State of the Bangladesh Economy in FY 2006-07 and Outlook for FY 2007-08
 
     
  Books contents;

The Centre for Policy Dialogue initiated its flagship program the Independent Review of Bangladesh's Development (IRBD) as an annual exercise back in 1995. This pioneering exercise, implemented under the leadership of CPD's founding Chairman Professor Rehman Sobhan, has continued to produce annual reviews of Bangladesh economic performance each year over the past years, the current one being the 14th volume in the series. In line with the previous publications, the IRBD 2007 examines and analyses key macroeconomic performance indicators of Bangladesh, in the fiscal year 2007. A major objective of the IRBD series has been to raise awareness about key developmental issues in Bangladesh and stimulate an informed debate around important issues. The IRBD 2007 has been prepared with this objective in view.

As followers of the CPD's IRBD exercise will know, the IRBDs are published in two volumes. The present volume, an analysis of macroeconomic performance is accompanied by a companion thematic volume on issues of long-term strategic concerns.

The FY2007 witnessed some major developments both at global and domestic levels. It has been a critically important time for Bangladesh from the perspective of political developments, having seen three consecutive governments - the immediate past political government, the first caretaker government and the second caretaker government. The present volume of the IRBD 2007 analyses the performance of the economy in FY2008 and also anticipates some of the likely outcomes in the following year, through an economic outlook for FY2008.

Chapter I of this volume presents an assessment of the state of the Bangladesh economy in FY2007. The chapter mainly concentrates on six major areas - growth-savings-investment, poverty situation, public finance and financial sector, monetary sector, real economy and external balance. It presents an assessment of progress in each of the aforesaid areas during the financial year. The discussion identifies major challenges that need to be addressed in those areas in the coming days and months. Evaluation of the performance of the economy indicates a number of positive developments in areas such as revenue collection, export growth, manufacturing production, remittance flows and flow of equity capital to the stock market. However, the economy had to address a number of challenges in this year which had serious adverse implications for the overall performance of the economy, alongside standard of living of the people and their welfare. A major issue of critical policy concern was the price hike of essential commodities, particularly of food items. Along with this, some of the other adverse developments were a fall in gross disbursement of agriculture credit, stagnant foodgrain production, acute shortage of electricity, poor implementation of the public investment programme, lower than expected disbursement of foreign aid, etc. As is known, some of these adverse factors are being passed on from one year to another and there is a need to address these issues on an urgent basis.

Chapter II is based on a set of proposals to the Ministry of Finance, Government of Bangladesh (GoB) that was prepared by the CPD for consideration, during the national budget for FY2007-08. The proposed measures cover areas such as revenue generation, investment promotion, export expansion, growth of local industries, balanced regional development, reform of the tax administration, producers and consumers price support and the needs of the marginalized group.

Chapter III of the present volume provides an analysis of the National Budget for the FY2008 and the Revised Budget of FY2007, which were placed before the country on 7 June 2007. The FY2007-08 budget was a departure from the traditional ones and distinct in nature since it was the first time that a full year budget was presented by a non-party caretaker government. The budget was expected to be free from political pressures and less attuned to pressure from vested interests. This section analyses the various proposals made in the budget, evaluates these against the expectations and highlights the outstanding areas that require further consideration.

Chapter IV includes an interim report presented by the CPD on recent trends in the economy during FY2007-8, their implications for performance during the rest of the fiscal year and identifies a set of structural and institutional issues, which need to be addressed by the government. The study recommends a number of suggestions for moving the economy forward and highlights a feasible set of policies in areas such as revenue earnings, revenue expenditure, Annual Development Program, budget deficit, monetary and real economic growth and external sector situation.

Chapter V provides a summary of recommendations from the CPD's study on "Price of Daily Essentials: A Diagnostic Study of Recent Trends", prepared for the Ministry of Commerce, Government of Bangladesh. As will be appreciated by the readership, creeping price of essential commodities has been one of the major challenges faced by the caretaker government. Higher inflation rates for prices of food (over the price of non-food ones) and higher consumer price index in rural areas (compared to urban areas) are two important distinctive features of the current inflationary trend. It is widely known that food price inflation hurts people with low income, fixed income earners, the vulnerable and marginalized groups. It has adverse implications for investment and competitiveness of Bangladeshi exports. This chapter presents a package of policy suggestions in view of this.

The present IRBD volume also includes a dialogue report on the "State of the Bangladesh Economy and Budget Responses FY2008" organized by the CPD on 14 June, 2007 (Annex I). The last section (Annex II) contains a chronology of the major economic events that occurred during FY2007 and also covers the period between July-November, 2007 of FY2008.