'Frame investment-friendly fiscal policies'

Speakers at CPD-The Daily Star-Prothom Alo dialogue ask govt

Staff Correspondent

01 May, 2003

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Speakers called for investment-friendly fiscal policies for poverty alleviation and economic growth at a dialogue on budgetary discipline and fiscal programme in the city yesterday.

They said macro-economic stability achieved over the last two years would not be beneficial if it was not mirrored in the investment sector. The Centre for Policy Dialogue (CPD) organised the dialogue at its office in collaboration with The Daily Star and the Prothom Alo. The dialogue was held under the regional consultation meeting on National Policy Review Forum 2003.

Former finance minister M Syeduzzaman moderated the dialogue which was addressed by former finance minister M A Muhit, Finance Secretary Zakir Ahmed Khan, CPD Chairman Prof Rehman Sobhan, former advisor to the caretaker government M Hafizuddin Khan, former secretary Motiul Islam, Dr Kaniz Siddiqui, Dr Momtajuddin, Orma Haider Chowdhury, Abdul Qayyum, and CPD Executive Director Dr Debapryia Bhattacharya. Speaking as the chief guest, the finance secretary said there was a plan to right-size the government instead of keeping it downsized. The government is narrowing public deficit on the basis of suggestions and recommendations by various high-powered commissions.

Rehman Sobhan observed that the disbursement of foreign aid was one of the major factors to the implementation of ADP. Absorbing foreign aid is also crucial in this context, he added. Muhit observed that there should be some standard in the inflow of foreign aid in the context of gross domestic investment (GDI). "If the foreign aid component is 20 per cent of our GDI, then we are self-reliant," he said.

The amount of public debt should be ascertained at the beginning of the year, he added. Muhit noted that five per cent increase in the government salary structure would require around Tk 3,300 crore annually. It would also raise salaries in other sectors like banking and private jobs. Hafizuddin said the performance of the Planning Commission was not satisfactory. He observed that the government should adequately compensate for government officials' salaries, eaten away by inflation. Motiul Islam said revenue expenditure should be lower than revenue earning. He stressed the need for private participation in the ADP.

People do not want to see any new tax in the coming budget, said Syeduzzaman. He underscored the need for policies and progammes in the budget to breathe life into the capital market. As foreign aid is on the wane, the government must give proper attention to mobilisation of internal resources, he added. He also underscored the need for access to foreign capital and productive use of foreign aid. Dr Kaniz Siddiqui said public expenditure should be looked in qualitative terms. There should be some sort of macro-economic analysis on the basis of government expenditure.

There should also be some mechanism so that the benefit of public expenditure goes to the poor, she observed. Mamtajuddin said the private sector should be in the saddle of investment as it adds a fillip to growth. Omar Haider said many projects in the ADP stood unimplemented for lack of sufficient foreign assistance. He contradicted the idea that the self-reliance depended on the availability of domestic resources. Giving an overview of the economic condition, Debapriya said Bangladesh's public finance was plagued by low revenue efforts with marginal share of direct tax, rigid revenue expenditure structure along with low-quality ADP. Weak export performance, decreasing disbursement of foreign aid and drying up of foreign direct investment have kept the balance of payment vulnerable to external shocks, he added.

He stressed the need for changes in the areas. "Otherwise there is a high possibility that the macroeconomic stability will deteriorate once again." Debapriya also underlined the need for forming parliamentary standing committees on ministries including finance and broadening people's participation in public resources allocation.