Fall in exports, govt expenditure concerning

The decline in government expenditure and the fall in export are the major concerns and discomfort for the Bangladesh economy, said the Centre for Policy Dialogue (CPD) on Monday.

Public expenditure fell by a large amount in the first four months of fiscal 2020-21 from a year earlier, said the civil society think-tank in its assessment report titled ‘State on the Bangladesh Economy in FY2020-21 (First Reading)’.

It found a substantial fall in development expenditure, with a 35.1 per cent decline in annual development programme (ADP) expenditure from a year earlier.

The operational expenditure was also lower. “This happens due to the needs triggered by the pandemic.”

To save about Tk 33,661 crore from the ADP in fiscal 2020-21, the finance division has allowed the ministries and agencies to spend only 75 per cent of the fund allocated by the government for ADP this fiscal year, the CPD said.

The remaining 25 per cent cannot be spent on operation under any circumstances, it said, adding that the remaining 25 per cent of the allocation has been put on hold since the finance division fears that it will be difficult to achieve the revenue target amid the pandemic.

Bangladesh’s export earnings declined 16.9 per cent and missed the growth target by a large margin of 12.2 per cent, the CPD said.

The volatility in export earnings continued into fiscal 2020-21, which began in July last year, the report said, adding that the total export earnings declined 1.1 per cent in the first seven months of the fiscal year.

“This implies that the total export earnings will require to grow by 70.4 per cent during the remainder of the fiscal year if the annual growth target of 21.8 per cent has to be reached.” 

The CPD, however, made a positive observation that industrial production for large and medium industries increased 7.7 per cent in the first four months of the fiscal year.  

The government should think of stimulating the domestic demands to overcome the setback in export as the global demand is unlikely to make a turnaround anytime soon, said Mustafizur Rahman, distinguished fellow of the CPD.

“There should be a second stimulus package by the government to promote the small and medium industrial sectors.” 

The remittance inflow made a 38 per cent growth but it is not normal as there is no data about the remittance outflow, he added.

The weak banks are a major area where the government should focus on for enhancing governance, said Fahmida Khatun, executive director of the CPD.

She also recommended that the weakly governed banks are barred from distributing stimulus funds as they would create further problems in the economy.

The government should give extra focus on food stocks as the global food market is volatile, said Khondaker Golam Moazzem, research director of the CPD.

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

The government should immediately raise the rice stock to 1 million tonnes through import on a government-to-government basis, he added.

The CPD, however, appreciated the government’s vaccination programme and said the Bangladesh economy is doing better compared to some other economies of the world.