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The overall economic condition of Bangladesh

1. INTRODUCTION

The current issue of Bangladesh Economic Update focuses on the overall economic condition of Banglade

particularly in the half way of FY 2011-12 The issue investigates the sector-wise performance of current f

year in light with the targets set in national !udget of FY 2011-12" #edium Term #acroeconomic Framew

%#T#F&" #edium Term Budgetary Framewor$ %#TBF& and other national plans" policies and goals The

also tries to e'plore current implementation status and of (nnual )evelopment *rogramme %()*&" and ma

pro+ection thereof

2. MACROCONOMIC !CNARIO

"D#

,n FY 2010-11" the total amount of )* in terms of ta$a was ./. !illion %in current mar$et price& in w

T$ 103/1 !illion came from agricultural sector" T$ 21.// !illion from industrial sector and T$ 03.

!illion from service sector The target of )* in FY 2011-12 is T$ /4.0 !illion in which the contri!uti

agricultural sector is pro+ected to !e T$ 104/. !illion" while industrial and service sector might contri!u

23110 !illion and T$ 3404 million respectively

"D# "ro$th

The government has targeted to achieve the )* growth rate of seven percent in FY 2011-12 !ased on

assumptions of further improvements in the glo!al and domestic economy and ta$ing into account the e'p

impacts of reforms initiated in various sectors ,n FY 2011-12" according to !usiness usual scenario" the gr

rate of )* might !e at 4/2 percent !ut the #T#F pro+ection is seven percent The gap !etween !usiness

usual scenario and #T#F pro+ection might !e 1/ percentage point ,n FY 2010-11" the growth rate of )*

444 percent that was percentage points more than that of the previous fiscal year 5owever" in FY 2011

the growth rate of )* might !e 4/2 percent that is only 14 percentage points more than that of the previo

fiscal year


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!avings and Investment

The target of the government is to stimulate )* growth rate at / percent !y 2013 where the share of

investment to )* is re6uired at 3-0 percent )* growth rate was 444 percent in FY 2010-11 with 2/

percent of savings and 2.3 percent of investment ,n FY 2011-12" the targeted )* growth rate is seven

percent" whereas savings as percentage of )* and investment as percentage of )* is targeted at 2/0 a

2/4 percent respective

Inflation Rate

For achieving the targeted )* growth rate" containing the rate of inflation at a tolera!le limit is a prere6u

,n FY 2011-12" the government has targeted the rate of inflation at . percent while it was // percent in F

2010-11 and .31 percent in FY 200-10 ,n 7ovem!er 2011" general inflation rate is 101 percent while i

/1 percent in 7ovem!er 2010

,n FY 2001-02" the rate of general inflation %12-month average& was 2. percent and point-to-point was 3

percent while consumer price inde' %8*,& was at 13024 The rate of inflation continued to increase further

the ne't fiscal years ,n FY 200.-0/" the rate of

Trade Balance

general inflation %12-month average& was higher at percent and the rate of point-to-point inflation was

100 percent But in FY 200/-0" the rate of point to point inflation followed a huge decline and dropped

to 22 percent as well as general inflation declined to 444 percentely

Im%ort and &%ort

(n increasing trend has !een o!served in import payments and e'port earnings over the years ,n FY 2011

import payments and e'port earnings are estimated !y the government at U9) 300 million and 2.00 m

respectively 5owever" in 2010-11" import payments was U9) 33440 million and e'port earnings was U9)

2230 million

B'dget Deficit

,n FY 2011-12" total revenue and foreign grants is estimated at T$ 123323 !illion that is 2 percent highe

that of the previous fiscal year in which total revenue is T$ 11/3/ !illion and foreign grants is T$ /3/

!illion

The government has estimated total revenue collection at T$ 11/3/ !illion in FY 2011-12 against T$

!illion of the revised !udget of FY 2010-11 The ta' collection from 7B: sources is estimated at T$ 1/.

!illion in FY 2011-12 that is a!out 212 percent higher than that of the collection of the previous fiscal ye


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The revenue e'penditure in FY 2011-12 is estimated at T$ 143/ !illion The total e'penditure for

development sectors is estimated at T$ 042 !illion and T$ 1124 !illion for non-development sector

FY 2011-12

#'(lic De(t

,n FY 2011-12" the overall pu!lic de!t;!orrowing has !een estimated at T$ 0244 !illion which is 31

percent higher than that of the revised !udget of FY 2010-11 and .0 percent higher than that of the revi

!udget of FY 200-10 The share of domestic !orrowing and foreign !orrowing has !een estimated at T$

2.20/ !illion and T$ 130/ !illion respectively in current fiscal year" which are 4.. and 323 percent

the total !orrowing #oreover" in FY 2011-12" net foreign and domestic !orrowing have !een pro+ected at

T$130/ !illion and T$ 2.20/ !illion respectively" which are 12. and 43 percent higher than those

FY 2010-11

Deficit financing and De(t Management

There are two sources of deficit financing< internal and e'ternal de!t The government has !ecome more

dependent on !an$ing sectors other than non-!an$ing ones for domestic financing over the time =ver the

few years" the overall !udget deficit registered an increasing trend that put a serious pressure on the total d

the country

"overnment Domestic Borro$ing )net*

8ontinuation of current trend might result into an increasing movement in domestic de!t Total estimation

government !orrowing from domestic sources in FY 2011-12 is T$ 2.20/ !illion which is 2324 percent

than that of FY 2010-11 and 2.. percent higher than that of FY 2001-02 ,n FY 2011-12" the governme

estimated to !orrow 4/ percent higher from !an$ing sectors in comparison to that of FY 200/-0 indicatin

sharp crowding out effect which has dampened private investments The government !orrowing from !an$

sector in FY 2011-12 %up to 9eptem!er" 2011& is T$ .22/ !illion which is 0/ percent of )* overnmen

!orrowing from the !an$ing system outstanding as on 30 9eptem!er 2011 is T$ /044 !illion which was .4/2 !illion outstanding as on 31 (ugust 2011 The government !orrowing from non-!an$ing sector in F

2011-12 %>uly to 9eptem!er" 2011& is T$1000 !illion that was T$ 1.10 !illion in FY 2010-11 overnm

domestic !orrowing from !an$ing sector in FY 2011-12 %>uly-9eptem!er" 2011& is 422. percent higher th

!orrowing from non-!an$ing sector


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#rinci%al and Interest #a+ment

Total payment in (pril 2011 amounts U9) . million in which U9) // million was principal payment

U9) 1. million was interest payment Both principal and interest payment have risen at a much higher ra

during the 10s ,n FY 2001-02" the principal and interest payments were U9) 3 million and U9) 11

million respectively Under the !usiness as usual scenario" in FY 2011-12" total payments might stand at U

23.1 million" which is 3 percent higher than that of the previous fiscal year ,n the current fiscal year"

principle payments might reach at U9) .01 million and interest payment at U9) 11 million" which

/0 and 20 percent of total payment

Net ,oreign Aid ,lo$

Total aid dis!ursements during >uly-=cto!er of FY 2011-12 stood at U9) 30/4 million compared to U9)

32 million of the same period of FY 2010-11 ,n addition" net foreign aid receipts during >uly-=cto!er

FY 2011-12 also stood lower at U9) /0 million" against U9) 214. million during >uly-=cto!er of FY

2010-11 ,n FY 2010-11" total foreign aid amounts U9) 1"...33 million" which was U9) 3/.12 million

than that of the previous fiscal year Total foreign aid might reach at U9) 1/004 million !y the end of t

current fiscal year that is only 1 percent higher than that of FY 2010-11

#'(lic ,inance Balance

,n the !udget of FY 2011-12" the government has targeted to collect total revenue of T$ 11/3/ !illion w

is 13 percent of the total )* The 7ational Board of :evenue %7B:& has to collect T$ 1/.0 !illion in t

FY 2011-12 which is .. percent of the total targeted revenue 5owever" the collection was ./ percent of to

targeted revenue in FY 2010-11 ,n (ugust 2011" the collection of total ta' revenue is T$ 4104 !illion tha

percent higher than that of the collection of (ugust 2010" among which 7B: ta' revenue is T$ //2 !illi

and non-7B: ta' revenue is T$ 223 !illion ,f the current trend prevails" at the end of this fiscal year" tota

revenue might amount at T$ /23 !illion against the government target of T$ ./ !illion indicating

of T$ 13332 !illion

Ta&

:evenue is the essential element to manage the government?s fiscal !udget ,t is a !etter way to finance the

!udget deficit thanthe !orrowings from any other sources ,n FY 2011-12" total targeted revenue is T$ 11/

!illion which is 2.1 percent higher than that of the preceding fiscal year #oreover" the targets of ta' and

ta' revenue are set at T$ ./ !illion and T$ 22400 !illion respectively in FY 2011-12 7B: and non-

revenue are proposed at T$ 1/. !illion and T$ 31 !illion respectively in FY 2011-12" while in FY 20

11" the contri!ution of 7B: and non-7B: were T$ .01 !illion and T$ 32234 !illion respectively ,n


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2010-11" the collection of total revenue" ta' revenue and non-ta' revenue was T$ /. !illion" T$ /232

!illion and T$ 14134 !illion correspondingly

Remittance

The receipt of remittances during >uly-7ovem!er 2011 is U9) 2.. million which is U9) 3431 mill

. percent higher than that of the same period of FY 2010-11 while the amount of total receipt of remittance

U9) /13 million in that year

N'm(er of #ersons -eft for A(road on m%lo+ment and Total or/ers Remittance

(t the !eginning of FY 2010-11" the total num!er of e'patriates went a!road amounts to 2/3. and remitt

earning was U9) /.31 million while a total of 030. e'patriates went a!road at the same period of FY 2

12 and total earnings from remittance totals U9) 101/ million ,f the first 6uarter of the three successiv

fiscal years is compared" total remittance earning amounts to U9) 0122 million which is 11/ percent

higher than that of FY 2010-11 and 111/ percent higher than that of FY 200-10 Earnings from remittanc

the first two months of the current fiscal year were in a satisfactory level that was U9) 101/ million an

U9) 1101. million in >uly and (ugust 2011 Though this flow !ecomes lower in 9eptem!er" it pic$s up

in =cto!er ,n =cto!er 2011" remittance earning was U9) 103/ million" which was correspondently 12

percent and 11 percent higher than those of FY 2010-11 and FY 200-10 ,n the first 6uarter of FY 201

total 20.43 e'patriates went a!road which is .01 percent higher than that of FY 2010-11 and 3./ perc

higher than FY 200-10 Under the !usiness as usual scenario" !y the end of this fiscal year" earnings from

remittance might reach at U9) 1043 million

,oreign &change Reserve

The foreign e'change reserves are essential for paying the import !ills and to repay the foreign de!ts The

foreign e'change reserves are declining over the years ,t has declined to U9) 2/20 million in 7ovem!

2011-12 from U9) 1033/3 million in =cto!er 2011-12" the lowest ever in the last 12 months This is low

!y U9) 1412 million or 1344 percent than that of 7ovem!er 2010-11 This foreign e'change reserves declined mainly due to the payments of the petroleum and imports of different capital machineries and incr

in !udget deficit and de!t (ccording to the Bangladesh Ban$" foreign e'change reserves were highest in

)ecem!er 2010 at U9) 111. million


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AD# Im%lementation

The (nnual )evelopment *rogramme %()*& for FY 2011-12 has !een pro+ected at T$ 40 !illion as 1

percent of the )* This is 100 percent higher than the proposed ()* and 2/00 percent higher than the

revised ()* of FY 2010-11

0.RA- !CTOR !CNARIO

)ifferent governments have ta$en si' five year plans after the independence mainly emphasi@ing on the

acceleration of economic growth" poverty alleviation and employment generation The growth performanc

during previous five year plans was not up to the mar$ considering the achievement of targeted growth rate

,n the Fifth Five Year *lan %1.-2002&" the average annual growth rate was 21percent against the target

growth rate of . percent Under the !usiness as usual scenario" the average annual growth rate of perc

might !e achieved !y the end of 9i'th Five Year *lan against the targeted growth rate of .3 percent There

the year gap !etween targeted and achieved growth rate might increase further in the upcoming years while

main o!+ectives of the plans may remain far !ehind

Agric'lt're

The sector of agriculture is one of the driving forces of the economy and the life-!lood of rural economy (

large population is depended on the sector of agriculture not only !ecause of food !ut also !ecause of livel

options Therefore" any change in agriculture sector affects the livelihood of mass people !oth directly and

indirectly 7evertheless" total employment of agriculture has decreased from /10 percent in 200 to 3

percent in 200 although it remained the highest source of employment %#E9" 200& The target of curren

government is to increase food production and ensure food security with $eeping the price of agriculture in

li$e fertiliser" seed" fuel etc at a reasona!le level 5owever" recent increased price of fertiliser" fuel and

electricity may !uild a !arrier in fostering the pace of agricultural advancement

Ind'str+

Bangladesh is in the process of transmission from a predominantly agrarian economy The present governm

is promised to increase the contri!ution of industrial sector in )* from 3033 percent in FY 2010-11 to

percent !y the calendar year 2021 ,n addition" the proportion of la!our force employedis pro+ected to acce

from 1./ percent in FY-200-10to 2 percent !y the calendar year 2021


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"ro$th Rate of Man'fact'ring !ector

The manufacturing sector consists of two su!-sectors< 9mall and 8ottage ,ndustry and #edium and Aarge

,ndustry Therefore" the total growth depends on !oth the two su!-sectors )uring FY 200-10" the growth

of total manufacturing sector was 4 percent whereas the growth rate of small and cottage industry was .

and medium and large industry was / percent ,n FY 2010-11" the growth rate of total manufacturing se

increased to 1 percent =n one hand" the growth rate of small and cottage industry decreased to .3 per

and on the other hand" medium and large industry increased to 101 percent (ccording to the !usiness as

scenario" in FY 2011-12" total growth rate of manufacturing sector might !e .4 percent" while the growth

of small and cottage industry and medium and large industry might !e.34" and 10.4 percent respectively

#o$er

*ower is a pre-condition for economic and social development for any country ,n achieving the targets of

ision 2021" the government has set up medium-term target of enhancing electricity supply to .000 #C %

Catt& !y 2013 %201& and long-term target of generating power supply to 20000 #C in 2021The present

demand of electricity is 4000 #C against the production of 000-400 #C while per capita electricity

consumption is 234 DC5 %Dilo Catt 5our& and only percent people are under electricity coverage in F

2010-11

!ervice

The services sector constitutes a significant share of gross domestic product %)*& and increasingly !ecom

the core of the economy of Bangladesh E'pansion of services offers room for increased foreign e'change

earnings through e'ports and foreign direct investment %F),& resulting from improved capacity and efficie

of the sector )epending upon the pattern of growth" it further contri!utes towards national development !y

enhancing efficiency and employment" which are $ey sources of national output resulting into the reductio

poverty and illiteracy

. !OCIA- !CTOR

ealth !ector

FY 2011-12 has witnessed a downward allocation in entire social sector in the national !udget The propos

!udgetary allocation in FY 2011-12 in health sector is T$ ///0 million %including development and non-

development&" which got reduced !y T$ 200 million and revised at T$ //40 million #oreover" the prop

pu!lic investment in health" population and family welfare sector has mar$ed negative revision during mo

the years !etween FY 2001-02 and FY 2011-12


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d'cation !ector

The government has given due importance on education sector for attaining the targets set in #illennium

)evelopment oals %#)s&" 7ational plan on (ction %7*(& - ,," 7ational Education *olicy %7E*& 2010 a

7ational Budget for FY 2011-12 The finance minister has proposed a !udgetary allocation of T$ 203140

million in FY 2011-12" development and non-development com!ined" that is 12 percent of the national !

and 3. percent and higher than the revised !udget of FY 2010-11

"ender

Bangladesh is a developing country with a per-capita )* of U9) . %Bangladesh Economic :eview" 20

,n the 2010 5uman )evelopment ,nde' %5),&" Bangladesh has ran$ed 12 among 14 countries" and acco

to the ender ,ne6uality ,nde' %,,& it has ran$ed 114 among 13/ countries %U7)*" 2010& 5ence" Bangla

has to go a long way than many least developed countries for eliminating gender disparity

3. #O4RT5 AND IN6UA-IT5

)espite considera!le thrust on poverty alleviation in all plan documents since the independence of Banglad

a significant portion of population is still living !elow the poverty line ,t is a constitutional o!ligation of th

government to provide a decent living standard for the citi@ens !y alleviating poverty ,n its election manif

the present government has therefore laid special emphasis on poverty alleviation and pledged to reduce

poverty They made a commitment to reduce the rate of poverty to 2 percent and 1 percent !y calendar y

2013 and 2021 respectively


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Ta(le 07 Targets and !tat's

for MD"8 4ision92:21 and

!,5# Targets; #ro. M#-O5MNT

,n case of employment generation" the government has planned to create employment opportunities for a!o

44 lac and 24 thousand man-month in the FY 2011-12 which is / percent higher than that of the previo

fiscal year But the employment opportunities are largely depended on investment =ver the years the grow

rate of investment has decreased from 1 percent in FY 2010-11 to 4.4 percent in FY 2011-12 Therefor

is evident that the trend of employment opportunities has !een following a decreasing trend during the last

years which has resulted from the decreasing investment scenario

Concl'sion

,n the long run after ta$ing into account the economic situation of Bangladesh the government has targ

to achieve the )* growth rate of . percent in FY 2011-12 !ased on assumptions of further improvem

in the glo!al and domestic economy and ta$ing into account the e'pected impacts of reforms initiated

various sectors


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