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CPD: Fall in Bangladesh’s export, govt expenditure a big concern

  • Published at 07:35 pm February 15th, 2021
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Logo of Centre for Policy Dialogue (CPD)

‘Public expenditure fell by a large amount during the first four months of FY2021 compared to the pre-Covid situation’

Centre for Policy Dialogue (CPD), a civil society think tank, said the decline in government expenditure and fall in export has been the major concerns and discomfort for the country's economy.

The CPD made the observations while presenting an assessment report titled “State on the Bangladesh Economy in FY2020-21 (First Reading)” on Monday.

The virtual event was addressed by CPD Executive Director Dr Fahmida Khatun, Distinguished Fellow Dr Mustafizur Rahman, and Research Director Dr Golam Moazzem. CPD Senior Research Fellow Tawfiqur Islam Khan presented the keynote paper.

The CPD said public expenditure fell by a large amount during the first four months of FY2021 compared to the pre-Covid situation. 

It found a substantial fall in development expenditure, with a 35.1% decline in annual development program (ADP) expenditure compared to the corresponding period of FY2020.

Operational expenditure was also lower, CPD said, adding: "This happens due to the needs triggered by the Covid-19 pandemic."

With a view to saving about Tk33,661 crore from the ADP in FY2021, the finance division has allowed ministries and agencies to spend only 75% of the fund allocated by the government for ADP in FY2021, CPD mentioned.

"The remaining 25% can't be spent on operation under any circumstances," it said adding that the rest 25% of the allocation has been put on hold since the finance division fears it will be difficult to achieve the revenue target under the pandemic.

According to CPD, Bangladesh's export earnings declined by 16.9% and missed the growth target by a large margin of 12.2%.

"The volatility in export earnings continued during the FY2021," the CPD observed adding that the total export earnings declined by (-) 1.1% during the July-January period of FY2021.

"This implies that the total export earnings will require to grow by 70.4% during the remainder of FY2021 if the annual growth target of 21.8% is to be reached," it added.

CPD, however, made a positive observation that industrial production for large and medium industries increased by 7.7% during the July-October FY2021 period while the corresponding figure for FY2020 was 5.4% as per the data by Bangladesh Bureau of Statistics (BBS).

Describing this scenario, Dr Mustafizur Rahman said the government should think of stimulating domestic demands to overcome the setback in export as global demand is unlikely to make a turnaround anytime soon. 

“There should be a second stimulus package by the government to promote the small and medium industrial sectors, he said, adding that the remittance inflow saw a 38% growth but it is not normal as there is no data about remittance outflow,” he added.

Dr Farida Khaiun said weak banks are a major area where the government should focus on enhancing good governance.

She also recommended that banks that are weakly-governed should not be allowed to distribute stimulus package funds as they would create further problems in the economy.

Dr Golam Moazzem said the government should focus more on food stocks as the global food market is volatile.

"Right now, our food reserve is 700,000 metric tons, which is about half of the required 1.5 million tons", he said, adding that local traders may now take advantage of the situation to create a crisis in the rice market by raising prices.

Golam also said the government should immediately raise the rice stock to 1 million metric tons through import on a G-to-G basis.

Lastly, CPD appreciated the government's vaccination program and said Bangladesh’s economy is doing better compared to some other economies of the world.

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