Booming investment projected for next FY

The government has projected above 20 per cent investment growth in the economy for the upcoming fiscal year to kick start the sputtering investment climate plagued with post-corona, slowing global economy, and runaway inflationary syndromes.

Senior finance officials believe the new fiscal year will usher in huge employment opportunities and scopes for new investment, as the budget is going to estimate more public and private investment than the current fiscal year.

According to the draft budget document for the upcoming 2022-2023 financial year, total investment has been projected at Tk 13,90,047 crore which is Tk 11,46,119 crore. The growth in investment is 21.18 per cent.

The growth in the gross domestic product (GDP) has been estimated at 7.5 per cent.

The investment will rise by Tk 2,43,927 crore, according to the document, obtained by The Business Post.

The Finance Ministry has projected a 31.5 per cent investment to GDP ratio for FY2022-23. It was 33.1 per cent for this fiscal year. The investment to GDP ratio for the next fiscal year is, however, lower than the ratio set for the current fiscal year due to change in GDP base year, officials at the finance ministry said.

For the ongoing FY2021-22, the private investment to GDP ratio was projected at 25 per cent (about Tk 8,65,649 crore) and the public investment to GDP ratio at 8.1 per cent (about Tk 2,80,870 crore) — which put the total at Tk 11,46,119 crore.

For FY2022-23, it forecasted 24.9 per cent private investment (about Tk 10,98,799 crore) and 6.6 per cent government investment (about Tk 2,91,248 crore) — taking the total to Tk 13,90,047 crore.

This means, that although the investment to GDP ratio has been lowered, both public and private investment in terms of money will still increase. In the next financial year, the government’s investment will go up by Tk 10,778 crore and private investment by Tk 2,33,150 crore.

In the next fiscal, the GDP size is projected to be Tk 44,12,849 crore in terms of money. This fiscal, it’s Tk 34,62,596 crore.

The government in the next fiscal will emphasise an increased private investment to create employment and raise the income limit for those who lost jobs or were forced to live below the poverty line because of the Covid-19 pandemic.

In FY2020-21, the private investment to GDP ratio was 24.2 per cent and the year before, in FY2019-20, it was 23.6 per cent.

Meanwhile, the private sector credit flow in the banking sector was targeted to grow at 15 per cent in the current fiscal year. In this fiscal, at the end of February, it was nearly 11 per cent.

The Finance Ministry did not go for a higher projection as private sector investment did not rise in the past two fiscal years due to Covid. But it’s hoping that private investment will increase in the next fiscal as the Covid situation is now under control and improving.

Policymakers are also hoping that, apart from a higher credit flow in the private sector, the industrial goods and capital equipment import situation will also improve in the coming year.

Banking on recovery

Although the Russia-Ukraine war has somewhat impacted the economy, Finance Minister AHM Mustafa Kamal is hoping to achieve a GDP growth target of 7.5 per cent in the next fiscal. In this fiscal, ending in June, the government had aimed to hit 7.2 per cent.

However, economists say that government should increase investments or the size of social safety net programmes to raise expenditure since the investment to GDP ratio is not that satisfactory.

They said that Bangladesh’s tax-to-GDP ratio needs to go higher since it is still lower than many countries in the world and the budget deficit should remain under 5 per cent of the GDP.

According to sources, the Finance Division hopes that recovering business activities and rising export earnings will play a major role in rejuvenating the economy in the next fiscal.

Because of this, the government plans to set Tk 4,33,000 crore as the revenue target in the national budget for FY2022-23, which is over Tk 44,000 crore higher than the ongoing fiscal’s target — Tk 3,89,000 crore.

Out of this, Tk 3,70,000 crore will be collected through the National Board of Revenue (NBR) sources. Tax revenue from non-NBR sources has been estimated at Tk 18,000 crore and non-tax revenue is projected to be the remaining Tk 45,000 crore.

The government wants to keep the budget deficit within 5.5 per cent of the GDP. In terms of money (including grants), it is expected to be Tk 2,44,864 crore.

Experts and people concerned are worried about achieving the 7.5 per cent GDP growth rate in the next fiscal since this fiscal’s 7.2 per cent target has become somewhat unreachable due to the pandemic-hit economy.

At the same time, the Russia-Ukraine war has also played a part in raising Bangladesh’s inflation rate, which has already surpassed the 5.7 per cent target.

The inflation rate was expected to be at 5.3 per cent in this fiscal’s budget. It was revised upwards to 5.7 per cent later.

Driven by soaring costs of food, the country’s annual inflation rate rose to 6.22 per cent in March this year from February’s 6.17 per cent. It was the highest since October 2020.

The Finance Division hopes that subsidies will keep the prices and the inflation rate under control in the next fiscal.

In the next budget, the government plans to introduce a Tk 2,46,207 crore Annual Development Programme (ADP) — which is 5.6 per cent of the GDP. It will be Tk 20,833 crore more than the current ADP size of Tk 2,35,324 crore.