|
|
Change Your Life! |
“Fiscal deficit sustainable”: World Bank |
|
News |
June 14, 2000
Dhaka, (UNB) - The World Bank yesterday(Tuesday) said that Bangladesh's present level of fiscal deficit was sustainable provided the quality of expenditure is good.
"Fiscal deficit is not a problem but quality spending is a must. The danger is that expenditure quality is extremely poor," said Roberto Zagha, sector manager, poverty reduction and economic management, South Asia region of the World Bank, at a press briefing at the Bank's office here.
"We are concerned over a number of projects in the ADP not viable economically," he said replying to a question whether the present fiscal deficit was a looming danger for Bangladesh's economy.
Echoing Zagha, World Bank country director in Dhaka Frederick T Temple said good quality spending could help Bangladesh achieve a higher growth.
On the danger of the increasing trend of bank borrowing, the Bank's opinion is that till date the Finance Minister's claim was based on hard fact that it was not creating inflation, nor hampering private sector lending.
"On the basis of hard evidence there was no inflation. There is excess liquidity in the banks," said World Bank economist Zahid Hossain. There is no evidence to say that bank money was not available for the private sector, he added.
Replying to a question, Roberto Zagha said it was true that the proposed budget was much more backward looking than forward looking.
"But Bangladesh's success over the 4/5 years was remarkable. The growth rate was high at 5 to 5.5 per cent," he said adding that Bangladesh's economy was the 8th fastest economy of the world.
"From a basket case to 8th fastest economy is remarkable performance indeed," said the regional official of the World Bank.
Zagha said the growth of the agriculture sector and export was remarkable. Some progresses have been made in poverty alleviation. Remarkable improvement has been made in social indicators.
But, he added, to make a dramatic change, raising the growth rate from 5 per cent to 10 per cent that Bangladesh needs, some of the elements to be addressed are absent in the budget.
He pointed out that to accelerate the growth rate at the desired level the problems reforming the sate-owned enterprises (SOEs), banking system etc, should be addressed immediately.
"Bangladesh could greatly benefit form the globalised economy provided some of these problems are resolved."
However, the World Bank official said that the budget document lacked future directives of trade policy and for structural reforms.
Terming the direct tax rate in Bangladesh as very low, he said this should be much more. Only 740 people pay 56 per cent of the total income tax. The total number of income taxpayer in Bangladesh is only 700,000.
Stressing the need for flexible and open exchange rate policy, Zagha said: "The exchange rate is rigid and less reactive…it should be much more flexible."
Earlier, briefing newsmen about the progress of ongoing discussion on the Country Assistance Strategy (CAS), World Bank chief in Dhaka Frederick Temple said the main expected features of the next CAS would be comprehensive approach to poverty reduction and emphasis on governance.
On a question whether governance issue would dominate in future funding of the Bank, he replied in the affirmative.
Temple said: “The most striking result of the first round of consultations was the pervasive emphasis on the importance of improving governance to reduce poverty and achieve prosperity in Bangladesh.”
He said the IDA lending to Bangladesh has been substantially lower than it could be, primarily because of the slow pace reforms.
“We recognize the constraints on accelerating reforms during an election year, but we would be prepared to increase our level of financial support if the government formed after the elections adopts and begins to implement a bolder reform program,” he added.
The World Bank country director said during the discussions, in particular the importance of reducing corruption and improving law and order were stressed by every group.
To prepare the next CAS, the World Bank held consultations in Dhaka, Rajshahi and Sylhet with villagers, slum dwellers, district leaders, businesspeople, labor leaders, NGOs, academics, donors, civil servants, MPs and ministers.
The second round of consultations will be held in May-June in Chittagong, Dhaka, Rajshahi and Sylhet to get feedback on the first round.
Temple said the CAS program is being designed to achieve several objective that include improving economic performance through improved governance and empowerment, particularly of the poor and women.
It also targets to strengthen macroeconomic management as a prerequisite for faster growth and poverty reduction, supporting faster, more pro-poor growth by supporting structural reforms and focusing particularly on rural development and manufactured exports.
Other features of the CAS program are accelerating human development through health, education and training program and reducing vulnerability and insecurity of the poor through disaster mitigation, responding to the arsenic contamination crisis, strengthening social safety nets, reforming the civil justice system and improving environmental management.
Shekhar Shah, Lead Economist of the World Bank head office in Washington, Kapil Kapoor and Nizamuddin Ahmed also answered questions from the journalists.
|