Govt slashes GDP growth target to 6.5% for FY23
The finance ministry on Tuesday proposed lowering the target gross domestic product (GDP) growth rate to 6.5% for the fiscal 2022-23, in line with the repeated predictions of economists around the country.
The proposal for lowering the GDP target from the earlier projection of 7.5% came at the ministry's coordination meeting on the Fiscal, Monetary and Exchange Rate.
Amid the dual threats of the difficult post-Covid pandemic recovery period and the global turmoil induced by the Russia-Ukraine war, economists had warned that meeting such an ambitious target was not possible.
Keep updated, follow The Business Standard's Google news channel
Organisations like the World Bank, the International Monetary Fund (IMF) and the Asian Development Bank (ADB) also hedged bets on a 6%-6.6% growth in various reports, going against government estimates.
In the meantime, regulatory initiatives like control in currency supply and controlled import of goods have been taken to reduce domestic demand.
Load shedding has also been scheduled in efforts of fuel savings.
The government is reducing the growth target this time due to multifaceted controls and contractionary initiatives.
As such, the growth rate target in the revised budget has been reduced by one percentage point compared to the original budget.
The 7.5% growth rate in the fiscal 2023-24 is still considered ambitious.
In addition to the growth target, major cuts in various sectors, including the total allocation, were decided in the meeting.
In the meeting, the size of the current budget was reduced from around Tk6.78 lakh crore to Tk6.58 lakh crore.
According to this, the allocation in the budget is decreasing by over Tk20,093 crore or about 3%.
The meeting chaired by Finance Minister AHM Mustafa Kamal was attended virtually by the agriculture minister, planning minister, commerce minister, secretaries of the ministries and chairman of the National Board of Revenue (NBR).
Various economic issues, including import-export, revenue collection, inflation and remittances were discussed at the meeting.
Afterwards, the budget management and resources committee meeting was also held.
Several officials who participated in the meeting said a proposal was made to increase the prices of some products and services to reduce the subsidy pressure.
They said the government has been subsidising gas, electricity, fuel oil and fertilisers for a long time considering the inflation and adverse effects on the public.
Recently, the amount of subsidy may increase several times due to the rise of gas and fuel oil prices in the international market, which may bring budget management under pressure.
Taking these issues into consideration, the Finance Division has proposed increasing the price of electricity and gas to reduce the subsidy pressure.
They further added that fuel prices have already been increased. In the meeting, it was recommended to the relevant ministries and divisions to take initiative in this regard and implement the increased prices soon.
In addition to various indicators of the economy in the current fiscal year, the overall situation of budget implementation and the budget estimate for the next fiscal year 2023-24 were discussed in the meeting.
Dr Md Kawser Ahmed, member of the General Economics Division (GED) of the planning commission, told The Business Standard that the finance ministry proposed a downward revision on the target of the GDP growth on the ground of the global phenomena.
There was no domestic reason behind it.
He said the price of energy, fuel, fertiliser, food and all other inputs and essentials has soared recently and there was no indication of the prices of such items coming down in the near future.
"Demands for exports will also drop following recessionary impacts in major markets. That is why the economy would achieve a lower growth than the target set in the original budget," he added.
According to several officials present at yesterday's meeting, the Finance Division informed the Coordination Council that the instability of the foreign exchange market cannot be controlled due to the dollar crisis.
Food and fuel prices are increasing at an abnormal rate and the suffering of common people is increasing, they said, adding subsidies could not resolve the crisis by using subsidies in all sectors.
They also said foreign exchange reserves are continuously decreasing without increasing export and expatriate income in line with the increase in import expenditure.
Multiple challenges are created in dealing with these crises.
In the budget of the current fiscal 2022-23, there is an allocation of about Tk83,000 crore for subsidies and incentives. However, there are demands to increase the allocation in these sectors by several times.
In this situation, the finance division proposed to increase the price of electricity and gas and reduce the subsidy pressure in the meeting.
A possible budget of Tk7.50 lakh crore was outlined for the next fiscal year in yesterday's meeting by estimating a 7.5% GDP growth in the next financial year.
Accordingly, the size of the new budget is increasing by Tk72.13 thousand crore.
The revenue target for the next financial year is Tk4.86 lakh crore, while it is Tk4.33 lakh crore in the current budget.
Out of this, the NBR is being given a revenue collection target of Tk4.42 lakh crore, up from around a lakh crore in the current budget.
The gap between income and expenditure is estimated to be Tk2.64 lakh crore next fiscal year, up from Tk2.44 lakh crore in the current year.
The World Economic Outlook of the IMF projected a 6% growth in Bangladesh last October.
At the same time the World Bank also revised down the GDP growth forecast for Bangladesh to 6.1% from the 6.7% growth projection made in April and June this year.
The ADB compiled a moderate projection for Bangladesh economy at a range of highest 6.6% growth.
