Stability in export growth recovery, buoyancy in remittance flows and a steady state in agricultural production are the major distinguishing features of fiscal 2003-04.
On the other hand, pushing GDP growth beyond six per cent, ensuring a more equitable distribution of incremental GDP, lifting private investment share beyond 20 per cent of GDP, improving domestic savings rate to 20 per cent, keeping inflation under control and maintaining exchange rate stability will be the major economic challenges for the coming fiscal 2004-05 which begins on July 1 next.
The Centre for Policy Dialogue (CPD) said this Thursday in its second interim report under the programme of Independent Review of Bangladesh's Development (IRBD).
"Positive movements have taken place in case of import growth, industrial loans and agricultural credit disbursement during the fiscal that is going to end on June 30," it said.
Assessing the Bangladesh economy's performance and identifying the emerging challenges, Executive Director of the CPD Debapriya Bhattacharya, however, said these reassuring trends are somewhat moderated by the mar ginal growth in the manufacturing sector, low level of FDI inflow, transitory bubbles in the capital market and perceptible price hike of essential commodities.
"It seems from our updated review that other than the annual development programme (ADP) and inflation, almost all other major target indicators of the mid-term macro-economic framework of the interim-Poverty Reduction Strategy Paper will be achieved," Debapriya, also a noted economist, said.
He said, accordingly, the economy is poised to record a 5.5 per cent or above growth in the current fiscal.
However, it is well known that a 5.5 per cent growth will result in a little above 3.5 per cent per capita income growth, which although impressive in the global context, may not be good enough for alleviating the situation of more than 40 per cent of the population living below the poverty line.
"Most of the key variables influencing macro-economic performance in fiscal 2003-04 started off on a relatively strong footing. The variables were strengthened further during the second quarter (October-December) and there were mixed signals in the third quarter (January-March).
Although real time data on the last quarter (April-June) are not available, it is difficult to say how the fiscal year will be rounded up. It seems that the mixed signals will persist.
Focussing on the major economic challenges for the next fiscal, the CPD analysis called for highlighting the relatively lack-lustre performance in revenue mobilisation.
It is not only that the non-tax and non-NBR tax components remain underachieved, but also there is no significant improvement in collection of income tax as well as in value added tax expansion.
"Thus an effective increase in income tax collection remains a major challenge," Debapriya pointed out.
He added that apart from emphasis on education and health, urgent attention was also needed to power generation.
Lack of dependable power supply is emerging as the major impediment to investment, particularly to small enterprises.
Among the indirect sources of revenue, the price of energy, particularly of petroleum products, will be a major issue against the backdrop of the global rise in oil prices.
Given the political costs involved in pushing up prices, the government will be well advised to reduce its taxes on petroleum products, the CPD said stressing the need for monitoring the rising trend in global price of rice as well as the domestic food stock.
The premier think tank observed that certain possible actions could be taken to eliminate the losses of state-owned Bangladesh Petroleum Corporation (BPC).
The possible actions are increasing the retail prices of petroleum products, liberalising the sector to allow competitive private participation and reconstructing the petroleum sector taxation structure (if possible through a duty-cut).
Analysing the consequences, the CPD said increasing retail prices right now will be irrational as it will push up the overall inflation rate which is already quite high.
Besides, increasing the diesel price may have a severe effect on the agricultural production process.
"So adjusting the import duty would be a better option for the government at this moment."
The price of kerosene has been adjusted from May 1, 2004 with the diesel price, which would supplement some of the losses that the government might face if the duty structure was not fine-tuned.
"The latest statistics show that the price of oil in international market has stabilised, which may encourage the government not to raise the petroleum price in the upcoming budget," the CPD paper said.