Political unrest tests economy\\\'s resilience

The Bangladesh economy is said to be bleeding now. Uncertainty looms over all conceivable spheres of social and economic life of the citizens. The country which was earning good image for its achievements in socio-economic arena is now fraught with unabated political unrest. All concerned, including business organisations, economists, civil society groups and the media, are apprehensive of a serious decline in GDP (gross domestic product), fiscal revenues, export earnings, inward remittances, foreign aid and investment.
The budget for FY 2014-15 of Bangladesh has been set at Tk 250, 5.06 billion and the growth target at 7.3 per cent. Now everybody, including the finance minister, is apprehending that the growth target is not achievable. The government is thinking to revise downward its growth rate target. The finance minister could not foresee what a terrible year 2015 would be.
Over the last few years, it has been observed that economic growth in Bangladesh is not investment-driven, rather it is based on increasing domestic consumption, public expenditure, export and import. Investment as a share of GDP could not exceed 28 per cent over the last few years. Private investment could not exceed 17 per cent. The growth theorists estimate that given the size of Bangladesh economy, the share of investment in GDP should be 32 per cent and that private investment should occupy more than 20 per cent. But this is not happening.
There are accusations of inadequate supply of gas and electricity. Now, everybody is insisting on a favourable business environment and a stable political situation. It is imperative for accelerating country's economic growth through massive investment.
Whether local or foreign investment, restoration of confidence is essential. There are reports in the media about falling bank credit. Investors are unwilling to make new investments in the prevailing situation. The chaotic situation in the country has resulted in the sluggish trend in trade, commerce and investment. The central bank in its monetary policy targeted increased credit flow in the private sector, which is unlikely to happen if the prevailing state of things keeps lingering.
The target of achieving 14 per cent increase in the credit flow during July-December period of the current fiscal could not be realised. Only 12.7 per cent could be achieved. One interesting feature has been observed about imports from the statistics released by the Bangladesh Bank. While investment is sluggish, import bill has been increasing. Statistics suggest that there was growth during July-December 2014. The corresponding growth in imports in the previous fiscal year was only 5.53 per cent. Observers suspect that higher import bills reflect flight of capital from the country. Persisting political unrest might have prompted such flight of capital.
The prevailing situation is affecting both domestic and international trade. Supply chain has collapsed. Whether small or large, every business has been affected. In the export trade, there are cancellation of orders and enhancement of carrying costs. The growth in the export sector is not encouraging. Available statistics suggest that export grew at only 2.0 per cent during July-January of the current fiscal. The growth in the corresponding period of the previous fiscal was 15 per cent. Remittance from abroad has also been found to be falling. In December 2014, the amount of remittance was $1.27 billion, it fell to $1.23 billion in January 2015.
Revenue collection also fell short of the target. According to the estimation of the Metropolitan Chamber of Commerce and Industry (MCCI), total tax-revenue collection (NBR and non-NBR) remained below target. The NBR tax-revenue collection was found to be 23.5 per cent short of the target during the July-November period of FY 2014-15. Interesting enough, there was no political disturbance during that period. So, there is apprehension that realising the ambitious revenue target will be difficult in the current fiscal.
Implementation of the annual development programme (ADP) for the FY 2014-15 until January did not reflect good sign. During the July-January period, 32 per cent of ADP was implemented. The progress of ADP implementation was 39 per cent during the same period in the FY 2013-14. During the last seven months, 33 per cent of government revenue allocation and 31 per cent of foreign aid were spent. The physical progress is found to be less than financial progress. Doubts are there as to how 90 per cent progress can be achieved at the end of the current FY.
According to the business community, the on-going political turmoil has cost the economy a loss Tk 1,500 billion over the last one and a half months.
The sluggish trend in trade, commerce and investment has a tremendous impact on employment. Every year 2.2 million people are entering the labour market. Job creation, under the prevailing business environment, remains too distant to reflect on.  
An end to the current stand-off can only be perceived through understanding of the grave realities and the very high stakes that the nation is faced with.  A sustainable democratic polity has to be sorted out through discussion and dialogue. It is the foremost responsibility of the politicians to put the country on the right track.
The writer is an economist and columnist.
 chowdhuryjafar@ymail.com