Muhith now tells of hurdles to 7pc growth
Achieving the projected seven percent economic growth might not be possible in the current fiscal year due to high import cost, spiralling inflation, downward investment flow and excessive subsidies in public spending, Finance Minister AMA Muhith said yesterday.
Earlier on many occasions, including in his budget speech in parliament, the minister termed the target realistic and attainable.
But speaking at a programme yesterday, he said factors like excessive bank borrowing by the government and high inflation rate are hindering the targeted growth.
Muhith was addressing the inaugural session of the two-day 11th annual SANEI (South Asia Network of Economic Research Institutes) at Ruposhi Bangla Hotel in the capital.
“Commodity price is totally upset,” he said, adding that subsidies in petroleum products and other commodities contributed to a soaring inflation. “We're in a very difficult situation with inflation. The inflation has already crossed double digit."
According to Bangladesh Bureau of Statistics (BBS), the inflation crossed double digit in March this year while it was around 11.5 percent in the last two months.
Muhith claimed that the government had to go for excessive bank borrowing this year as prices of electricity and fuel were not adjusted timely.
Inadequate utilisation of foreign fund also led to a high bank borrowing, he said, adding, “A lot of aid was negotiated, but not utilised."
Between July 1 and November 17 this year, the government borrowed Tk 18,986 crore from banks, which is Tk 29 crore more than the current fiscal year's borrowing target of Tk 18,957 crore, according to Bangladesh Bank.
In the current FY, the budgetary allocation for subsidy is Tk 20,477 crore. But different ministries demanded Tk 46,000 crore, finance ministry sources said.
Of them, the Power Development Board sought Tk 10,000 crore while the Bangladesh Petroleum Corporation Tk 16,700 crore.
The minister also defended production of electricity and import of petroleum products, including furnace oil, at higher costs, saying they would boost industrial growth.
Electricity is one of the elements that were bringing the economy down, he said, and added that the government had been purchasing electricity from rental power plants temporarily.
“You must have the dual fuel system because we have the problem of gas,” he added.
Saying that the investment rate in the country has remained static at 24 percent of the GDP for over a decade, the finance minister said it was still too low.
“The flow of investment is extremely low at a time when we're planning to achieve seven percent economic growth.”
He suggested using more foreign resources and mobilising domestic resources for achieving the projected growth.
Presiding over the occasion, TN Srinivasan, chairman of SANEI Research Advisory Panel, said subsidy in South Asia is nothing new, but the problem is that a big chunk of it was not justified.