REJAUL KARIM BYRON

The government is setting a high growth target for the next fiscal year, banking on the possibility of stability returning to the Middle East by June next year and the expansionary fiscal and monetary policies being pursued.

Even though GDP growth has been declining for three consecutive years, the government is targeting 6.5 percent growth for the next fiscal year, The Daily Star has learned from finance ministry officials involved with the proceedings.

This is much higher than the economic outlooks from the World Bank, the International Monetary Fund, and the Asian Development Bank, which projected Bangladesh’s GDP growth between 4 and 5 per cent.

“The government always sets a high growth target, while development partners provide more conservative projections,” said a finance ministry official, adding that the BNP-led government has begun taking several measures after assuming office to boost growth.

To boost public investment to deliver the high GDP growth, the annual development programme for the next fiscal year will be increased by 50 percent to Tk 3 lakh crore.

On the other hand, to encourage private investment, policy interest rates will be reduced from July. Besides, the Bangladesh Bank has already announced a stimulus package of Tk 60,000 crore.

“The current economic situation in Bangladesh is stagflationary -- and under the current global conditions and with this pace of reform, 6.5 percent is pie in the sky, I would say,” said Zahid Hussain, a former lead economist of the World Bank’s Dhaka office.

Growth projections depend on improvements in key “choke points” in the economy: banks, ports, the National Board of Revenue, roads and markets.

“Whether ports function properly, whether extortion occurs in roads and markets -- all these things matter.”

Without reforms in policies and institutions, these choke points will not open.

“The knots must be untied first,” he said, adding that the solution is not more government spending or investment, but making institutions and policies investment-friendly.

For instance, as many as 35,000 factories are idle simply because there is no gas.

In such cases, higher spending cannot increase production.

“Therefore, instead of chasing targets, the question is whether we can do better than this year.”

Reforms are needed in areas like port functioning, banking and energy.

“Everything cannot be changed overnight. But there must be a roadmap -- what is being done, what will be done -- a clear plan. The journey is long, but progress must be visible. Without these, turning growth around -- even to 5 percent, let alone 6 percent -- will be difficult in the current context.”

If the Strait of Hormuz remains closed, the economy will be hit until the situation is resolved, he said.

Globally, commodity prices are rising due to supply constraints,

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