The overall economic condition of Bangladesh

1. INTRODUCTION
The current issue of Bangladesh Economic Update focuses on the overall economic condition of Bangladesh
particularly in the half way of FY 2011-12 The issue investigates the sector-wise performance of current fiscal
year in light with the targets set in national !udget of FY 2011-12" #edium Term #acroeconomic Framewor$
%#T#F&" #edium Term Budgetary Framewor$ %#TBF& and other national plans" policies and goals The issue
also tries to e'plore current implementation status and of (nnual )evelopment *rogramme %()*&" and ma$es
pro+ection thereof
2. MACROCONOMIC !CNARIO
"D#
,n FY 2010-11" the total amount of -)* in terms of ta$a was ./.012 !illion %in current mar$et price& in which
T$ 1003/1 !illion came from agricultural sector" T$ 21.0// !illion from industrial sector and T$ 003.12
!illion from service sector The target of -)* in FY 2011-12 is T$ /114.0 !illion in which the contri!ution of
agricultural sector is pro+ected to !e T$ 1204/. !illion" while industrial and service sector might contri!ute T$
232110 !illion and T$ 034040 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'pected
impacts of reforms initiated in various sectors ,n FY 2011-12" according to !usiness usual scenario" the growth
rate of -)* might !e at 4/2 percent !ut the #T#F pro+ection is seven percent The gap !etween !usiness as
usual scenario and #T#F pro+ection might !e 1/ percentage point ,n FY 2010-11" the growth rate of -)* was
444 percent that was 21 percentage points more than that of the previous fiscal year 5owever" in FY 2011-12"
the growth rate of -)* might !e 4/2 percent that is only 14 percentage points more than that of the previous
fiscal year
1
!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 32-00 percent -)* growth rate was 444 percent in FY 2010-11 with 2/00
percent of savings and 20.3 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 2/10 and
20/4 percent respective
Inflation Rate
For achieving the targeted -)* growth rate" containing the rate of inflation at a tolera!le limit is a prere6uisite
,n FY 2011-12" the government has targeted the rate of inflation at .2 percent while it was // percent in FY
2010-11 and .31 percent in FY 2001-10 ,n 7ovem!er 2011" general inflation rate is 1021 percent while it was
/10 percent in 7ovem!er 2010
,n FY 2001-02" the rate of general inflation %12-month average& was 2.1 percent and point-to-point was 32/
percent while consumer price inde' %8*,& was at 13024 The rate of inflation continued to increase further in
the ne't fiscal years ,n FY 200.-0/" the rate of
Trade Balance
general inflation %12-month average& was higher at 110 percent and the rate of point-to-point inflation was
1000 percent But in FY 200/-01" the rate of point to point inflation followed a huge decline and dropped down
to 222 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 2011-12"
import payments and e'port earnings are estimated !y the government at U9) 32000 million and 22.00 million
respectively 5owever" in 2010-11" import payments was U9) 33440 million and e'port earnings was U9)
22130 million
B'dget Deficit
,n FY 2011-12" total revenue and foreign grants is estimated at T$ 123323 !illion that is 20 percent higher than
that of the previous fiscal year in which total revenue is T$ 11/3/2 !illion and foreign grants is T$ /13/
!illion
The government has estimated total revenue collection at T$ 11/3/2 !illion in FY 2011-12 against T$ 121/.
!illion of the revised !udget of FY 2010-11 The ta' collection from 7B: sources is estimated at T$ 11/.
!illion in FY 2011-12 that is a!out 2122 percent higher than that of the collection of the previous fiscal year
2
The revenue e'penditure in FY 2011-12 is estimated at T$ 1432/1 !illion The total e'penditure for
development sectors is estimated at T$ 20402 !illion and T$ 112124 !illion for non-development sectors in
FY 2011-12
#'(lic De(t
,n FY 2011-12" the overall pu!lic de!t;!orrowing has !een estimated at T$ 00244 !illion which is 3121
percent higher than that of the revised !udget of FY 2010-11 and 0.20 percent higher than that of the revised
!udget of FY 2001-10 The share of domestic !orrowing and foreign !orrowing has !een estimated at T$
2.20/ !illion and T$ 1302/ !illion respectively in current fiscal year" which are 4.2. and 3203 percent of
the total !orrowing #oreover" in FY 2011-12" net foreign and domestic !orrowing have !een pro+ected at
T$1302/ !illion and T$ 2.20/ !illion respectively" which are 122.1 and 143 percent higher than those of
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 past
few years" the overall !udget deficit registered an increasing trend that put a serious pressure on the total de!t of
the country
"overnment Domestic Borro$ing )net*
8ontinuation of current trend might result into an increasing movement in domestic de!t Total estimation of
government !orrowing from domestic sources in FY 2011-12 is T$ 2.20/ !illion which is 2324 percent higher
than that of FY 2010-11 and 2.20. percent higher than that of FY 2001-02 ,n FY 2011-12" the government has
estimated to !orrow 4/ percent higher from !an$ing sectors in comparison to that of FY 200/-01 indicating a
sharp crowding out effect which has dampened private investments The government !orrowing from !an$ing
sector in FY 2011-12 %up to 9eptem!er" 2011& is T$ .22/ !illion which is 0/ percent of -)* -overnment
!orrowing from the !an$ing system outstanding as on 30 9eptem!er 2011 is T$ /0442 !illion which was T$
.4/22 !illion outstanding as on 31 (ugust 2011 The government !orrowing from non-!an$ing sector in FY
2011-12 %>uly to 9eptem!er" 2011& is T$1000 !illion that was T$ 1.010 !illion in FY 2010-11 -overnment
domestic !orrowing from !an$ing sector in FY 2011-12 %>uly-9eptem!er" 2011& is 4222. percent higher than
!orrowing from non-!an$ing sector
3
#rinci%al and Interest #a+ment
Total payment in (pril 2011 amounts U9) .00 million in which U9) 2// million was principal payment and
U9) 12. million was interest payment Both principal and interest payment have risen at a much higher rate
during the 1110s ,n FY 2001-02" the principal and interest payments were U9) 032 million and U9) 121
million respectively Under the !usiness as usual scenario" in FY 2011-12" total payments might stand at U9)
123.1 million" which is 3 percent higher than that of the previous fiscal year ,n the current fiscal year"
principle payments might reach at U9) .0212 million and interest payment at U9) 11120 million" which are
/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) 300/4 million compared to U9)
00322 million of the same period of FY 2010-11 ,n addition" net foreign aid receipts during >uly-=cto!er of
FY 2011-12 also stood lower at U9) /020 million" against U9) 2140. 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 less
than that of the previous fiscal year Total foreign aid might reach at U9) 1/00242 million !y the end of the
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$ 11/3/2 !illion which
is 13 percent of the total -)* The 7ational Board of :evenue %7B:& has to collect T$ 11/.0 !illion in the
FY 2011-12 which is .. percent of the total targeted revenue 5owever" the collection was ./ percent of total
targeted revenue in FY 2010-11 ,n (ugust 2011" the collection of total ta' revenue is T$ 4104 !illion that is .
percent higher than that of the collection of (ugust 2010" among which 7B: ta' revenue is T$ 2//2 !illion
and non-7B: ta' revenue is T$ 223 !illion ,f the current trend prevails" at the end of this fiscal year" total ta'
revenue might amount at T$ /2023 !illion against the government target of T$ 12./2 !illion indicating a gap
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$ 11/3/2
!illion which is 2.21 percent higher than that of the preceding fiscal year #oreover" the targets of ta' and non-
ta' revenue are set at T$ 12./2 !illion and T$ 22400 !illion respectively in FY 2011-12 7B: and non-7B:
revenue are proposed at T$ 11/. !illion and T$ 3112 !illion respectively in FY 2011-12" while in FY 2010-
11" the contri!ution of 7B: and non-7B: were T$ .1011 !illion and T$ 322134 !illion respectively ,n FY
0
2010-11" the collection of total revenue" ta' revenue and non-ta' revenue was T$ 1/02. !illion" T$ /2321
!illion and T$ 14134 !illion correspondingly
Remittance
The receipt of remittances during >uly-7ovem!er 2011 is U9) 012..0 million which is U9) 30431 million or
. percent higher than that of the same period of FY 2010-11 while the amount of total receipt of remittance was
U9) 02/103 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 2/30. and remittance
earning was U9) /2.31 million while a total of 2030. e'patriates went a!road at the same period of FY 2011-
12 and total earnings from remittance totals U9) 10122/ million ,f the first 6uarter of the three successive
fiscal years is compared" total remittance earning amounts to U9) 001221 million which is 111/ percent
higher than that of FY 2010-11 and 111/ percent higher than that of FY 2001-10 Earnings from remittance in
the first two months of the current fiscal year were in a satisfactory level that was U9) 10122/ million and
U9) 1101.1 million in >uly and (ugust 2011 Though this flow !ecomes lower in 9eptem!er" it pic$s up again
in =cto!er ,n =cto!er 2011" remittance earning was U9) 10310/ million" which was correspondently 1221
percent and 1201 percent higher than those of FY 2010-11 and FY 2001-10 ,n the first 6uarter of FY 2011-12
total 20.243 e'patriates went a!road which is .011 percent higher than that of FY 2010-11 and 3./0 percent
higher than FY 2001-10 Under the !usiness as usual scenario" !y the end of this fiscal year" earnings from
remittance might reach at U9) 101043 million
,oreign &change Reserve
The foreign e'change reserves are essential for paying the import !ills and to repay the foreign de!ts The gross
foreign e'change reserves are declining over the years ,t has declined to U9) 12/220 million in 7ovem!er
2011-12 from U9) 1033/3 million in =cto!er 2011-12" the lowest ever in the last 12 months This is lowered
!y U9) 104102 million or 1344 percent than that of 7ovem!er 2010-11 This foreign e'change reserves has
declined mainly due to the payments of the petroleum and imports of different capital machineries and increase
in !udget deficit and de!t (ccording to the Bangladesh Ban$" foreign e'change reserves were highest in
)ecem!er 2010 at U9) 111.00 million
2
AD# Im%lementation
The (nnual )evelopment *rogramme %()*& for FY 2011-12 has !een pro+ected at T$ 040 !illion as 21
percent of the -)* This is 1100 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$en si' five year plans after the independence mainly emphasi@ing on the
acceleration of economic growth" poverty alleviation and employment generation The growth performance
during previous five year plans was not up to the mar$ considering the achievement of targeted growth rate
,n the Fifth Five Year *lan %111.-2002&" the average annual growth rate was 221percent against the targeted
growth rate of . percent Under the !usiness as usual scenario" the average annual growth rate of 202 percent
might !e achieved !y the end of 9i'th Five Year *lan against the targeted growth rate of .3 percent Therefore"
the year gap !etween targeted and achieved growth rate might increase further in the upcoming years while the
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 livelihood
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 0/10 percent in 2002 to 0323
percent in 2001 although it remained the highest source of employment %#E9" 2001& The target of current
government is to increase food production and ensure food security with $eeping the price of agriculture inputs
li$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 government
is promised to increase the contri!ution of industrial sector in -)* from 3033 percent in FY 2010-11 to 00
percent !y the calendar year 2021 ,n addition" the proportion of la!our force employedis pro+ected to accelerate
from 1./2 percent in FY-2001-10to 22 percent !y the calendar year 2021
4
"ro$th Rate of Man'fact'ring !ector
The manufacturing sector consists of two su!-sectors< 9mall and 8ottage ,ndustry and #edium and Aarge
,ndustry Therefore" the total growth depends on !oth the two su!-sectors )uring FY 2001-10" the growth rate
of total manufacturing sector was 42 percent whereas the growth rate of small and cottage industry was ...
and medium and large industry was 21/ percent ,n FY 2010-11" the growth rate of total manufacturing sector
increased to 121 percent =n one hand" the growth rate of small and cottage industry decreased to .30 percent
and on the other hand" medium and large industry increased to 1001 percent (ccording to the !usiness as usual
scenario" in FY 2011-12" total growth rate of manufacturing sector might !e 1.4 percent" while the growth rate
of small and cottage industry and medium and large industry might !e.34" and 10.4 percent respectively
#o$er
*ower is a pre-condition for economic and social development for any country ,n achieving the targets of
Bision 2021" the government has set up medium-term target of enhancing electricity supply to .000 #C %#ega
Catt& !y 2013 %2012& and long-term target of generating power supply to 20000 #C in 2021The present
demand of electricity is 4000 #C against the production of 0000-0400 #C while per capita electricity
consumption is 234 DC5 %Dilo Catt 5our& and only 01 percent people are under electricity coverage in FY
2010-11
!ervice
The services sector constitutes a significant share of gross domestic product %-)*& and increasingly !ecoming
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 efficiency
of the sector )epending upon the pattern of growth" it further contri!utes towards national development !y
enhancing efficiency and employment" which are $ey sources of national output resulting into the reduction of
poverty and illiteracy
1. !OCIA- !CTOR
2ealth !ector
FY 2011-12 has witnessed a downward allocation in entire social sector in the national !udget The proposed
!udgetary allocation in FY 2011-12 in health sector is T$ ///10 million %including development and non-
development&" which got reduced !y T$ 200 million and revised at T$ //410 million #oreover" the proposed
pu!lic investment in health" population and family welfare sector has mar$ed negative revision during most of
the years !etween FY 2001-02 and FY 2011-12
.
d'cation !ector
The government has given due importance on education sector for attaining the targets set in #illennium
)evelopment -oals %#)-s&" 7ational plan on (ction %7*(& - ,," 7ational Education *olicy %7E*& 2010 and
7ational Budget for FY 2011-12 The finance minister has proposed a !udgetary allocation of T$ 203140
million in FY 2011-12" development and non-development com!ined" that is 120 percent of the national !udget
and 13. percent and higher than the revised !udget of FY 2010-11
"ender
Bangladesh is a developing country with a per-capita -)* of U9) .22 %Bangladesh Economic :eview" 2011&
,n the 2010 5uman )evelopment ,nde' %5),&" Bangladesh has ran$ed 121 among 140 countries" and according
to the -ender ,ne6uality ,nde' %-,,& it has ran$ed 114 among 13/ countries %U7)*" 2010& 5ence" Bangladesh
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 Bangladesh"
a significant portion of population is still living !elow the poverty line ,t is a constitutional o!ligation of the
government to provide a decent living standard for the citi@ens !y alleviating poverty ,n its election manifesto"
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 22 percent and 12 percent !y calendar year
2013 and 2021 respectively
/
Ta(le 07 Targets and !tat's
for MD"8 4ision92:21 and
!,5# Targets; #ro<ection;
"a%
2ead Co'nt #overt+ =
MD"s Targets (+ 2:13 Targets 21
*ro+ection 22
-ap
4ision92:21 Targets Targets 12
*ro+ection 1.
-ap 2
!i&th ,ive 5ear
#lan )!,5#*
2:11913
Targets 22
*ro+ection 22
-ap 3
>. M#-O5MNT
,n case of employment generation" the government has planned to create employment opportunities for a!out
424 lac and 24 thousand man-month in the FY 2011-12 which is 22/ percent higher than that of the previous
fiscal year But the employment opportunities are largely depended on investment =ver the years the growth
rate of investment has decreased from 101 percent in FY 2010-11 to 4.4 percent in FY 2011-12 Therefore" it
is evident that the trend of employment opportunities has !een following a decreasing trend during the last few
years which has resulted from the decreasing investment scenario
Concl'sion
,n the long run after ta$ing into account the economic situation of Bangladesh the government has targeted
to achieve the -)* growth rate of . percent in FY 2011-12 !ased on assumptions of further improvements
in the glo!al and domestic economy and ta$ing into account the e'pected impacts of reforms initiated in
various sectors
1
10