GDP
Without reforms, Bangladesh’s GDP could fall below 4% by 2035: World Bank study
World Bank, in a study, has found three obstacles to Bangladesh’s economic reform. Without massive reforms, Bangladesh’s gross domestic product (GDP) could fall below 4 percent by 2035, it said.
The three obstacles are declining trade competitiveness, a weak and vulnerable financial sector, and unbalanced and inadequate urbanization. If these three obstacles can be addressed, the development will get a boost and growth will be more sustainable, the study noted.
According to the World Bank report, Bangladesh has been one of the top 10 fastest-growing countries in the world for several decades. But there is no reason to be complacent. Economic boom is never a permanent trend, the report said.
Also read: Bangladesh’s GDP likely to grow by 6.6% in FY 2023: ADB
Growth in fast-developing countries is always at high risk. Few countries have sustained high growth for long periods. Only one-third of the countries in the top 10 continued to experience high growth over the next decade, the report said.
World Bank has made some recommendations to sustain economic growth. For example, to maintain growth in exports, products should be diversified.
Apart from this, Bangladesh’s tariff rate is higher than other countries, due to which the trade capacity is decreasing.
Also read: Commit 2% of GDP to climate finance each year: civil society organisations
Regarding the banking sector, World Bank said, it will play an important role in future economic development. Although the financial sector has improved in the last four decades, it is still not sufficient, the report said.
On the other hand, urbanization is essential for Bangladesh’s next development stage. Attention should be paid to balanced urbanization, the report said.
Ahsan H. Mansur, Executive Director of Policy Research Institute of Bangladesh and a former IMF official said, “I fully agree with what the World Bank has said. Our first-generation reform is done. The second and third-generation reforms were to take place. But we have not yet initiated the second-generation reforms.”
Read Do more to support micro, small, medium-sized enterprises: UN
Bangladesh is gradually falling behind other countries, including Vietnam. “With the current policies, we cannot take per capita income to $12,000. We have no alternative to human resource development.” He added.
Bangladesh’s GDP likely to grow by 6.6% in FY 2023: ADB
Bangladesh’s gross domestic product (GDP) is expected to grow by 6.6% in fiscal year (FY) 2023, according to the latest Asian Development Bank (ADB) report, Asian Development Outlook (ADO) 2022 Update, released on Wednesday.
The moderately lower growth forecast reflects slower domestic demand and weaker export prospects due to slower growth in advanced economies.
Read: ADB provides assurances of $2 billion in budget support
Inflation is projected to rise from 6.2% in FY2022 to 6.7% in FY2023. The current account deficit is expected to narrow from 4.1% of GDP in FY2022 to 3.6% of GDP in FY2023 as imports slacken and remittances increase.
The main risk to this growth projection is a slowdown in exports caused by global uncertainty over the prolonged war in Ukraine.
“The government is navigating the prolonged external economic uncertainties relatively well and has implemented appropriate policies to reduce the external imbalance, said Country Director Edimon Ginting.
But turbulent times like these are also a good time to accelerate reforms that would improve the country’s growth prospects in the medium term, he said.
These reforms include improving domestic resource mobilization, deepening the financial market, and enhancing competitiveness to promote the creation of productive jobs in the private sector, Ginting said.
Read: ADB, govt agree to complete projects timely to boost economic recovery
Uncertainties in the international energy market provide a good momentum to accelerate reforms to achieve the country’s climate change goals and expand domestic renewable energy supply to reduce dependence on fossil fuels, he added.
The ADO 2022 Update states that private investment growth will be lower due to global uncertainty and energy shortages.
With slower revenue growth and higher import costs, public investment growth will also be slower as a result of government austerity measures.
Inflation is expected to accelerate from 6.2% in FY2022 to 6.7% in FY2023 as price pressures increase due to the upward adjustment of domestic administered prices for all types of fuel and rising global commodity prices.
Do more to support micro, small, medium-sized enterprises: UN
UN Secretary-General Antonio Guterres has urged all to do more to support micro, small and medium-sized enterprises in building resilience to external shocks and pursuing sustainable business models.
“Micro-, small and medium-sized enterprises represent around 90 per cent of global businesses, more than 60 percent of employment and half of GDP worldwide. They are the economic lifeblood of communities around the world,” he said.
Read: Global hunger crisis pushes one child per minute into severe malnutrition: UNICEF
In a message marking the Micro, Small and Medium-Sized Enterprises Day that falls on June 27, the UN chief said these enterprises have also been disproportionately impacted by a host of challenges that are disrupting economies -- from climate catastrophe to COVID-19 to the global fallout from the war in Ukraine.
The theme of this year’s Day, “Resilience and Rebuilding”, highlights the vital role of micro-, small and medium sized enterprises for a fair and sustainable recovery.
Read:Internet shutdowns hurt human rights, economy, daily life: UN
Strengthening small businesses helps fight poverty, create jobs and safeguard livelihoods, particularly for the working poor, women and youth, said Guterres.
“On this International Day of micro-, small and medium-sized enterprises, let us renew our commitment to leverage their full potential, rescue the Sustainable Development Goals and build a more prosperous and just world for all,” he said.
Padma Bridge: Target to generate Tk 1600 crore a year in tolls
The Padma Bridge will add 1.2 percent to the country's gross domestic product (GDP) in a year by easing connectivity between the capital and Mongla and Payra ports.According to Bangladesh Bureau of Statistics (BBS) the bridge will add Tk 42,362.21 crore to the GDP, which is equal to1.2 percent of GDP.The bridge Division of government took loans of Tk 30193 crore from the finance division which is estimated to be paid by 36 year along with 1 percent interest. The money will be collected as tolls from the vehicles that travel through the Padma Bridge.Since the inauguration of the Padma Bridge, the bridge authorities have set a target of collecting a toll of Tk 133.66 crore per month. That money will be repaid in 140 installments. For this, the government wants to collect a toll of Tk1, 603.97 crore annually.
Also read: Padma Bridge to transform Bagerhat into a new economic hub
The government has already fixed toll rates on vehicles. There are two types of toll collection on the largest bridge in the country. One of these is that tolls can be paid directly. Drivers will be able to pay the toll by showing the card by recharging in advance. Vehicles do not have to stop for this at the toll plaza.The Padma Bridge Project Director Shafiqul Islam told the UNB the Padma Bridge, a biggest project ever of the country, was built with the money of the people of the country.“After the inauguration, the toll of the bridge will be collected by Korea Express Corporation and China Major Bridge Company. The government has already appointed them,” he said.Besides collecting tolls, the companies will also repay the loan of the bridge, management and maintenance works will also be done by them.Shafiqul said the money spent to construct the bridge would come up in 30 to 35 years.However, if the estimated toll collection target is achieved timely, it will be possible to collect the full cost of the bridge by 20 to 25 years.
Also read: Padma Bridge is a befitting reply to conspirators, PM tells a huge rally after its opening
Commit 2% of GDP to climate finance each year: civil society organisations
Civil Society Organisation leaders on Sunday demanded at least 2% of GDP [Gross Domestic Product] be diverted towards climate financing through the national budget every year.
They also urged the government to include coastal infrastructure issues as a prioritized investment sector to achieve a sustainable and climate resilient economy.
The demands were made at a seminar jointly organized by COAST Foundation, CPRD [Center for Participatory Research & Development] and CDP [Coastal Development Partnership] at CIRDAP auditorium in the capital on Sunday.
Dhirendra Debnath Shambhu, MP, and the Chair of Parliamentary Standing Committee on Fisheries and Livestock ministry attended the seminar as the Chief Guest, while the keynote paper was presented by Syed Aminul Hoque, Director of COAST Foundation.
Moderated by Rezaul Karim Chowdhury, Executive Director of COAST, the seminar was also addressed by Sharif Jamil, General Secretary of BAPA, AHM Bazlur Rahaman, CEO of BNNRC, Md. Shamsuddoha, CEO of CPRD, Prodip Kumar Roy of CSRL, and Dr. Mesbah Uddin Ahmed of Jatiya Sramik Federation.
Read: Experts for commission to monitor budget expenditure
In his keynote paper, Aminul Hoque said that the government’s commitment to fight climate change has hardly been reflected in its declared national budget 22-23 fiscal year. The amount allocated Tk 30,531 crores as climate budget is very traditional and business as usual which is unable to fulfill the demand, he added.
He mentioned that the government has prepared Delta plan-2100, NDC 2030 [National Determined Contribution 2030], BCCSAP-2009 and recently drafted NAP [National Adaption Plan] that require around 2.20% of GDP to implement, but current allocation is only 0.69%.
He put a few demands regarding climate financing issues included that the government must ensure at least 2% of GDP as climate financing according to their strategic plans and real time implement, to Include coastal infrastructure issues as one of the prioritized investment sectors and separate allocation for embankment construction.
In his speech, Dhirendra Debnath Shambhu, MP, opined that climate financing is important and needs to increase for holistic and balanced development in socio-economic perspectives.
He demanded a separate ministry or board at least for coastal development issues.
Sharif Jamil said we don’t expect the growth of a few capitalists and thus achieving socio-economic sustainability hardly be possible ignoring the environmental issues. Government will have to think universal sustainability that would come from a balance planning of both economic, environment and climate change issues, he added.
Bazlur Rahaman said, there have different problems and climatic challenges among the East coast, south-west and mid-coastal areas and planning should be developed accordingly.
He demanded special health care for vulnerable coastal women acute suffering with reproductive health.
Budget FY23: Education allocation to rise by less than 2 pc of GDP
The Education and Technology sector get 5 per cent higher allocation in the proposed national budget for 2022-23 fiscal year, placed by Finance Minister AHM Mustafa Kamal in Parliament on Thursday.
The allocation was increased to Tk 99,978 crore from Tk 94,878 crore in the budget for 2021-22 fiscal year. The allocation is 14.7 per cent of the total proposed budget.
However, the allocation for only education except technology is Tk 81,449 crore in the 2022-23 fiscal year increasing from Tk 71,974 crore in the 2021-22 fiscal year. The allocation against education still remains less than 2 percent of the country’s GDP.
Read: Budget FY23: Kamal says e-commerce business boomed, but riddled with scams
In the proposed budget, Tk 31,761 crore was allocated against the Primary and Mass Education Ministry, while Tk 39,961 crore against the Secondary and Higher Education Division, Tk 9,727 against Technical and Madrasa Division, Tk 16,613 crore against the Science and Technology Ministry and Tk 1,916 crore against the ICT Division.
In the budget speech, the finance minister said the government is relentlessly working to build Sonar Bangla as envisaged by the Father of the Nation by giving the highest importance to the education sector and has adopted education as one of the main strategies for development.
He said the government has taken special initiatives in the education sector to compensate the loss during the Covid-19 pandemic.
Read: Budget FY23: Kamal sees rising inflation as a major challenge
“Our education programme was disrupted since the first week of March 2020 due to the spread of coronavirus infection. However, the government took various steps to continue the academic schedule by keeping the education activities free from the negative effects of the pandemic,” he said.
Bangladesh to unveil budget today
Bangladesh Finance Minister AHM Mustafa Kamal will unveil a Tk 6.80 trillion (Tk 6.80 lakh crore) national budget for the financial year 2022-2023 in Jatiya Sangsad on Thursday.
The size of the budget will be about 15% of the country's gross domestic product (GDP). GDP is the total monetary value of all the finished goods and services made in a country during a financial year.
This is the country’s 51st budget and the 23rd of the Awami League government in five terms. The budget will see special measures of tax exemptions on agriculture, food processing and small sector development, UNB has learnt.
Also read: Gender budget framework needs to be redesigned, say discussants at a pre-budget dialogue
Experts emphasise on having measures to control inflation and stabilise the country's foreign exchange rate, besides steps to ensure food security.
Tajuddin Ahmed presented the first budget as the first finance minister of the post-independence Bangabandhu government in 1972.
Also read:Russia-Ukraine war creates uncertainties: Kamal on upcoming national budget
In the upcoming budget, the target of GDP growth is set at 7.5% and inflation will be pegged at 5.5%.
Bangladesh economy’s remarkable progress in 50 years
Bangladesh’s socio economic development over the past 50 years has been surprising despite problems of alleged corruption, poor intuitional capacity and natural disasters.
Dismissed as a basket case at independence in 1971, Bangladesh has braved stiff hurdles to become self-sufficient in food grains production and made good progress in manufacturing sector too.
This remarkable progress is best illustrated by a chronology of the national budgets since 1972.
Also read: PM: US$1500 million under way as budgetary support
In 1972, the budget of Bangladesh was Tk 786 crore while the gross domestic product (GDP) was USD $6.288 billion. As per the GDP, per capita income was $94.4 or Tk566 in 1972 and the population was about 70 million.
In the fiscal year 2021-22 the country’s budget size swelled to Tk 603681 crore ($ 71 billion), the estimated GDP was $465 billion. The population Bangladesh is stood at over 160 million in 2021.
The provisional estimate for per capita income in 2021-22 was $2,824, up from $2,591 in the previous year, accoding to a Bangladesh Bureau of Statistics report. “In nominal terms, Bangladesh's GDP stands at $465 billion in the current fiscal year.
Braving flood, cyclone and drought, the economy has grown steadily since the independence. Bangladesh has achieved remarkable success in food production, manufacturing and manpower export.
Bangladesh is characterized as a developing economy. It is the 41st largest in the world in nominal terms or at current prices, and 30th largest by purchasing power equivalence; international dollars at current prices.
Also read: Finance minister is set to unveil Tk6.80 tn national budget at JS on Thursday
At a glance Bangladesh’s budget:
Fiscal Year – by Whom - Annual Outlay-
1972-'73 Tajuddin Ahmed Tk 786 crore
1973-'74 Tajuddin Ahmed Tk 995 crore
1974-'75 Tajuddin Ahmed Tk 1,084.37 crore
1975-'76 Azizur Rahman Tk 1,549.19 crore
1976-'77 Maj Gen Ziaur Rahman Tk 1,989.87 crore
1977-'78 Lt. Gen. Ziaur Rahman Tk 2,184 crore
1978-'79 President Ziaur Rahman Tk 2,499 crore
1979-'80 MN Huda Tk 3,317 crore
1980-'81 M Saifur Rahman Tk 4,108 crore
1981-'82 M Saifur Rahman Tk 4,677 crore
1982-'83 AMA Muhith Tk 4,738 crore
1983-'84 AMA Muhith Tk 5,896 crore
1984-'85 M Sayeduzzaman Tk 6,699 crore
1985-'86 M Sayeduzzaman Tk 7,138 crore
1986-'87 M Sayeduzzaman Tk 8,504 crore
1987-'88 M Sayeduzzaman Tk 8527 crore
1988-'89 Maj Gen (rtd) Munim Tk 10,565 crore
1989-'90 Wahidul Haq Tk 12,703 crore
1990-'91 Maj Gen (rtd) Munim Tk 12,960 crore
1991-'92 M Saifur Rahman Tk 15,584 crore
1992-'93 M Saifur Rahman Tk 17,607 crore
1993-'94 M Saifur Rahman Tk 19,050 crore
1994-'95 M Saifur Rahman Tk 20,948 crore
1995-'96 M Saifur Rahman Tk 23,170 crore
1996-'97 Shah AMS Kibria Tk 24,603 crore
1997-'98 Shah AMS Kibria Tk 27,786 crore
1998-'99 Shah AMS Kibria Tk 29,537 crore
1999-'00 Shah AMS Kibria Tk 34,252 crore
2000-'01 Shah AMS Kibria Tk 38,524 crore
2001-'02 Shah AMS Kibria Tk 42,306 crore
2002-'03 M Saifur Rahman Tk 44,854 crore
2003-'04 M Saifur Rahman Tk 51,980 crore
2004-'05 M Saifur Rahman Tk 57,248 crore
2005-'06 M Saifur Rahman Tk 61,058 crore
2006-'07 M Saifur Rahman Tk 69,740 crore
2007-'08 AB Mirza Azizul Islam Tk 87,137 crore
2008-'09 AB Mirza Azizul Islam Tk 99,962 crore
2009-'10 AMA Muhith Tk 113,815 crore
2010-'11 AMA Muhith Tk 132,170 crore
2011-'12 AMA Muhith Tk 165,000 crore
2012-’13 AMA Muhith Tk 191,738 crore
2013-’14 AMA Muhith Tk 222,491 crore
2014-’15 AMA Muhith Tk 250,506 crore
2015-’16 AMA Muhith Tk 295,100 crore
2016-’17 AMA Muhith Tk 340,605 crore
2017-18, AMA Muhith Tk 4, 00,266 crore
2018-19, AMA Muhith Tk4, 64,573 crore
2019-20, AHM Mustafa Kamal Tk 5, 23,190 crore
2020-21 AHM Mustafa Kamal Tk 5, 68,000 crore
No need to worry about Bangladesh's debt situation right now: Official document
Bangladesh's total debt burden is currently far below the threshold level on both domestic fronts posing no threat to the economy, according to an official document.
For Bangladesh the comfortable level for total public debt is 70 per cent of GDP and external debt is 55 per cent of GDP.
The country's projected total debt (42.9 per cent of GDP) and external debt (16.4 per cent of GDP) by fiscal 2023-24 is far below the respective thresholds and do not pose any threat despite having a slight upward trend due the COVID-19 shock, according to the recent document.
Also read: No Chinese debt trap in Bangladesh: Chinese envoy
It said that prudent fiscal policy adopted by the government is expected to keep the public debt at a sustainable level over the medium term.
The country's debt sustainability analysis (DSA) by the World Bank-IMF shows that government debt remains at a low risk of debt stress despite the economic shock caused by the COVID-19 pandemic (IMF article IV report 2020).
External and domestic debt indicators are below their respective thresholds under the baseline and stress test scenarios until 2030.
The document said that composite index (CI) rating that is calculated by the above framework based on the country's real GDP growth, remittances, international reserves, world growth, and CPIA (Country Policy and Institutional Assessment) score is calculated 3.06 that suggest a strong debt carrying capacity.
The official document stated that Bangladesh has a solid and strong track record in debt service payments and the country's external debt stock is still reasonably low.
Projected external debt stock stands at 53.5 billion USD at the end of FY21, which is 14.7 per cent of the projected GDP.
The country's external debt service liability that includes amortisation of long term external debt and interest payments stands at 2.1 billion USD in FY21, which is 5.7 per cent of the projected export earnings and 3.6 percent of the projected revenue earnings in FY21.
The World Bank-IMF joint Debt Sustainability Analysis (DA) in 2019 assessed the threshold level of external debt service liability for Bangladesh is 21 per cent of its export and 23 per cent of government revenue.
This indicates that Bangladesh's external debt lies far below the danger level and the government has adequate repayment capability.
“However, the government should remain vigilant against any external development including exchange rate risk,” the document mentioned.
It said that the government usually provides guarantees/counter guarantees against loans incurred by the state-owned enterprises in line with government's priority sectors, such as power, energy,national aircraft carrier (i.e Biman Bangladesh Airlines Itd), and agriculture etc. These liabilities would come into effect only if the concerned enterprise fails to pay back the loan.
Also read: High value public debt spent on nonproductive sector causes imbalance in economy: CPD
As of May 2021, the face value of government guarantees/ counter guarantees stands at Tk. 1,066.6 billion and the outstanding amount of loan against those Guarantees is Tk. 738.4 billion, which is 2.1 percent of the projected GDP and 12.2 percent of the government expenditure in FY22.
Power and Energy sector alone accounts for 58.5 per cent of the outstanding contingent liabilities followed by Bangladesh Biman and Agriculture sector as 14.8 per cent and 6.7 per cent respectively.
Having such extent of contingent liabilities, the government has devised necessary monitoring system under a risk framework so that these guarantees do not turn into government liabilities.
“Rigorous monitoring and sovereign guarantee/counter guarantee guidelines issued by the government are expected to keep the contingent liabilities in control.”
The document stated that Implementation of the declared economic recovery program, providing adequate investment in the health sector including mass vaccination program, and implementation of expansionary monetary policy pursued by Bangladesh Bank would help for a sustainable economic recovery as the government has projected 7.2 per cent GDP growth in FY22.
At the same time, projected overall implicit interest rate that is calculated from the projected debt stock and interest payments is 5.3.
Favourable debt dynamics on the back of higher GDP growth compared to lower interest cost implied that projected government finance would not accumulate the public debt (Debt:GDP).
Slight upward trend in the debt-GDP ratio due to the winding fiscal deficit during the economic recovery period will not be a cause for concern as the revenue collection will boost in the medium term when the economy get back to its normal level.
Sovereign debt set to edge upwards in coming years
The government's debt, that is the country's sovereign debt, is projected to reach Tk 16,306.5 billion in the next 2022-23 fiscal, before growing to Tk 18,732.30 billion in 2023-24.
According to an official document, the sovereign debt is Tk 13,919.5 billion for the running 2021-22 fiscal.
In the 2023-24 fiscal, the government will get Tk 11568 billion from domestic sources while Tk 7164.30 billion from external sources.
In the 2022-23 fiscal, the government will get Tk 10021.70 billion from domestic sources while Tk 6284.80 billion from external sources.
In the running 2021-22 fiscal, the target was Tk 8674 billion from the domestic sources while Tk 5272.50 billion from external sources.
Also read: Bangladesh’s foreign debt far below risk limit: Economic review tells PM
In the 2020-21 fiscal’s revised budget, the debt was Tk 12037.70 billion with Tk 7489.20 billion domestic debt and Tk 4548.5 billion external.
The government's debt in 2019-20 fiscal was Tk 10062 billion where the domestic debt was Tk 6313.7 billion and external was Tk 3748.30 billion.
The document said that the government debt has been projected to edge up in the medium term in line with the pace of economic recovery.
Outstanding debt is projected to increase by 1.3 percentage point of GDP to Tk. 13.9 trillion (Domestic vs. external ratio 1.6:1) at the end
of fiscal 2021-22 from the revised target of fiscal 2020-21, as additional budget will be required for the health sector, including the cost of carrying out the
vaccination program and implementing the declared stimulus packages.
Government debt has been projected to rise in the subsequent years as the economic recovery path might be slow due to the advent of new variants of the COVID-19.
Also read: No chance of Chinese debt trap: FM
The government debt has been projected to 42.9 percent of GDP at the end of fiscal 2023-24 where domestic debt is 26.5 percent of GDP and external debt is 16.4 percent of GDP.
The projection is 42.1 percent of GDP at the end of fiscal 2022-23 where domestic debt is 25.8 percent of GDP and external debt is 16.2 percent of GDP.
The official document mentioned that additional government spending for implementing the declared fiscal stimulus package to foster economic recovery from the pandemic as well as weaker than expected revenue collection have been pushing up the government debt level slightly.
Considering the present trend in the revenue collection and the resulting fiscal deficit, total debt stock is projected to increase by 2.2 percentage point of GDP to Tk. 12.0 trillion in the revised budget from the original budget in FY21 where both domestic debt and external debt level rises by 1.1 percentage point.
As per the document, high GDP growth, stringent fiscal discipline, low interest cost that resulted from optimum borrowing mix, and stable exchange rate have contributed in stabilising government debt over the decade (fiscal 2010-11 to fiscal 2019-20).
Government's outstanding debt hovered around 35-36 percent of GDP during the decade.
It actually declined until fiscal 2017-18, but then the trend was reversed and the debt stood at 36.0 percent of GDP at the end of FY20.
Composition of the debt stock has changed as well in the last ten years.
Domestic debt increased gradually to 22.6 percent of GDP at the end of fiscal 2019-20 from 16.7 percent of GDP at the end of discal 2010-11.
External debt has declined gradually to 13.4 percent of GDP at the end of fiscal 2019-20 from 18.3 percent of GDP at the end of fiscal 2010-11.