FROM PAGE B1

To achieve the government’s growth goal, it will be necessary for economic growth to increase by more than two percentage points in one year, according to Prof Islam. To do this, there will be a need for a strong resurgence in private investments, higher exports, adequate energy availability, political stability, better credit flow to the productive sectors, and revival of domestic demand.

Although growth above 6 percent is possible, based on the present trend of the economy, which shows several obstacles such as high interest rates, stress on private investments, problems within the banking system, and economic uncertainties globally, he added.

A more realistic expectation for growth could be somewhere between 5 and 6 percent unless there is any change in the situation with respect to investments and industrial performance, Islam said.

The professor went on to note that if private investment becomes favourable, inflation falls and external pressures decrease, the level of growth would certainly pick up. “However, attaining the targeted 6.5 percent is certainly a distant possibility for the time being.”

Ashikur Rahman, principal economist at the Policy Research Institute of Bangladesh (PRI), said the government’s growth ambition is understandable and well-intentioned, but pursuing it through an expansionary fiscal and monetary policy mix carries serious risks given the current macroeconomic context.

Inflation remains close to 10 percent, export growth is weak, global uncertainty persists, the banking sector is under severe stress with non-performing loans reportedly above 32 percent, and the tax-to-GDP ratio barely reaches 7 percent, he noted.

“Against this backdrop, any attempt to stimulate growth through higher public spending and easier money could intensify inflationary pressures, worsen external imbalances and put renewed depreciation pressure on the exchange rate,” he said.

Such a course, according to him, would risk undermining the macroeconomic stability Bangladesh has painfully regained over the past two years.

“The priority, therefore, should not be to chase a headline growth number through demand-side stimulus. Instead, policymakers should focus on productivity-enhancing reforms that can raise potential growth without fueling instability,” said the economist.

This means deregulation, improving the investment climate, reforming and where appropriate privatising state-owned enterprises, strengthening the banking sector, and making critical investments in power, energy, logistics and infrastructure, he said.

Bangladesh should certainly aim for higher growth, but the path to that growth must be built on fiscal and financial sector reforms, productivity and confidence, not on policies that could reignite inflation and weaken macroeconomic stability, Rahman added.