FY19 starts today with polls-centric economic challenges

Jasim Uddin | Published: 00:05, Jul 01,2018

 
 

Financial year 2018-2019 begins today with a number of challenges for the government in economic front including election-centric sluggishness of private and foreign investment amid political uncertainty, rising defaulted loans in scam-plagued financial sector and achieving a large revenue collection target.
The national elections is likely to be held in first half of the FY19, most likely in December, which may bring another dimension to the already sluggish investment from private sector and foreign sources, economists say.
Political uncertainty surrounding the participation of the opposition Bangladesh Nationalist Party in the national elections will continue to weigh on the investment decision of both local and foreign investors in first of FY 19, which may ultimately affect the economic growth of the year, they fear.
Former adviser to a caretaker government Mirza Azizul Islam on Saturday told New Age that there was a possibility of economic slowdown in the new fiscal year due to feared political uncertainty and instability in the run-up of the upcoming national elections scheduled to be held by the end of the first half of the fiscal year.
The existing slower performance in overall budget implementation might also deepen in the election year due to uncertainty, he said.
Development officials of the government would also be busy with election work which would also put negative impact on budget implementation, he pointed out.
Uncertainty centring the elections might also impede investment in real sectors, he said.
Private investment remained almost sluggish over the years and further deterioration in the sector would put a negative impact on overall economic growth, he observed.
The government in the budget for FY19 has an ambitious target of reaching the overall investment to 33.54 per cent of GDP this fiscal year from 31.47 per cent in the just concluded fiscal year.
It has targeted private sector investment growth to 25.15 per cent of GDP from 23.25 per cent while that of public sector to 8.39 per cent from 8.22 per cent
Even after relative political calm, overall investment grew only by on 0.96 percentage points in FY18 while the government has targeted a rise of more than 2 percentage points for FY19.
Foreign investment on the other hand continued to fall in recent months.
In the first 10 months of the just concluded year, foreign investment fell by 4.2 per cent to 1.46 billion from 1.52 billion during the same period of the previous year.
Even in the capital market, foreign investment is falling fast with net investment on the country’s main bourse hitting 7-year low in FY18.
Aziz said that the existing challenges like inadequate infrastructure, gas and electricity, lack of good governance, dismal situation in ease of doing business, slowdown in poverty alleviation and growing income disparity would also continue to become irritating problems for the government.
Streamlining embattled banking sector or maintaining a status quo to prevent further degradation will be another challenge given that the government will remain busy in election-centric activities.
Finance minister AMA Muhith has already ditched a plan to form a banking commission to probe banking sector irregularities and recommend measures.
Muhith said that the next government, after the elections likely to be held in December, would decide in this regard.
The sector is plagued with loan scams as the amount of defaulted loans rising to Tk 88,600 crore as of March 31, 2018 bringing liquidity shortage in the financial market.
In January-March quarter of FY18, defaulted loans rose by 20 per cent.
Bangladesh Bank officials fear that the rate of defaulted loans might increase further as the election will come close with the sluggish business activities.
World Bank Dhaka office lead economist Zahid Hussain on Saturday told New Age that the in the new fiscal year the main risk in the economy would remain in banking sector which had been going through an indiscipline situation over the last few years.
He said that regulatory institutions of the banking sector like Bangladesh Bank and Banks and Financial Institutions Division were captured.
An association was determining everything related to banking sector, he alleged.
It would be the main challenge for the government to come out from the situation, he pointed out.
Pressure in external sector like rising imbalance in current account due to huge import payment will remain an important challenge for the government.
The economy might also face an inflationary pressure in the new financial year due to rising price of rice in domestic market and higher price of fuel oil and other commodities in international market, he said.
The traditional challenges like slower progress in revenue mobilisation, ADP implementation, attracting private investment both domestic and foreign direct investment and improving other regulatory issues might continue to create pressure on overall economy, he added. 

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