Unnayan Onneshan, a private think-tank, has said the International Monetary Fund-prescribed measures, incorporated in the proposed budget for the next fiscal year, will have a knock-on effect, particularly on investment, leading to deceleration of growth.
‘The fiscal measures, coupled with contractionary monetary policy and orthodox exchange rate management, are part of a three-year programme agreed between the government and the International Monetary Fund,’
said the UO in its budget assessment.
The organisation observed that the government was responsible for the recent macroeconomic pressures.
The government’s wrong choices of policies, stemming from chaotic management of the economy and pursuance of policy conditionalities in order to be eligible for the loan from the Extended Credit Facility of the IMF, will have a knock-on effect, particularly on investment, leading to a deceleration of growth of national output, it observed.
The UO estimated that the real GDP growth may reach as low as 5.47 per cent in the current fiscal year and GDP growth may further dip in 2012-2013 while the finance minister projected a GDP growth of 7.2pc in the proposed budget for FY ‘12-13.
It estimated that although the government targeted Tk 520.68 billion deficit, which is five per cent of the GDP, for the FY 2012-2013, the deficit might increase to Tk 533.65 billion by the end of the fiscal year.
Besides, it said, the government borrowing from banking system was targeted at Tk 230 billion for FY 2012-13 but continuation of the current trend may witness a total of Tk 351.90 borrowed from banking system by the end of the next fiscal year.
The UO said the contractionary monetary policy to curb inflationary pressure resulted in slump in investment, particularly by the private sector through increasing the cost of fund.
The rate of point-to-point inflation in May 2012 came down to slightly below double-digit at 9.15 per cent. The high inflation, resulting in lower consumption, led to decrease in aggregate demand, culminating in lowering the rate of expansion of the economy, as the current economic growth in Bangladesh is a consumption-led one, it observed.
About poverty, the think-tank says, the basic problem of poverty lies in its concept that poverty is the manifestation of social property relationship.
‘However, slump in investment has squeezed the scope for employment generation opportunity without which the process of alleviating poverty is next to impossible and the overall impact may lead into stagnation in the pace of reduction in poverty. If the reduction in poverty is halted from the desired level and the rate of graduation from poverty goes down or stagnates, the rate of economic growth also falters.’