Bangladesh Economy:

Achievements and Challenges

Dr. Salehuddin Ahmed

Former Governor, Bangladesh Bank.

Professor , BRAC University.

2.

Bangladesh with high density of population and many geo-economic challenges has several achievements.

Poverty remains a major challenge besides other challenges.

3.

GDP growth rates for past two decades are satisfactory and increased to 6.12 in 2014

Worsening income distribution and increase in unemployment recent years due to less attention in redistribution.

4.Inflation accelerated in 2011-

2012 led by food prices.Bangladesh Bank has chosen

inflation rate as nominal anchor.

Over the last two decades , inflation is contained. Recent fall in global prices attributed to some extent to contain inflation.

5. Low interest rate leads to increase in private sector credit growth rates, with some exceptions.

5.(Continued)

Recent fall in private sector investment corresponds with high rate of interest. However , other reasons like global recessions, political uncertainty are there.

6. The economy transformed from highly agrarian to industry and service oriented one.

6. (Continued)

Agriculture has become modernized and greatly contributed to food self-sufficiency.

7.External sector performed well.

Global financial crisis of 2007 did not have much impact.

RMG export steadily grew. Remittance flow good US $14b forex reserve stood at US $22 billion. ( Jan.2015)

Export limited, diversification required. Recent export growth slow.

7.

8. Fiscal management faces challenges:(a)High govt. borrowings for budget,

high service charge for debt ( 20% of budget)

(b)Inadequate revenue mobilization. Low tax/GDP ratio ( 8.6 % against global 13.5%)

(c)Revenue expenditures, subsidies very high.

9. Banking Sector Problems

State owned banks: financial scam, default loan .

Private banks: default loan, not very innovative .

Regulations and compliance problems : Lack of good governance, Management problems.

10.

MDG Goals, targets achievedHealth sector: good results

even compared to India Education Sector : Good

achievement but quality of education remains a question.

10. (continued)

Challenges: Reduce maternal mortality to 139, child mortality to 31, and primary enrolment to 100% by 2015.

Gap is more evident in nutritional outcome. Need to increase entitlement capacity of poor to have a balanced diet.

Institutional challenge: national, local and community level.

11. Challenges of the economy

(a)Political instability

(b)Lack of good governance

(c)Reform measures

(d)Growth rates : To be increased to 7.5 to 8%, investment and other factors .

(e)Face impact of climate change

(f)Improve human welfare: education, health, safety nets, income distribution

12. Risk factors of the economy(a)Insufficient infrastructures(b)Constraint in domestic revenue

mobilization.(c)Low level of financial

development: capital market(equity and bond), insurance market, hedging / future markets

12. (continued)

(d).Accelerate pace of reforms to attract more FDI, contract enforcement, land registration for industries.

(e) Inadequate human capital: education, skill development, employment opportunities for youth and women.

(f) Constraints in opportunities of NRBs

13.Faster growth rates and improvement of quality of life (and poverty reduction) requires:(a)Regulatory bodies to be effective

(b)Government bodies like BBS, IMED, Planning Commissions, to work efficiently.

(c)Private business promotion bodies ( BOI, EPB) to be more effective.

13. (Continued)

(d) Chamber bodies, and Business Associations should work in tandem with the govt.

(e) Good governance, transparency, accountability and rule of law.

Above all “Political Will’ manifested in positive actions and “Political Stability” and “Democratic Norms” are essential