The budget for FY14 is a mixed bag of opportunities and challenges, said World Bank Sunday.
But there are downside risks both external and internal, said Zahid Hossain, lead economist of the WB, at a press briefing on the proposed budget.
Escalating political tensions, industrial disturbances or reputational risks and the deterioration in state-owned commercial bank finances are the external factors that might affect budget implementation, according to the WB report.
While acute external risks have diminished to a greater extent they still exist. Re-emergence of stress in the Euro area, global oil price shock, escalation of tension in Syria, Iran and revival of Chinese demand for oil are internal factors that also might hinder budget implementation, it said.
Johannes Zutt, the newly appointed country director, said Bangladesh has done well in macro economy management. “But there are headwinds to move forward,” he said. He said the country still might take a hit from the EU crisis seen in 2008-09. There are also reputational risks due to recent tragedy in RMG sector, he said.
The WB said the budget has opportunities including increased capital spending and expenditure on repairs and maintenance, subsidy reduction, rationalisation of social protection and revenue mobilisation.
It said the provisional growth estimated by the Bangladesh Bureau of Statistics for FY13 is 6.03%, which is better than the 5.1% growth seen in developing countries and South Asian countries.
“Growth declines due to slower agricultural and services growth, yet healthy,” it said.
Continued drop in private investment growth and increased gross national savings helped build up the reserve, it said. Private investment declined one percentage point in FY13 from 20% in FY12.
And Private credit growth fell to 12.7% in March 2013. Gross national savings increased by 1.5 percentage points in FY13 from 27.5% in FY12.
The WB said the inflation target of 7.5% is achievable if food inflation is checked. External balance improved because of flat imports and pick up in exports, it said.
Strong remittances and lower trade deficit has bolstered current account surplus to $2.8bn in this fiscal year compared with $120m in the last fiscal.
“Stronger aid disbursements and FDI also doubled financial account surplus that rose to $1.6bn from $779m,” it said
A prudent monetary stance is needed to safeguard macroeconomic stability—keep inflation in check, said Hussain.
NBR revenue might fall short of target by around Tk30bn. The inflation target of 7% inflation is achievable depending on steeper than projected decline in international commodity prices, prudent monetary policy, fiscal discipline and internal stability.