Dhaka: Centre for Policy Dialogue (CPD), a civil society think tank, on Saturday recommended the government to focus on lowering the interest rate of National Savings Bond (NSD) and adjustment of fuel price and exchange rate to sustain the economic growth for the current fiscal year 2016-17.

It also stressed the need for reform in three sectors –-banking, local government and public investment towards economic sustainability.

The CPD came up with the recommendations at a press conference at the city’s Brac Centre Inn placing an analytical report on Bangladesh’s macroeconomic performance in FY2016-17.     

Presenting the report, CPD research fellow Towfiqul Islam Khan said they analysed the strength and weakness of the country’s macro economy and provided observations on mitigating various forthcoming challenges.

He said the robust GDP growth and rebounded investment in FY2015-16, low inflationary pressure, rising foreign exchange reserve, manageable fiscal deficit, and positive outcome in the capital market are now comfortable spaces for Bangladesh economy in FY206-17.

He, however, said the financing mix of the budget deficit based on NSD sale, rising non-performing loans (NPL), weak governance amid new scams in banking sector, inadequate Capital Adequacy Ratio (CAR), and lower remittance inflow are the major areas of concerns for this fiscal year.

Addressing the event, CPD distinguished fellow Dr Debapriya Bhattacharya said the government can face immediate economic challenges by harmonsing NSD interest rates with other interest rates, the exchange rates of Taka and lowering fuel prices to invite private investment.

“It’s now essential to lower NSD interest rate, fix a ceiling for NSD buyers and bring its sale under a strict surveillance with a view to saving the government’s revenue,” he said.

Dr Debapriya said Bangladesh had a robust economy in the last fiscal, but weakness was seen in remittance inflow, export and agriculture, which are major sources of strength of the economy.

“As part of midterm plan to increase the economic growth, Bangladesh needs to form a banking commission (to bring transparency the banking sector), ensure the quality of public expenditures and empower the local government,” he said.  

About food-friendly programme for the ultra-poor, the CPD report showed that each beneficiary received 79kg rice instead of 90kg on average as 3,88,695 metric tonnes of rice was distributed among 49,11,806 beneficiaries. Coarse rice price increased during the operation of the programme.

Dr Debaprya said the rice should be distributed among readymade garment workers as they are now facing hurdle due to non-food inflation particularly house rent and gas. “If the rice is distributed among garment workers, it’ll help minimise the current unrest in the apparel sector.”

The CPD report said the revenue mobilisation will need to grow at an almost impossible rate of 49.7 percent in the last nine months of FY17 to meet the annual target as the total revenue mobilisation in the first quarter was only 13.7 percent higher than that of the same period of the FY16.

If the status quo persists in total revenue collection, the possible revenue shortfall in the current fiscal could be about Tk 40,000 crore, the report said.

In the last fiscal 2015-16, the shortfall of revenue earnings was Tk 37,057 crore and the revenue-GDP ratio was 9.9 percent against the target of 12.1 percent, while the revenue growth of National Board of Revenue (NBR) was only 18 percent against the target of 42.3 percent.

The CPD analysis said expenditure for annual development programmes (ADP) did not mark any significant breakthrough in the first half of the current fiscal, though it registered a better performance compared to the same period of the previous fiscal.

The ADP expenditure was 27.6 percent from June-December of FY17, while it was 23.5 percent in the same period of FY16.

In the FY2015-16, the ADP implementation rate was only 56 percent in the first nine months of the fiscal, while 29 percent in the last month.

The CPD report said the NPL increased from 8.8 percent (of total loans) in December 2015 to 10.1 percent in June 2016 and 10.3 percent in September last. 

It said export earning recorded only 4.4 percent growth during the last July-December period against the annual growth target of 8 percent.

But the export earnings need to grow by 11.9 percent annually over the next five years to attain the target of USD 60 billion by 2021, while RMG export earnings need to grow by 12.2 percent annually to reach the export target of USD 50 billion by 2012, the report said.

In the FY16 fiscal, the export growth was 9.7 percent against the target of 7.3 percent.

CPD executive director Prof Mustafizur Rahman and additional research director Dr Khondaker Golam Moazzem also spoke on the occasion.