After achieving above 7.0 per cent growth since FY 2015-16 to three consecutive years, Gross Domestic Product (GDP) growth in Bangladesh has reached 8.15 per cent in FY 2018-19. This feat of achieving continued growth in Bangladesh's GDP has been praised worldwide.
However, the coronavirus pandemic that poses a major risk to the global economy has also had negative effects on the Bangladesh economy. According to the estimates of Bangladesh Bureau of Statistics (BBS), GDP growth has been decelerated to 3.51 per cent in FY20, which has been estimated to 5.47 per cent in FY21.
During FY 21, the country's per capita national income stood at US$ 2,227, from US$ 2,024 in the previous fiscal year.
The Honourable Prime Minister announced incentive packages of about Tk 1.28 trillion to address the pandemic crisis and keep the country's economy moving and bring it back on track. These incentive programmes, which is 4.40 per cent of GDP, are being implemented through 23 packages. Some of the notable activities of this package are to provide special funds for export oriented industries; provide working capital to affected industries and services sector enterprises as well as micro (including cottage industries), small and medium enterprises; increase the benefits of Export Development Fund; increase the coverage of social safety net; provide direct cash transfer to targeted people; and create various funds for the agricultural sector.
In addition to financial incentives, various measures have also been taken to reduce import duty on Covid-19 related health and medical products and provide policy assistance to increase liquidity in the banking sector. Through implementation of this attractive and timely stimulus package, the government has been able to play a highly effective role in employment creation and safeguarding employment, stimulating domestic demand and keeping economic activities moving. As a result, the trend in the Bangladesh economy has started a turnaround towards the high growth trajectory.
Moreover, to address the impact of Covid-19, funds have been allocated in the budget to meet the targets of each ministry and division. The revised budget outlay for FY20 was Tk. 5015.77 billion, which increased by 7.46 per cent to Tk 5389.83 billion in FY21. The government is cautious of limiting the budget deficit to 5.0 per cent by increasing efficiency in revenue management. However, due to the increase in government expenditure against Covid-19 pandemic, the actual budget deficit for FY20 stood at 5.4 per cent. The budget deficit has been estimated around 6.10 per cent of GDP in FY2l. Initiatives have been taken to further automate and digitise income tax, value added tax and customs departments to bring transparency in tax management. Online IT based value added tax system has already been introduced. It is expected that implementation of the ongoing reform programmes will help keep the budget deficit within the limit of 5.0 per cent in the coming years.
There has been a negative growth in import and export in FY20. However, both export and import showed a positive move during FY21. Notable progress has been made in the area of remittances due to the provision of incentives at the rate of 2.0 per cent on remittances sent by non-resident Bangladeshis (NRBs) through the banking channel and the easing of the process for sending remittances. The inflow of remittances for FY21 stood at US$ 24.78 billion, up by 36.10 per cent compared to the previous fiscal year. It is expected that this high growth trend of remittance inflows will continue in the coming days. In addition, various initiatives and diplomatic activities by the government have been continued, including those for the expansion of the foreign labour market, skills development and safe migration. As a result of the increase in remittances, the deficit in the current account balance has improved during FY 21, compared to the previous fiscal year. At the same time, due to the US$ 9.3 billion surplus in the overall balance of payments, foreign exchange reserve increased significantly to reach at US$ 46.39 billion on June 30, 2021.
The monetary policy for FY21 has been framed with the dual objectives of supporting domestic demand to stimulate economic growth in coordination with the government's sustainable development goals, and maintaining price level and achieving macroeconomic and financial stability. To ensure adequate liquidity in the financial system to tackle the financial crisis stemming from the pandemic, the interest rate and the Cash Reserve Requirement (CRR) have been reduced more than once. At present, both the repo rate and CRR are 4.0 per cent. Furthermore, the interest rate on bank loans has been brought down to a single digit or 9 per cent with the aim of creating an industrial and business-friendly environment for the industries, businesses and service sector organisations and enabling them to achieve financial viability in local and international markets.
Apart from economic development, Bangladesh has also made significant strides in the social sector. Bangladesh has been able to achieve the targets ahead of schedule related to hunger, poverty and health in the Millennium Development Goals (MDGs) of the United Nations. The government has adopted 'Vision 2041' after the implementation of 'Vision 2021' and formulated the Second Perspective Plan (2021,-2041) as the strategic policy document for the vision. Implementation of the Seventh Five Year Plan (2015-2020) has been successfully completed. The implementation of the Eighth Five Year Plan (2021-2025) has started. The government has set its goal to become a higher middle income country by 2031 and a happy and prosperous developed country by 204I.
The government is working tirelessly to tackle the coronavirus pandemic, implement pledges made under the Election Manifesto of 2018, implement the Second Perspective Plan (2021-2041) and achieve the Sustainable Development Goals (SDGs). lt is hoped that through the implementation of the initiatives taken by the government, the expected growth targets will be achieved and the country will move towards continued development.
A H M Mustafa Kamal, FCA, MP, is Minister, Ministry of Finance, Government of the People's Republic of Bangladesh. The piece is a slightly abridged version of the Preface of 'Bangladesh Economic Review-2021. (mof.portal.gov.bd)
Note: The review is an annual publication of the government and is usually published during the budget session along with other budget documents in June every year. However, due to the outbreak of Covid-19 pandemic, there has been some delay in publishing the Review. It was published during the first week of October this year.