In the proposed budget for the fiscal year 2020-21, Finance Minister AHM Mustafa Kamal set the GDP growth target at 8.2 percent. But economists have a different say.
Executive Director of the Policy Research Institute Ahsan H Mansur termed the 8.2 percent GDP (gross domestic product) growth target “ludicrous” while former advisor to a caretaker government Dr Mirza Azizul Islam labeled it “unrealistic”.
On Thursday (June 11), the finance minister posted a Tk 5,68,000 crore budget for FY2020-21 laying emphasis on health, social safety net and agriculture.
In the outgoing FY2019-20, GDP growth was forced to scale down to 5.2 percent against the targeted 8.2 percent due to the pandemic.
In the proposed budget speech, the finance minister said the coronavirus pandemic has turned the country’s economy upside down with a lower fiscal growth this year and the next fiscal year’s budget is to expose the extent of the grim situation.
Yet, he set GDP growth at 8.2 percent in the proposed budget.
Professor Selim Raihan, executive director of the South Asian Network on Economic Modeling (SANEM) -- a research organization, questioned the rationality of setting the high growth target amid the Covid-19 pandemic.
He said, “There is no guarantee when economic activity will get normal. Export and remittance -- two mainstays of our economy -- are experiencing a shock. Negative growth is forecasted in our export destinations. Oil price is plummeting in the global market and workers in the middle-east are losing jobs.”
“And all these crises are going to be graver in the days to come. Therefore, the question remains if the 8.2 percent GDP growth target is feasible or not,” he added.
Earlier, on Tuesday, while speaking at a workshop on “Transparency in the financial sector” in the capital, economist Ahsan H Mansur questioned, “I can’t understand how the finance minister sets this GDP target? Where will this GDP come from?”
“We (economists) recommended setting a 5 to 5.50 percent GDP growth target which may be increased up to 6 percent,” he said.
“In this pandemic time, every person is scared and frightened. Export earnings and remittance have dried up while import has hit the bottom. It cannot be said for sure how long such conditions will prevail.”
“But he (finance minister) again set 8.2 percent growth target for the next fiscal like the outgoing one,” added Mansur.
Bangladesh achieved 8.15 percent growth target in FY2018-19 and set a target of 8.2 percent for the outgoing FY2019-20. But it stumbled in the face of global trade stagnation thanks to the pandemic.
Last April, the World Bank predicted that Bangladesh’s GDP growth would plunge to 2.0–3.0 percent in the 2019-20 fiscal year amid the declining garment exports, lower private investment growth and broader disruptions caused by the Covid-19 havoc.
But the finance minister then disagreed with the World Bank's forecast, saying the country’s GDP cannot crash-land since the economy was on a strong footing except for export growth during the first eight and a half months till March 15.
Former adviser to a caretaker government Dr Mirza Azizul Islam thinks that 8.2 percent GDP projection does not match the reality.
He said, “The World Bank is forecasting GDP growth around 1 percent. How come we set this ambitious target? How will it be achieved?”
The economist said businesses have ground to a halt, industrial production has lost pace, and export-import have hit the bottom in the last three months of the pandemic, while the National Board of Revenue (NBR) lag far behind than the target of achieving revenue collection.
He said, “Highest 4 to 5 percent GDP growth could have been set for the new fiscal year. It will not be possible to achieve this huge growth target in the present condition. Revenue target is also not realistic.”
In the Tk5,68,000 crore proposed budget, the revenue target has been set at Tk3,78,016 crore. As a result, the budget deficit will stand at Tk1,85,984 crore, which is 5.8 percent of the total GDP.
The government wants to borrow Tk 84,983 crore from the banking sector to meet the deficit.
Dr Islam feared that excessive borrowing from the banking sector would aggravate the investment climate.
“If this huge sum of money is borrowed from the banking sector, it will ultimately worsen the investment in the private sector and private entrepreneurs will not be able to avail credit facilities,” he warned.
