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Revenue shortfall may put BD into debt trap

Warn economists


FE Report | Monday, 8 July 2019


As the government spending is growing, failure in meeting the revenue targets could put Bangladesh into a debt trap, economists warned on Sunday.
To avoid such unpleasant macroeconomic situation, the policymakers should focus not only on aspiration towards upper middle-income country but on the capacity building of the revenue board to raise the revenue-GDP (gross domestic product) ratio.
The economists, at the same time, called for setting up development priorities and raising budgetary allocations for the health and education sectors to properly reap the benefits of high demographic dividend.
The call came at the final plenary session titled 'Economic policy priorities for a middle-income country' of the two-day international conference for economists.
The Bureau of Economic Research (BER) and the Department of Economics of the University of Dhaka (DU) jointly organised the conference with the theme 'Inclusive Growth for Sustainable Development' at Muzaffar Ahmed Chowdhury Auditorium on the DU campus.
Professor of the Department of Economic of Dhaka University Dr Selim Raihan moderated the session.
Speaking at the session, Executive Director of Policy Research Institute (PRI) Dr Ahsan H Mansur said Bangladesh managed to maintain its socioeconomic growth over the years despite having low revenue-GDP ratio.
He said low level 0f statistics was fine for low level of development activities, but the country is now moving towards upper MIC (middle-income country) and the size of the government expenses keeps increasing.
"Are we going to absorb it as there is pressure in the exchange market, BoP (balance of payment) is under pressure and the pressure was also observed from the government to fund its mega projects," he said.
Mr Mansur said the government is implementing most of the mega projects, except the Padma Multipurpose Bridge, through borrowing from external sources.
Giving example of Rooppur Nuclear Power Plant project, he said the cost of the project is around US$ 13 billion, which will be borrowed from outside.
The project would alone increase the foreign debt-GDP ratio by around 50 per cent, he added.
"These are the risks. If we can't maintain our fiscal management, we can bring trouble. Temptation is very high as most of the countries have fallen into those temptations," he said.
Suggesting enhancing the capacity building of the National Board of Revenue (NBR), the noted economist said the MIC aspiration should match the capacity, otherwise it would bring trouble for the economy.
"In my view, Bangladesh is set for that kind of situation. So, develop the capacity first and move forward," he added.
Renowned economist Dr Wahiduddin Mahmud said managing fiscal policy, enhancing revenue-GDP ratio and social public spending would be challenging tasks for the government in the coming years.
He said Bangladesh is in the middle of the tenure of demographic dividend, but the progress is much below the satisfactory level.
"We cannot go ahead in such a situation. We need to make our people more efficient, especially in the time of fourth industrial revolution," he said.
Mr Mahmud also suggested setting up work priorities and capacity-building of the government offices to meet the challenges during the transition towards impersonal rule-based economy from personal negotiation-based businesses.
Executive director of the Centre for Policy Dialogue (CPD) Dr Fahmida Khatun said many countries remained in the trap of MIC for years because of poor governance while some countries in the East Asian region became successful.
She said the government should learn lessons from them after analysing the factors behind the stories of their successes and failures.
She said Bangladesh is moving towards dual transition-upper MIC and achieving SDGs (sustainable development goals) by 2030 -- and that resource mobilisation will be a huge challenge.
She also stressed the need for reforms in the resource mobilisation system.
Member (general economic division) of the Planning Commission Dr. Shamsul Alam said the government is building smooth connectivity across the country to attract more local and foreign investment.
He said 100 special economic zones are being built to attract investors and many foreign investors started coming to Bangladesh finding it a suitable place for their investment.
Urging the academia and think-tanks to come up with more policy suggestions, he said the government recently accepted their demand for formulation of a commission for the banking sector.
"So, it (banking commission) will be formed," he assured.

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