State of the Bangladesh Economy in FY2010-11 and Outlook for FY2011-12
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State of the Bangladesh Economy in FY2010-11 and Outlook for FY2011-12 FY2010-11 Centre for Policy Dialogue (CPD) State of the Bangladesh Economy in FY2010-11 and Outlook for FY2011-12 CENTRE FOR POLICY DIALOGUE (CPD) B A N G L A D E S H a c i v i l s o c i e t y t h i n k t a n k Published in February 2012 by Centre for Policy Dialogue (CPD) House 40/C, Road 32, Dhanmondi R/A Dhaka 1209, Bangladesh Telephone: (+88 02) 8124770, 9141703, 9141734, 9145090 Fax: (+88 02) 8130951 E-mail: [email protected] Website: www.cpd.org.bd Blog: www.cpd.org.bd/Blog/ Copyright © Centre for Policy Dialogue 2012 All rights are reserved. No part of this publication may be reproduced or transmitted in any form or by any means without prior permission in writing from the publisher. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The Centre for Policy Dialogue (CPD) was established in 1993 as a civil society initiative to promote an ongoing dialogue between the principal partners in the decision making and implementing process. Over the past 19 years the Centre has emerged as a globally reputed independent think tank with local roots and global outreach. A key area of CPD's activism is to organise dialogues to address developmental policy issues that are critical to national, regional and global interests with a view to seek constructive solutions from major stakeholders. The other key area of CPD activities is to undertake research programmes which are both serviced by and are intended to serve as inputs for CPD's dialogue process. Some of the major research areas of CPD include: Macroeconomic Performance Analysis; Fiscal Policy and Domestic Resource Mobilisation; Poverty, Inequality and Social Justice; Agriculture and Rural Development; Trade, Regional Cooperation and Global Integration; Investment Promotion, Infrastructure and Enterprise Development; Climate Change and Environment; Human Development and Social Protection; and Development Governance, Policies and Institutions. CPD actively networks with other institutions within and outside Bangladesh which have similar interests, and also regularly participates in various regional and international fora. In recognition of the track record in research, dialogue and policy influencing, CPD was selected as one of the awardees under the Think Tank Initiative (TTI) through a globally competitive selection process. TTI is supported by a number of governments and foundations, and is implemented by the International Development Research Centre (IDRC), Canada. CPD's current publication list includes more than 370 titles including Books, Monographs, Working Papers (Occasional Papers), Dialogue Reports and Policy Briefs. CPD outputs are available for sale at the Centre and also in selected bookstores in Bangladesh. CPD publications and other relevant information are also regularly posted on CPD's website www.cpd.org.bd The views expressed in this volume are those of the CPD IRBD 2011 Team members and do not necessarily reflect the views of the CPD. ISBN 978-984-8946-09-1 Cover and graphic design Avra Bhattacharjee Typesetting and page lay-out Fazley Rabbi Shakil Md. Shaiful Hassan Price : Tk. 350 USD 30 Printed at Enrich Printers 41/5 Purana Paltan, Dhaka 1000 C12012_1STA_MPA CPD IRBD 2011 Team Dr Debapriya Bhattacharya, Distinguished Fellow, CPD was the Team Leader of the CPD IRBD 2011 Team. Lead contributions were provided by Professor Mustafizur Rahman, Executive Director; Dr Fahmida Khatun, Head, Research Division; Dr Khondaker Golam Moazzem, Senior Research Fellow; Mr Syed Saifuddin Hossain, Senior Research Associate (on leave); Mr Md. Ashiq Iqbal, Senior Research Associate; Mr Towfiqul Islam Khan, Senior Research Associate; and Mr Ashiqun Nabi, Senior Research Associate, CPD. Dr A K M Nazrul Islam, Former Research Fellow and Mr Syeed Ahamed, Former Senior Research Associate contributed to the preparation of a number of IRBD draft outputs. Valuable research support was received from Mr Hasanuzzaman, Senior Research Associate; Mr Md. Tariqur Rahman, Senior Research Associate; Mr Muhammad Al Amin, Senior Research Associate (on leave); Ms Nusrat Jahan, Research Associate (on leave); Mr Kishore Kumer Basak, Research Associate; Mr Mazbahul Golam Ahamad, Research Associate; Mr Md. Zafar Sadique, Research Associate; Ms Mehruna Islam Chowdhury, Research Associate; Mr Nepoleon Dewan, Programme Associate; Ms Nusrat Jahan Tania, Programme Associate; Mr Shouro Dasgupta, Programme Associate; Ms Farzana A Misha, Former Senior Research Associate; and Ms Shamma Tabassum, Former Programme Associate. Mr Towfiqul Islam Khan served as the coordinator of the CPD IRBD 2011 Team. Preface Independent Review of Bangladesh's Development (IRBD) has been the flagship programme of the Centre for Policy Dialogue (CPD) since 1995 when the programme was first initiated. A major objective of the IRBD programme is to examine and analyse the key macroeconomic performance indicators of the Bangladesh economy including fiscal- budgetary and monetary sectors and the real economy, both on the basis of interim assessments of the economy, and also for the entire fiscal year. The purpose of the IRBD exercise is to highlight major developments in the economy of Bangladesh, to flag emerging challenges confronting macroeconomic management, to raise awareness about key developmental issues and challenges facing the Bangladesh economy, and to stimulate an informed debate around these issues. As in earlier years, the work on IRBD FY2010-11 volume has involved both analytical work, and dialogues including a number of discussion sessions with relevant experts and stakeholders. Thus, along with the CPD researchers, views of many stakeholders have also been reflected in this volume. The present volume also includes a number of interim outputs prepared under the IRBD 2011 programme at CPD. Chapter 1 of the present volume presents an assessment of Bangladesh's macroeconomic performance in FY2010-11, and identifies the major achievements and the emerging pressure points at the end of fiscal year. This chapter also traces the early trends in FY2011-12 and flags four critical concerns for the Bangladesh economy as the new fiscal year unfolds: adverse spillovers from global economic situation, deepening stresses in public finance management, unabated price inflation, and increasing pressures on the external balances. In view of these emerging strains, the prospect of economic growth and challenges facing macroeconomic management in FY2011-12 have also been discussed in the chapter. Chapter 2 of this volume provides an analysis of the national budget for FY2011-12 and the revised budget of FY2010-11, which were placed before the National Parliament on 9 June 2011. The chapter presents an in-depth analysis of the proposed revenue mobilisation targets and public expenditure plans of the government including sectoral allocations for the Annual Development Programme (ADP) for FY2011-12. In addition, this chapter examines the various fiscal proposals made in the budget, evaluates these against the expectations, highlights the outstanding areas that demand further consideration, and provides critical comments on the feasibility of implementation of the proposals. Chapter 3 undertakes a critical assessment of the Monetary Policy Statement (MPS) of Bangladesh Bank for the second half of FY2010-11 (January-June 2011). This chapter was originally prepared and presented as the keynote paper for a CPD organised dialogue titled Growth, Inflation and Monetary Policy: Challenges for Bangladesh in FY2010-11, held on 13 February 2011. The chapter explores to what extent the policy stance, stated in the aforementioned MPS, was adequate to address the emergent macroeconomic challenges confronting the PREFACE policymakers. The chapter also articulates the challenges facing monetary management in FY2010-11, and discusses the outlook for economic growth in view of the evolving macroeconomic situation and the proposed policy framework. In 2011, a CPD research team conducted a study, in collaboration with the BRAC Advocacy Unit, to examine the efficacy of fiscal measures and public service delivery for the ultra poor. Chapter 4 includes a Policy Brief prepared based on the research findings of the above mentioned study. These findings were presented at a national dialogue on National Budget 2011-2012: Allocation for Safety Net and Related Sectors to Eradicate Extreme Poverty, organised by the All-Party Parliamentary Group (APPG) on Extreme Poverty, held on 4 May 2011. The chapter puts forward a set of recommendations emerging from the research findings which could be addressed by the Members of Parliament (MPs). Chapter 5 presents an analytical review of the emerging situation with respect to overseas migration and the inwards remittance flow with focus on the state of affairs over the first six months of FY2011-12. The chapter identifies some of the key emerging challenges and proposes a set of immediate to mid-term doables which policymakers could consider as they grapple with the task of addressing the attendant issues. The present IRBD volume also includes two dialogue reports as Annexes. Annex 1 is a report on the CPD organised dialogue on State of Bangladesh Economy and Analysis of the National Budget FY2011-12, held on 18 June 2011. Annex 2 is a report on the post-budget discussion held in Chittagong titled An Analysis of the National Budget for FY2011-12, which was organised by the CPD in association with the Bangladesh Economic Association (BEA), Chittagong Chapter on 25 June 2011. Keynote presentations at these two dialogues were made based on CPD's analysis of the national budget for FY2011-12. These presentations were followed by discussions by representatives of key stakeholder groups who shared their critical perspectives and views on a wide-ranging issues covering fiscal proposals, strategies for revenue mobilisation, proposals for development-related investments in the ADP, and the major challenges with regard to implementation of the budgetary proposals and raising the quality and efficacy of implementation.