Financing could be a constraint to implement ‘as usual’ big budget : WB

The World Bank on Monday said that achieving the GDP growth at targeted 7 per cent in the next fiscal year would be challenging for the government but might not be impossible on some presumed pre-conditions. At a press briefing on the ‘FY 2016 budget assessment’, the WB termed the proposed budget ‘as usual at extended size and financing to implement the budget could be a constraint because of lower growth in revenue mobilisation and foreign assistance inflow than the target set for the fiscal year. ‘Ensuring Political stability and an increase in GDP-investment ratio will require for achieving the targeted GDP growth,’ WB Bangladesh lead economist Zahid Hussain said at the briefing held at its Dhaka office. It is not impossible but challenging, he said. Bangladesh will require increasing its investment rate to 33.5 per cent of GDP from the current 29 per cent along with maintaining political stability to attain 7 per cent GDP growth, he said. Zahid said that an increase in investment at least by 2 per cent to 2.5 per cent would be necessary though investment climate continued to remain weak in the country. Doing business reforms also received limited attention, infrastructure management reforms remained missing and financial sector reforms lacked direction in the budget, he said regarding the reforms issues. The WB also said that there was no need to establish a new bank for the government officials as declared by the finance minister in his budget speech. ‘The country needs no new banks neither in public nor private sectors and steps for consolidated merger for weak banks are needed,’ Zahid said. The multinational lending agency said that domestic resource mobilisation, improving quality of the development expenditure, containing the growth of interest costs, and bringing structural and policy reforms in business regulation, quality and coverage of service delivery would be major challenges in the next budget. There are some laudable intentions on structural reforms but limited initiatives to ensure those reforms, it observed. The WB said that containing inflation to 6.2 per cent was a realistic target which was consistent with monetary programme of the government. It said that the revenue collection target was ambitious and achieving the target at 27 per cent would be challenging as the country never achieved such a growth though there was scope to increase revenue collection which would depend on the capacity and efforts of the revenue administration. There is some fiscal space to cope with the financing constraint, the WB said, suggesting the government for tightening non-ADP capital and net lending of Tk 33,300 crore and cutting ADP allocation in low priority projects. The WB also said that the resilient growth should continue in the next fiscal year on given prospects of global recovery and stable commodity prices in international market along with some positive domestic factors including stable inflation and exchange rate, rise in reserve and continued balance of payment surplus, and healthy growth in NBR revenue collection. It also identified some risks including weak Euro and Euro zone economy, weaker demand for labour in Middle East countries, vulnerability of the financial sector in the country, faltering transition and labour unrest in garment sector and resurgence of disruptive politics in the next fiscal year. Zahid said that the size of the annual development programme for the next fiscal year was not so high in international standards. The WB, however, is doubtful about the implementation ability of the programme as previous experiences does not provide much comfort, he said. On the other hand, obsession with achieving the size created risks of erosion in quality, he said, adding that the government should focus on improving links between expenditure and the quality and coverage of service delivery. It also said that the challenges still remained in public investment management as there were too many unapproved projects and practice of symbolic allocation remained pervasive. The WB said that the government should give urgent attention on improving quality of development expenditure, maintaining infrastructure and containing interest costs of the government. World Bank acting country director Salman Zaidi, among others, spoke at the briefing. News Courtesy: www.newagebd.net