Bangladesh Predicts 7.2 Percent Economic Growth
By Julhas Alam 8 June 2012
DHAKA, Bangladesh—Bangladesh said on Thursday it anticipates 7.2 percent economic growth in the coming fiscal year from increased export earnings and more remittances from Bangladeshis abroad.
Finance Minister A.M.A. Muhith unveiled the budget for 2012-13 in Parliament amid a boycott of the proceedings by the opposition, who accuse the government of repressing its leaders and activists.
Muhith said that growth in the fiscal year that ends this month was expected to be around 7 percent — higher than the official Bangladesh Bureau of Statistics’ revised estimate of 6.3 percent. Muhith said the agency failed to take into account recent growth in agricultural production.
The budget focuses on power and other infrastructure development to spur growth and aims to cap the deficit at five percent of gross domestic product.
The minister said the government would install new oil-fired power plants and import power from neighboring countries such as India, Nepal and Bhutan to help cope with a shortage.
Muhith said he was targeting a 22 percent increase in tax revenue by bringing more people under the tax net. Last year’s revenue collection increased largely thanks to a crackdown on tax evasion.
Growth is expected to be driven largely by higher income from exports, especially of garment products, and increased remittances. Bangladesh mainly exports readymade garments to the United States and Europe, but is looking to increase deliveries to new markets including Japan and India.
Already, about 10 million Bangladeshis work abroad, mostly in the Middle East, sending home US $10 billion each year. The government said it hopes to send more people abroad in the coming year.
Despite encouraging development, the economy faces daunting challenges. Bangladesh recently won a dispute with its neighbor Burma, also known as Myanmar, regarding territorial water claims in the Bay of Bengal.
Amid dwindling foreign direct investment, implementing the government’s new budget will be challenging because of high inflation, the protracted global economic crisis and growing subsidies in various sectors.
Muhith said the government will need to borrow 338.84 billion takas ($4.18 billion) from domestic banks, non-banking institutions and savings certificates in 2012-2013.
Muhith promised to increase social spending by providing subsidized grain and cash incentives to the poor. Almost 40 percent of people in Bangladesh live on less than one dollar a day.
The government also pledged to rein in inflation. Last month, the average annual inflation stood at 10.76 percent. Muhith said he was optimistic that inflation would be reduced to 7.5 percent in the coming year.
The nation’s main opposition Bangladesh Nationalist Party says it is boycotting Parliament in protest at the jailing of many of its senior leaders following recent violence during a series of opposition-sponsored general strikes.
The strikes were enforced in April and May to press authorities to find a missing opposition leader. The opposition blames the government and security agencies for his disappearance. They deny the allegation.