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Symphony the Saifur way

Crosscutting issues now need careful handling if investment has to rally

INAM AHMED and REJAUL KARIM BYRON
Will he pause for a moment to brood over what lies ahead before entering the budget session today? Will he be on an even springier mood or in his ever carefree style? Wait until Finance Minister M Saifur Rahman's turn to present the pro-
posed budget for next fiscal comes today.
Whatever magic Saifur might be carrying with him, he would better have a plan to push the average growth rate beyond the 5 per cent band. It has been quite a long time -six years, to be precise -- that GDP has been stuck on that rung. Now it needs to go beyond, minimum 7 per
cent, to break poverty barriers.
And he would better come with new ideas for investment acceleration -- not only in the public sector, but private too. This effort will cut across a number of critical issues -rolling back the law and order slide, fighting corruption and embarking on a monetary expansion
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programme that would not lead to runaway inflation.
More credit flow to the private sector will be a key challenge, as investment stagnated this fiscal. This is also linked to a bulk of crosscutting issues -- institutional reforms being one of them; making credit less costly and turning the wheels of production smoothly by snapping the red tape are among others.
Understandably, Saifur has reasons to feel sprightly. Macroeconomic indicators show well for him. A year ago, when the revenue target was set 20 per cent higher for this fiscal, many were sceptical. Eleven months down the line, the target has been surpassed by Tk 11 crore with the growth mark reached.
The debt service liabilities (DSL), billed to account for 18.46 per cent of revenue budget, have been reduced -- by retarding bank loans and borrowing less than before by lowering net sale of high-interest bearing savings instruments -- to Tk 3,254 crore in the first nine months of this fiscal from Tk 3,551 crore of the same period the previous fiscal.
The current account balance has also improved to $669 million in July-February from the previous fiscal's $468 million, which was possible mainly because of a robust remittance flow that grew by 25 per cent until May. Exports also recovered from last year's negative trend (-7.44 per cent) to 6.15 per cent until March. Though it trails 4.18 per cent behind the target, it is still good considering the choppy global market environment.
Foreign direct investment (FDI) had a little to contribute to this picture. Till February of this fiscal, $26 million flowed in as FDI, which is 37 per cent lower than that of the same period of last fiscal. Last fiscal's FDI was then again 62 per cent lower than the previous year's.
But here also lies a challenge. Saifur has to think ways and implement them to put exports on a fast track. If that cannot be achieved, the fiscal balance will come under fresh strains and investment too. Then Saifur has to look inward and support the import substitute industries. That is also linked to an effective demand growth, more strongly in
rural areas. And here, everything gets interlinked -- right from keeping inflation under arrest to law and order to credit policy.
The forex reserves now at $1.93 billion despite a fall in foreign aid also give considerable relief to the finance minister. With donors lining up to pour in more funds, reserves will ratchet up.
And prudent fiscal policy has brought down budget deficit by one percentage point of GDP over two years to a projected 4.1 per cent from as high as 6.1 per cent in 199900.
Saifur has already fielded a bloated ADP for next fiscal. At Tk 20,300 crore, he banked on availability of funds from the World Bank and the IMF to shift to this high ADP growth of 19 per cent from this fiscal's revised ADP. Spending on prioritised and quality projects would give the needed growth boost. Otherwise, as Dr Wahiduddin Mahmud has pointed out, the "Dutch Disease" syndrome might surface.
Now, all this stability had been achieved on the low level of equilibrium, as Dr Debapriya Bhattacharya said. But the scenario will unfold in a different way when the gear shifts upward. There comes the chance to prove finesse in balancing inflation, borrowing, fiscal deficit, credit expansion, ADP implementation and export drive.
On the back of the thick of the statistical mist come the reforms -already done and to be done. Saifur had been bold enough to privatise a number of loss-making state-owned enterprises and shut down the Adamjee Jute Mills. More to come. And more have been agreed upon with the donors as part of the financing deal. The wide-ranging reforms are awaiting the nationalised commercial banks, one of them to be privatised. In presenting the budget, Saifur will have to tell the nation what more are there on the agenda, some of which are likely to draw flak from those at the receiving end.
The next year will prove how successfully Saifur can conduct the orchestra of reforms and management to create the investment symphony.