a) The proposed Budget was planned based on dubious and unrealistic assumptions. It used the same assumptions set out in the Sixth Five Year Plan, among others: the energy constraint will ease, investment rate will rise to 28-29% of GDP, trade policy will be supportive of high growth, and global economic trends will be stable. Nevertheless, none of these assumptions are grounded in reality, rather they are pure speculations. For example, it is a common knowledge that current global economic trends are far from stable. The lingering global recession, euro zone crisis, ever increasing fuel prices, and the slowdown of China's economy, to name a few, create huge number of challenges to countries in managing their economies. Bangladesh too is not insulated from these challenges. Being an exporting country, Bangladesh relies heavily on external demands.
b) Action plans to achieve the budgetary visions are starkly missing in the budget. The public, being the major stakeholder, has every right to know how the proposed budget be executed to meet its objectives.
c) The Budget according to the Finance Minister would implicate high borrowing from the banks. Evidence shows that western countries which have employed similar methods of budget funding, using similar assumptions, economic predictions and speculations found their banking systems crumbled and required massive bailouts. Some of them discovered that they are now at the mercy of IMF and World Banks. They have been given an ultimatum either to adopt strict austerity measures imposed by IMF or face insolvency. It seems to me Bangladesh is now going in the same direction.
d) In the last two budgets, the government claimed of its success in managing the macroeconomics by making them fundamentally stable and resilient. If it is true, certainly this fact does not match with the huge budget deficits and current account imbalances faced by Bangladesh now. When the same government lost the office in 2001, the country's current account balance at that time was negative US$281 million. This time a much worse scenario awaits Bangladesh if the government is allowed to execute the proposed Budget. Sadly, not only the next inheriting government will be tasked to rebuild the wrecked economy but every Bangladesh citizen will also be made to pay the national debt, a legacy of the present government.
e) When a nation faces huge current deficit as in the case of Bangladesh today, naturally its economic growth will be in negative. Therefore, on what basis the FM made a prediction for a growth rate at 7.2% and GDP at 6.3% next year? Isn't it strange that while China's economic growth is declining due to global recession, the FM on the other hand boldly painted rosy pictures of Bangladesh's present and future economy without providing any proofs. For the FM's information, GDP is no longer a reliable measurement to gauge the health of a country's economy. Even those European countries with higher GDPs than Bangladesh could still go bust.
f) Excessive borrowing from banks by the government also could result in the drying up of the banks' vaults. This is consequently will reduce credit accessibility to local entrepreneurs, resulting in stagnation in investment and employment, and declination in growth prospects. Liquid accessibility is a handmaiden to domestic development/growth. Heavy bank borrowing will shrink the portion of credit accessibility to private entrepreneurs that eventually will stunt production and competitiveness. It is also expected interest rates will rise when the credit squeeze becomes critical. No right-minded entrepreneurs would ask for loans with such high interest rates. It's mind boggling to think how Bangladesh products would compete in global competitiveness in such a situation. While competitors become more innovative, producing 'quality at a cheap price' goods, Bangladesh manufacturers face an increase in production cost and a bleak growth prospect in their businesses. Already, it has been reported that world demands for readymade garments are now shifting from Bangladesh to Cambodia, where buyers could find quality goods at bargain prices.
g) There is no significant change observed in the trade policy that could provide sufficient incentives to boost trades. The traders' community has issued a warning that whatever adjustments to trade taxes announced in the Budget will only bring short-term profits. To protect local industries, the government proposed an increase in tariffs concerning finished products while reducing duties on several raw materials. However, such protection for extended periods will create inefficiency and undermine global competitiveness. Bangladesh needs to review its trade policy several times in a year in order to remain competitive in the global markets.
h) The Budget's aim to bring down the inflation rate from whatever it is now (my estimation is at 14%) to 7.2% defies logic, to say the least. Furthermore, there is no mention on how the government is going to do it. With excessive borrowing from banks and foreign lenders, this mission is rendered impossible.
i) Whitening black money is an unconstitutional decision, sending a wrong message to investors from abroad. Though it might be justified as an attempt by the government to rein in cash outflow, it might also be interpreted by investors as a sign of a serious domestic liquidity crisis and lack of good governance which might significantly influence investment decisions. Without good governance investors will lose their confidence in the government's ability to safeguard their investments. It is my opinion that only a weak government would succumb to the immoral demands of the black money holders. Instead of promoting accountability and transparency, the government seemed to promote corruption in society and attract devious investors to the country.
Judging from the issues raised above, the growth prospects of Bangladesh economy under the proposed budget is dim. The assumptions employed as a basis for this Budget are unrealistic, merely served as eyewash. Therefore whatever economic predictions/statistics derived from these assumptions are suspected at best.
The heavy borrowing from the banks by the government will create a credit squeeze which will lead to higher cost