Lower private investment and employment generation along with impact of slow economic recovery in USA and EU from the financial crisis are the headwinds for achieving the targets Bangladesh set in its 6th five-year plan.
The observation came at a meeting on the mid-term review of 6th Five-Year Plan arranged by the General Economic Division of the Planning Commission, at NEC Conference Room yesterday.
The government has started to implement the 6th five-year plan from the financial year of 2010-11.
Presided over by the Planning Minister AHM Mustafa Kamal, the meeting was also attended by Finance Minister AMA Muhith, State Minister for Finance and Planning MA Mannan, economists, high government officials and researchers.
Member of GED, Prof Shamsul Alam, presented a review on the progress of the ongoing 6th Five-Year Plan.
He said although the GDP growth and the investment have fallen short of target at the sixth five-year plan, the revenue-GDP ratio, remittance, foreign exchange reserve and export earnings have increased.
“Sluggish private investment might be a concern. As a result, the target of average GDP growth at 7% might not be achieved in the Plan,” he added.
Shamsul said low pace of employment generation and export diversifications are the challenges for the development of the country.
He suggested strengthening local government with necessary legal framework, civil service reforms, quick reform of the commercial banks to reduce the NPL, modern tax measures and also strengthening the Anti-Corruption Commission.
Commenting on the progress of the Plan, the finance minister said poverty reduction in Bangladesh was really fantastic as its income inequality had not risen over the period.
“I think we need to boost the national protection (social safety-net) for the vulnerable groups. If it is done correctly, the poverty reduction will get a new momentum,” he said.
The GED member, however, expressed his dissatisfaction over the slow employment growth.
The minister was also critical of the present method of the employment calculation, terming the process not a better one.
Muhith was upbeat about the increasing public investment although he was dissatisfied about the institutional reform of the public sector.
“Public service reforms are yet to be done and it will not happen in near future. It will take more time,” he said, expressing dissatisfaction over the present bureaucratic tangle on the reform pace.
Centre for Policy Dialogue Executive Director Mustafizur Rahman said there are many achievements during the last three-year period of the sixth five-year plan.
He, however, criticised the misuse of the public funds.
“Public investment is going up. But the government is failing to invest the public money at an affordable cost, he said, adding that the Padma Bridge project cost was Tk10,000 crore initially which has now dubbled up to Tk26,000 crore.”
Muhith: Banks deal with NPL really bad
The finance minister said the rising non-performing loan (NPL) in the commercial banks is really a big challenge for the economy as the commercial banks fail to mange it.
“Commercial banks’ performance in dealing with NPL is really bad. The culture of non-repayment of the credit has also risen in recent years compared to the past days,” he said.
He said: “30 years ago I had seen that some borrowers were not repaying their loans to the lender in time. Now, this culture is being practiced to a large extent. I think the non-repayment culture was a baby 30 years ago which has now grown into a adult.”
The finance minister has sought suggestions from the attended economists and experts on how the NPL could be reduced.
Mustafizur Rahman said the NPL in Bangladesh has crossed 10% of the total outstanding credit which is highest in this region.
Citing example of India, he said their NPL is only 2% of the total outstanding loans of the commercial banks.
The CPD official said the spread between the bank credit and the deposit is still high (more than 5%) which is also backfiring the economy.
He added that the lack of governance in the financial sector is boosting the NPL which is also affecting the spread.
If the governance was established, the “Hall-mark scam” could not emerge in the country.
“If a businessman borrows at 12-14 percent rate from the bank he needs to realise how much profit does he make?” he questioned. Bangladesh Bank Governor Dr Atiur Rahman said they were not in a comfortable position on the increased NPL at the banks.
“But the NPL has jumped to 10.39% from 8% a year ago due to newly introduced 90 days calculation method.”
“We had enhanced our supervision on the commercial banks to reduce the NPL,” he said.