fiscal year. There has also always been a big difference between commitment and disbursement of external aid in the case of Bangladesh. This does otherwise reflect the poor aid absorptive capacity of its economy. Things need to improve on this front, on a priority basis to minimise the growing external debt servicing liability.
The trends show that revenue earning might suffer a setback during the current fiscal year. The deceleration in export earning is also likely to continue. On the whole, slack ADP implementation, together with a slow rate of investment, declining trends in the growth of export receipts, and the like do not help draw a rosy outlook for the economy beyond the short term.
Each of these areas deserves focused attention. Bureaucrats, who implement the ADP, need to be activated to deliver. Without supervision and accountability, which are weak areas, the task would not prove easy. Unless the operational efficiency of the banking sector improves the quality of projects, supported by bank funds, is unlikely to improve. The private sector also awaits positive signals from the government that it can improve energy supply without unnecessary procedures delaying it.
A superficial overview creates an optimistic picture of the country's macro-economy, in the backdrop of foreign currency reserve, swelling, comfortable balance of payments and reasonably good productivity in manufacturing and agriculture.
Viewed from the dimension of time, some of the rather satisfactory macro economic indicators, may not be a complete picture. The overall macro economy could be accumulating some disconcerting aspects, the strains of which could be felt, not immediately, but in mid- and longer-terms. And, of course, time is an unavoidable dimension for a micro economy.
The picture of normalcy could be broken unless the negative trends are detected early with due seriousness for correction. For example, the rate of investment has been a big and persisting challenge in recent years. Economic growth for generating jobs and income and poverty alleviation depends on investment. But, investment in real sectors has been lagging, ever since the emergency caretaker government had taken charge nearly three years ago. The situation has turned even worse under the present government. Investment by the private sector continues to be sluggish for reasons, ranging from energy insufficiency to the government's slow response in providing guidelines that could encourage the private sector to invest in infrastructure improvement. Where private investment is not up to the desired level, the public sector has to make up with extra investment. But, is that the ground reality?
The government's annual development programme (ADP) shows the extent of public sector investment in a particular year. But poor implementation often frustrates ADP promises. The government, according to available reports, could not even implement 25 per cent per cent of the Taka 300 billion ADP up till now of the current financial year. This rate of implementation is slower than realised under the unelected caretaker government. Only faster ADP implementation can ensure total implementation, without which the economy cannot get the investment pledged by the government. Foreign aid support to the economy is also dwindling.
The flow of foreign aid has not picked up much, notwithstanding a higher projection this fiscal year. There has also always been a big difference between commitment and disbursement of external aid in the case of Bangladesh. This does otherwise reflect the poor aid absorptive capacity of its economy. Things need to improve on this front, on a priority basis to minimise the growing external debt servicing liability.
The trends show that revenue earning might suffer a setback during the current fiscal year. The deceleration in export earning is also likely to continue. On the whole, slack ADP implementation, together with a slow rate of investment, declining trends in the growth of export receipts, and the like do not help draw a rosy outlook for the economy beyond the short term.
Each of these areas deserves focused attention. Bureaucrats, who implement the ADP, need to be activated to deliver. Without supervision and accountability, which are weak areas, the task would not prove easy. Unless the operational efficiency of the banking sector improves the quality of projects, supported by bank funds, is unlikely to improve. The private sector also awaits positive signals from the government that it can improve energy supply without unnecessary procedures delaying it.