Dhaka, Bangladesh (BBN)– The government will face some major challenges including boosting private investment, bringing momentum in economic activities, achieving GDP growth at higher rate and containing inflation in the new fiscal year 2014-2015 that begins on Tuesday amid looming risk of political instability, economists and business leaders said on Monday.
Achieving the targets set in the budget documents will be tough even in the normal circumstances as many of the targets are over ambitious, they said, according to the New Age, a local newspaper, report.
Any political instability which seems inevitable will create tough challenges for the government in implementation of the budget for the year, causing tremendous pressure in the economy, they said.
Economists and businessmen on Monday told the newspaper that maintaining macroeconomic stability through ensuring enough investment in the private sector and restoring momentum in economic activities, achieving revenue collection and export earnings target and containing high inflation would be tough for the government.
Ensuring law and order situation in the country particularly ensuring personal safety will also be a major challenge for the government, they said.
The budget for the FY 2014-2015 will be implemented from Tuesday. The parliament on Sunday passed the budget of BDT 2,50,5.06 billion with a deficit of BDT 675.52 billion or 5.0 per cent of the gross domestic product.
In the budget, the government has set target of achieving growth at 7.3 per cent and bringing down inflation at 6 per cent.
Finance minister AMA Muhith in his budget speech mentioned that favourable weather and political stability were required for achieving growth target and other budgetary assumptions including investment, inflation and export earnings.
Opposition alliance led by the Bangladesh National Party (BNP) has already threatened to launch tough movement against the government after Eid-ul Fitr demanding new national elections.
Centre for Policy Dialogue executive director Mostafizur Rahman said that the country needed peaceful environment and political stability to achieve 7.0 per cent economic growth and more.
“The country’s economy has some inherent resilience to grow by 5.0 per cent to 6.0 per cent. But the government should ensure political stability for economic growth by 7.0 per cent to 8.0 per cent,” he said.
All sectors including industrial and agricultural production, services, transportation, export, inflation and investment will directly or indirectly be disrupted if there is any political unrest like hartal and violence in the new fiscal year.
Investment including foreign direct investment will be adversely affected as investors will not come up with term investment amid political uncertainties and policy unpredictability, he said adding that foreign investors would also refrain from new investment.
Increasing budget implementation capacity is also another requirement to achieve the targets set in the budget which is bigger than the government’s implementation capacity, he said.
Mostafiz stressed on ensuring inclusive and discussion-based political culture in the country to avoid further political uncertainties and instability.
Bangladesh Bank data showed that the credit growth in the private sector stood at 11.5 per cent in March — much below from the central bank target of 16.5 per cent.
In the last fiscal year, the economy grew by 6.12 per cent against the target of 7.2 per cent.
Former caretaker government adviser Mirza Azizul Islam said that the targets demonstrated in the budget were over ambitious which would be challenging to achieve even in the normal
economic and political circumstances.
“It will be more challenging for the government to implement the budget in terms of achieving GDP growth rate, implementing annual development programme, containing inflation and achieving revenue collection targets,” he said.
Political instability will disrupt investment, employment generation, revenue collection leading slower economic growth in the country, he apprehended.
Former Bangladesh Bank governor Salehuddin Ahmed said improving investment environment, removing political uncertainties, ensuring law and order and good governance in the banking sector were the major challenges for the government.
Till now, there is no sign of improvement of business and investment-friendly environment in the country, he mentioned.
Former Federation of Bangladesh Chambers of Commerce and Industry president Mir Nasir Hossain said that stable political situation was the pre-condition of economic development.
Enhancing private investment through ensuring stable political environment, providing improved infrastructure and utilities including gas will be the major challenges for the government, he said.
He said that the government might increase its borrowing from domestic sources particularly from banks being failed in borrowing from foreign sources that will create financing problems for private investors.
Government’s possible excessive borrowing from banks may make credit costlier and less available for investors, he said.
Former Bangladesh Employers Federation president Fazlul Haque said that improving infrastructure for accelerating investment along with ensuring political stability, increasing revenue collection and implementing ADP would be important for the government.
BBN/SSR/AD-01July14-10:10 am (BST)
