A warm and hearty welcome to newly appointed Finance Minister (FM) AHM Mustafa Kamal. He takes over from Abul Mal Abdul Muhith who ably steered the economy for the past decade through thick and thin.
Minister Mustafa Kamal seemingly has two advantages: first, beside being a renowned businessman of the country and an accomplished accountant, he is the former planning minister of the earlier regime with a lot of experience in economic issues. The economic problems are well-known to him to which he is here to seek solutions. It is hoped that under his dynamic leadership, the economy of Bangladesh will hit a new heigh. Second, Kamal inherits a relatively healthy economy than his predecessor. Some of the comfort zones, as drawn from published documents, are as follows:
Bangladesh has achieved the highest-ever of about 8.0 per cent (7.86 to be exact) GDP growth in the 2017-18 fiscal year thus exceeding well the estimated growth of 7.65 per cent. The Bangladesh Bureau of Statistics (BBS) estimated that per capita income has increased to about $1,700 in FY2017-18 from $1,600 in the previous fiscal year. The GDP size increased to Tk 22 trillion ($274 billion) in FY2017-18, rising from nearly Tk 20 trillion in FY2016-17.Paripassu that robust growth, the incidence of poverty now has fallen to 25 per cent - a drastic fall during the last decade or so. The social indicators performed much better than neighbouring countries to draw praise world wide. Over the years, the structural change of the economy is worth noting. In the 2017-18 fiscal year, for example, the contribution of the agriculture sector to the country's GDP was about 14 per cent, while the industry and services sectors contributed 30 and 56 per cent, respectively. The GDP growth rate witnessed a resiliently monotonic upward movement, 6.55 per cent in FY2014-15, 7.11 per cent in FY2015-16 and 7.28 per cent in FY2016-17. By and large, from a basket case, the economy has grown brawny, if not brimming.
Glowing achievements aside, the newly appointed FM will have to deal with a number of challenges lying ahead. The challenges are not new either but may need newer approach to deal with. Foremost of them is the need for ensuring financial discipline in the financial sector (especially banks) allegedly in disarray. Scams and loan defaults especially in public banks - Sonali, BASIC and Janata for example, are likely to create havoc unless healed with proper policies. Amidst the anarchy prevailing in the sector, permission for new banks, allegedly politically motivated, could turn things worse. The second challenge is raising tax revenues to the tune of no less than Tk 3.0 lakh crores by overhauling and revitalising the National Board of Revenue (NBR) as well as by putting in practice the long awaited VAT law. Revenue earnings could better be maximised by not raising taxes but lowering taxes. En passant, separate benches in the High Court should be established to deal with dodgy tax evasion cases and tax disputes. As it is now, it takes years after years to get a verdict on tax/duty related cases filed by the authorities thus depriving government of a large chunk of revenue. In fact, innovative ways of using tax-tricks could help reduce the much maligned income disparity in society. Challenge is also there for plugging flight of capital. The fourth challenge is completion of the mega projects as early as possible. We need to realise that unless and until those projects are completed, economic growth rate may not reach as high as 8.0-9.0 per cent. The fifth challenge is ensuring quality development projects, above political considerations, in pursuit of developmental objectives. The final challenge, the least of which lies in his domain, is the prevalence of good governance. This would require a massive reform to public administration, law, education etc. The earlier reforms dated back to 1970s could bring us to this level of 6.0-7.0 per cent growth rate but to target 8.0-10 per cent and that also quality growth, drastic reforms are just the clarion call of the hour. On this final challenge, the FM has the responsibility of conveying to his colleagues, including the prime minister that unless massive socio-economic and political reforms are agreed upon to be undertaken, private and foreign investments would fall short of expectations leading to a case of growth without employment generation. In fact, fulfilment of every commitment in the election manifesto warrants hard-nosed reforms.
Nobel Laureate Milton Friedman, in his autobiographical lecture, said how he chose his subject between Mathematics on the one hand and Economics on the other during the great depression. Quoting from Robert Frost's famous poem, "The Road Less Traveled" he said:
Two roads diverged in a yellow wood,
And sorry I could not travel both
I took the one less travelled by.
And that has made all the difference.
Two messages should be clear to the respected FM. First, in economics you cannot travel both -the great paradox of great need on the one hand and unused resources on the other. Second, if your government wants to make all the differences, then take the one less travelled by. Reforms are pains in the short run but gains in the long run.
Finally, and perhaps contrary to the conventional economics wisdom, Bangladesh has enough resources to meet everyone's need but not enough resources to meet everyone's greed. It only needs a firm political commitment to grill the greed.
Abdul Bayes is a former Professor of Economics at Jahangirnagar University.
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