The government has revised down the GDP growth projection to 6.1 per cent for 2020-21, the second revision this fiscal year, reflecting the devastating impacts of the second wave of the coronavirus pandemic on the battered economy.
The government had initially targeted to achieve an 8.2 per cent expansion in the gross domestic product (GDP) in the current fiscal year. Later, the target was reset at 7.4 per cent.
The new growth target was fixed yesterday at a meeting of the fiscal coordination council chaired by Finance Minister AHM Mustafa Kamal.
Top officials of the finance ministry, the Bangladesh Bank and other ministries were also present at the meeting.
The GDP growth target for the next fiscal year could be set at 7.2 per cent, according to a source who was present at the meeting.
In March, the World Bank projected that Bangladesh’s GDP might grow as high as 5.6 per cent in the current fiscal.
Economist Binayak Sen told The Daily Star: “We can’t expect a very high growth rate of 8 per cent as projected unrealistically in the 8th Five-Year Plan.”
“But, if we can achieve a stable 5-6 per cent growth rate with broad-based healthcare for all, social protection for the poorest and the new poor, and robust agricultural growth in the next two to three years, that will be good for the economy and the citizens.”
“That will be more consistent with realistic expectations about government revenues in the medium term.”
The director-general of the Bangladesh Institute of Development Studies said once the Covid-19-related uncertainties petered out nationally and internationally, Bangladesh could aim for higher growth targets and address structural reforms in tax administration and implementation capacities.
The government is planning for an expansionary budget for 2021-22. The size could be Tk 602,484 crore, which is 17.3 per cent of the GDP.
The next budget could prioritise buying and producing coronavirus vaccines, stimulus packages and the health sector to face the pandemic-induced economic shock and protect the poor from hunger.
In yesterday’s meeting, the health secretary proposed a significant budgetary allocation for vaccine import and production.
The government has set aside a block allocation of Tk 10,000 crore in the current fiscal year for the health sector.
Of the sum, around Tk 2,500 crore has been spent to purchase coronavirus jabs and other related equipment. Another Tk 1,000 crore would be spent to provide cash assistance among 35 lakh poor people under a new stimulus package announced recently, an official of the finance ministry said.
The meeting assured other ministries of providing the necessary amount of funds, if needed, during the remaining period of the fiscal year.
Sen said the next budget should emphasise public health and social protection, especially in urban areas, and agriculture as the best safety net for the rural poor.
“Within the domain of public health, we should seriously think about the production of vaccines and encourage vaccine diversification.”
“We should invest more for research and development in the area of health and infectious disease because we are a high-risk, high-density country. We should expand the network of urban primary health infrastructure at the ward level since 60 per cent of Covid-19 infections are in Dhaka and another 20 per cent in Chattogram.”
The government has unveiled a Tk 225,124-crore annual development programme (ADP) for FY22.
The budget for FY21 has been revised down to Tk 540,286 crore, from Tk 568,000 crore initially.
The revenue generation target could be set at Tk 389,079 crore for FY22. The National Board of Revenue (NBR) would be given a task to earn Tk 330,078 crore, almost similar to the current fiscal’s target.
The government set a revenue collection target of Tk 378,000 crore in FY21. The NBR has been asked to raise Tk 330,000 crore.
The next budget would aim to limit the inflation rate to 5.3 per cent, from 5.4 per cent in the current fiscal year.
The budget deficit, set at about 6 per cent of GDP in FY21, may be allowed to go up to 6.1 per cent in FY22 starting on July 1.
Binayak Sen said the budget for the next fiscal year could adopt expansionary fiscal and monetary policies. Still, the absorption capacity of different ministries was a binding constraint as indicated by the low implementation capacity of the health ministry.
The health ministry managed to spend only 20 per cent of the ADP allocation in the first eight months of the fiscal year.