“The graduation is actually a very important milestone,” Fan said while speaking at a programme arranged to release the ‘Bangladesh Development Update: Building on resilience’ here.
“I think Bangladesh needs more measures to increase the domestic revenue mobilisation in this regard. I’m quite happy to see the NBR (National Board of Revenue) launching the process for preparing a medium-term revenue strategy which I think a very positive step,” he added.
The WB country director said Bangladesh continues a strong development trajectory with growth in between 6-7 percent over the last couple of years, which is a strong growth.
He said the strong growth has benefitted from the strengthening garment exports as well as recovering remittances.
“The economy has continued to grow quite robustly and I think this continued sustained growth in Bangladesh in the last couple of decades and certainly in the last few years. It’s also very well recognised in the recent UN recognition that the country is eligible to graduate from the LDC status,” he said.
Fan stressed undertaking significant reforms, attracting more women in the labour market, wooing more investment through further improving the business environment, streamlining regulatory framework in infrastructure project management particularly in the public sector, and continuing the country’s achievement in reducing poverty particularly extreme poverty.
Replying a question about the World Bank’s stance after the fulfillment of criteria by Bangladesh for LDC graduation, he said Bangladesh is still now a fully IDA eligible country and currently a lower-middle income country.
He said the government needs to put in place a long-term strategy on dealing with the non-performing loans and inefficiency at the state-owned commercial banks.
The World Bank will continue to support the government efforts so credible data could be produced and disseminated, he said.
Replying another question, Fan said when the inflation is rising, the fiscal deficit is increasing alongside the external deficit, and that is why the government should not have expansionary monetary policy to increase credit growth.
He said actions are also needed to generate double-digit growth. “Bangladesh can do it by creating jobs for the 2 million young people….each year and attracting more women to the formal labour market requires investment”.
In ‘Bangladesh Development Update: Building on resilience’ report, the development partner projected that the economy is poised to grow at 6.5 percent to 6.6 percent in the current fiscal (FY18) which is lower than the government’s recent projection of 7.65 percent, saying that Bangladesh is continuing a strong development trajectory.
“The potential growth of Bangladesh is likely to reach 6.5 percent to 6.6 percent,” said World Bank’s lead country economist Dr Zahid Hussain.
In his power-point presentation, Dr Zahid said the growth is driven by consumption and domestic demand as the consumption to GDP ratio is projected to increase from 74.67 percent in FY17 to 76.39 percent in FY18.
When asked about the significant difference between the government’s recent GDP projection and the World Bank’s projection, he said there is a need for further analysis over the growth issue as there are some doubts.
He, however, admitted that no other organisation in the country, except the Bangladesh Bureau of Statistics (BBS), has such institutional capacity to calculate national accounts or making such level of estimation. “We’ll have to take the estimation of BBS seriously,” he added.
Asked to rate the Bangladesh Bank for its role in materialising the last monetary policy, Zahid said he would give either A or A minus to the central bank in this regard.
He said the economy of Bangladesh is robust, but the macro stability is in stress. There is sustained poverty reduction and the challenges remain in the banking, revenue and job sectors, he added.
The World Bank economist said the exports are rebounding, the remittances are recovering, private investments are not taking off, but public investment is projected to increase from 7.4 percent of GDP in FY 17 percent to 8.2 percent in FY18 and industry sector remains as the growth leader.
“The impact of growth on poverty has reduced as around 3.3 million people are now living in extreme poverty in urban Bangladesh. The annual pace of poverty reduction fell from 1.7 percentage points from 2005 to 2010 to 1.2 percentage points from 2010 to 2016, despite GDP growth from an average of 6.1 percent before 2010 to 6.5 percent after…inequality has increased while on the whole, the outlook of Bangladesh is positive.”
Dr Zahid said the macroeconomic stability may be challenged with increased inflation, persistent external deficit and elevated budget deficit.
The WB economist also said Bangladesh needs to build resilience on regulatory, infrastructure management and skills development reforms for job creation, tackle the banking sector’s poor risk practices, corruption and collusion, increase revenue buoyancy through the ongoing automation of tax administration, improve administrative processes, carbon taxes, tobacco taxes and rationalise tax incentives and exceptions.