Looking back: Financial year 2015-16: 7.05pc GDP growth raises questions [ Tritiyo Matra News ]

Looking back: Financial year 2015-16: 7.05pc GDP growth raises questions

Local May 28, 2016

The government is facing series of questions about its estimate of 7.05 per cent growth of gross domestic product in the outgoing 2015-16 financial year which is marked by poor revenue generation because of sluggish economic activities.
Economists, local think-tank and multilateral donors raised the questions saying that the projected growth rate was higher and could not be substantiated by the economic indicators.
Barring the exports, other economic indicators were far from good in the outgoing financial year, former caretaker government adviser Mirza Azizul Islam told New Age in the past week.
He said actual revenue collection, remittance inflow and capital goods imports were not supportive of the estimated GDP growth of more than 7 per cent.
In financial year 2014-15, the GDP grew by 6.51 per cent.
Government officials attributed the estimated high growth to the implementation of the new national pay scale in the outgoing financial year. More than Tk 15,000 crore was needed to implement the first of the two phases of the pay scale implementation in 2015-16.
Local think-tank Centre for Policy Dialogue said the implementation of the pay scale had no major impact over the poor economic activities.
Income tax collection remained much lower than the estimated 14.1 per cent growth of nominal GDP exposing that there was no significant reflection of the pay scale to the other macroeconomic indicators, it noted at a recent proess conference.
Bangladesh Bureau of Statistics made more than 5 percentage point higher growth in the outgoing financial year over the past fiscal when the government was facing severe criticisms that it had failed to exceed 7 per cent growth rate since it came to power in 2009.
In 2006-07, the GDP growth reached 7.06 per cent.
Policy Research Institute executive director Ahsan H Mansur said that calculations of the bureau, controlled by the planning ministry, often proved to be ‘flawed and politically motivated.’
Before the bureau submitted its projection at a meeting of the National Economic Council on April 6, the ministry of finance expressed pessimism that crossing the 7 per cent GDP growth barrier might be hampered due because of poor implementation of the annual development programme and sluggish remittance and revenue earnings.
The finance ministry expressed its pessimism to sovereign credit rating agency Standard and Poor’s during series of meetings in late March before announcement on the credit rating on Bangladesh by the latter.
The World Bank while releasing the Bangladesh Development Update on May 1 said that 10 of the 12 economic indicators witnessed slower growth between July 2015 and February 2016 than that of same period in the previous financial year.
The government showed the provisional GDP growth at 7.05 per cent in the outgoing fiscal although there was stagnancy in investment by the private sector, said World Bank chief economist Zahid Hussain in Dhaka.
He said continued weakness in the banking sector, particularly in the state-owned banks, was undermining credit and growth and affected fiscal sustainability.
According to a finance ministry official, the government failed to boost up domestic demand which was essential to expand the economic activities.
The government failure has been attributed to the delay in adjustment of fuel oil prices. Had the government cut the fuel oil prices earlier than it did finally in late April, the government might have options to support higher growth rate amidst criticisms.