CPD sees risk to business as politics turns volatile

Business Report


The centre for Policy Dialogue (CPD) branded the current fiscal 2013-14 as a political business cycle year when everything from budgetary allocation to project expenditure and consumption pattern will be decided by political considerations.
It has therefore urged the government to downsize the budget to reduce burden of deficit financing at the cost of the tax payers. This is one aspect of its critical review of the state of the economy at a press conference held in the city on Tuesday.
On the other hand, the private think tank fear big backlash in business and investment and other socio-economic growth this year from volatile political events and urged the government and the business community to save the economy from falling into political trap.
CPD fellow Dr Debapriya Bhattachariya and Ececutive Director Prof Mustafizur Rahman  spoke on the occasion. Debapriya said the GDP growth will fall below 6 per cent in the current fiscal year as the country enters into the political business cycle in the election year when economic activities largely become stagnant. Moreover, he said, the country’s banking sector marked its worst year in the last fiscal year 2012-2013 marred by big swindling cases.
The country was poised to achieve 7.2 percent growth this year but it faces the risk of losing 0.67 percentage point of GDP growth for being an election year. Political business cycle is a notion which suggests that a business cycle is caused by elected government leaders who manipulate the economy to achieve personal goals like to remain in the office, he said.
Debapriya said in the election year budget deficit increase from increased public expenditure and public consumption and this in turn lead to increased tax collection effort. All these factors are visible in the economy at this moment, he said.
He urged the government to down size the budget to reduce the deficit and reduce bank borrowing.  ‘The FY 2013 should be marked as the worst one for the banking sector. The government had a surreal budget for which banking sector had to bear the brunt,’ he said.
He said despite having nearly Tk 80,000 crore liquid in banks now they can’t  lend cash due to higher interest rate. This in turn is affecting private investment.
The CPD said the private sector credit growth was 11 per cent in the first quarter of the current fiscal compared to the target of 18.5 per cent in the FY13 when capital machinery import fell by 8.5 per cent.
‘It is a sign of stagnancy. And although many businesses took bank loan and bought capital machinery, they could not start production because of power shortage,’ said Debapriya.

Source: Weekly Holiday


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