Without mending reforming policies, it will be difficult for Bangladesh to graduate from a lower-middle income country to an upper-middle income country, said economists at a conference on Saturday.
Bangladesh cannot achieve this goal without repairing the capital market, revenue collection and reducing the amount of bad loans in the banking sector, speakers said at the first session of the fourth conference organised by the Bangladesh Economist Forum in Dhaka.
AB Mirza Azizul Islam, former finance adviser to the caretaker government, presided over the session, while Planning Minister MA Mannan attended as the chief guest at the event.
"There is no way to disregard the necessity of reforming different sectors, including the banking sector, but the government is facing difficulties," said Mannan.
According to Bangladesh Bank data, the country became a lower-middle income country in 2015.
Now the country's goal is to become an upper-middle income country by 2031, and a high income country by 2041, speakers said.
Four papers were presented at the first session of the conference.
Dr Sadik Ahmed, vice chairman of Policy Research Institute (PRI), presented a paper on fiscal year-based policies for graduating to a high income country.
"To become an upper-middle income country, six aspects of financial management should be emphasised – ensuring a stable macro-economy, preparing a growth oriented budget, balanced distribution of development in financial policy, establishing a productive, efficient, and appropriate budget, making the government institutions self-sufficient, and decentralising the financial system," he added.
Sadiq also said that a major challenge for the government is to maintain an 8 to 9 percent growth rate.
Government investment will have to be increased to 28 percent from the existing 23 percent by 2025. Private investment will have to be raised to 39 percent from 36 percent, in phases.
To increase efficiency, 3 to 4 percent of the GDP will have to be allocated to the education sector in the budgets for the next 5 to 10 fiscal years.
Allocation for social safety programmes will have to be increased to at least 3 percent from the existing 1.5 percent of the GDP. Additionally, the allocation in the health sector will have to be raised to at least 1.5 percent from 0.7 percent by 2025.
The tax to GDP ratio in Bangladesh is lowest in the world, at only 9 percent.
Dr Sadiq also said, the challenge of reducing income inequality by increasing investments has to be won in order to graduate to the middle-income country status.
The economists thought that bringing the low-income people to the mainstream of economy is also necessary for making development sustainable.
Dr Mustafa K Mujeri, executive director of the Institute for Inclusive Finance and Development (InM) said, the financial sector has been becoming dependent on government institutions.
Alongside, the banks and financial institutions are at the risk of unhealthy competition. There is no alternative to a strong share market, bond market and policy reform from the government level to solve this problem.
Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh (PRI) said, it is well known that increase of export is very urgent for economic development. However, he said there is no alternative to cutting down dependency on garments industry and diversification of commodity.
Mirza Azizul Islam said, the government has been implementing many mega projects. But most of the projects have to be revised mid-way. This increases cost by three to four times and more time is required to implement the project. He said ensuring transparency in government investment is also important.