The independent multidisciplinary think-tank, Unnayan Onneshan (UO), in its pre-budget issue of Bangladesh Economic Update identifies ten major economic challenges against the backdrop of shortfall in collection of revenue vis-à-vis target, infrastructure deficit and depressed investment, culminating into non-achievement of targeted rate of growth in gross domestic product (GDP), reports UNB.
The monthly update of April 2015 presents a critical analysis of the ten major economic challenges relating to growth in GDP, revenue collection, government expenditure, budget deficit, foreign aid, private sector credit, export, inflation, non-performing loan, and saving-investment gap which the economy has underwent during the FY 2014-15 and should be taken into account for the upcoming budget for FY 2015-16.
Calling for public debates for shifting the focuses of policies and functions of the ministry, the research organisation suggests three core areas - expansion of productive capacity, effective provision of social services to the citizens and sustainable development - for the next national budget of 2015-16.
In addition to shifts in policies, the UO urges restructuring the present functioning of the Ministry of Finance by dividing the functions into six divisions, ie Public Finance Management Division, Revenue Division, Economic Relation Division, Social Security and Development Management Division, Banking Division, and Productive Capacity Expansion Division, in order to ensure enhanced effectiveness, strengthened capabilities and greater accountability, suiting to the need of the country.
Noting that the growth in GDP has been falling short of target in recent years, the think-tank projects that if the business situation continues as usual, the targeted rate of growth in GDP of 7.3 per cent will not be achieved and may stand at the maximum of 6.26 per cent.
Observing the shortfall in collecting revenue vis-à-vis the target, the UO finds that in FY 2014-15, the target of the collection of revenue was set at Tk 1829.54 billion (182954 crore), whereas the actual amount of revenue collection has stood at Tk 666.97 billion during the first half of the current fiscal year, representing only 36.5 per cent of the target.
Taking account of unsatisfactory implementation of government expenditure, the research organisation evinces that the actual amount of non-development expenditure and annual development programme expenditure has stood at Tk 597.89 billion and Tk 170.09 billion during the first half of FY 2014-15 against the whole fiscal year's target of Tk 1701.91 billion and Tk. 803.15 billion respectively, representing only 35.1 per cent and 21.2 per cent of respective targets.
Referring to the low budget deficit due to low implementation of budget in the current fiscal year, the think-tank shows that against the target of Tk 675.52 billion in FY 2014-15, the actual budget deficit has become Tk 101.04 billion during the first half of the fiscal year, which has been financed by Tk 14.58 billion from foreign sources and Tk 86.46 billion from domestic sources (Tk 57.55 billion from banking system and Tk 28.91 billion from non-bank sources).
Referring to declining foreign grant and increasing foreign loan, the UO demonstrates that foreign grant and foreign loan have stood at Tk 3.93 billion and Tk 52.75 billion respectively during July-December period of FY 2014-15 against the target of Tk 62.06 billion and Tk 45.02 billion set in the budget of FY 2014-15 for the whole fiscal year.
Growth in private sector credit has fallen short of the target at the end of the first half of the FY 2014-15 signalling sluggishness in business activity in the economy, comments the research organisation.
The actual growth in private sector credit stood at 13.5 per cent against the target of 16.5 per cent set in the monetary policy statement announced by the central bank for the first half - July-December - of FY 2014-15.
Referring to increased gap between savings and investment, the research organisation evinces that in FY 2012-13 and FY 2013-14, the national savings were 30.53 per cent and 30.54 per cent, whereas the total investment were 28.39 per cent and 28.69 per cent of the GDP representing 2.14 and 1.85 percentage point gaps respectively.
