Anu Mahmud :
World Bank’s July, 15 report that puts Bangladesh in the category of lower middle income economies is no doubt very uplifting. The people’s relentless efforts to improve their lot have paid dividends in the end; we have, after all, been able to free ourselves of the age-old tag of a poor member of Least Developed Countries. And it is no mean feat that it has been achieved some six years ahead of the government’s projected timeline of crossing the threshold of a middle income economy by 2021.
Reassuringly, henceforth Bangladesh will enjoy the same status as India and Pakistan among the SAARC nations as an economy of consequence.
Despite WB’s listing, to get UN’s nod as a lower middle income country, Bangladesh will have to wait three more years and do some more homework. The economy has to be placed on a stronger footing. With the mainstay of its foreign trade depending on a single commodity, the economy will remain very fragile until its export base is further broadened. Business confidence will need to be restored and transparency and accountability in the governance established. Thrust should be on providing the necessary condition for increased private and foreign direct investment. To this end, the need for developing infrastructure and improving the human development index need not be overemphasised.
However, with our present per capita Gross National Income lying between US$ 1046 and US$ 4125, Bangladesh is listed among the lower middle income countries. That leaves us with the challenge of going the extra mile to achieve a per capita GNI target ranging from US$ 4126 to US$ 12736, if we are to graduate to the status of a true middle income economy. Given our past record of stubbornly keeping to the growth path at around 6 per cent of the GDP over the past few years, thanks to the hard working peasantry, expatriate wage earners and a thriving private sector, the prospect of meeting this yet new target will not be an impossibility.
The new status will greatly improve the image of the country as a less risky, more economically stable country which may encourage foreign investment and thereby rejuvenate the economy further.
At the same time we must also be aware of the challenges ahead as a result of this new ranking. Loans from international development organisations may come with stricter conditions as Bangladesh steps out of its low income category, which the country must be ready to tackle. We must also remind ourselves that while we are clearly forging ahead in the direction of economic progress, the rich-poor gap has actually widened, which, if not significantly reduced, will hinder sustainable development. Income inequalities must be reduced in our endeavour to be more economically robust. Only then will the notion of middle income status have real meaning.
A note of caution. There is little room for going overboard about the pride of being branded as a lower middle income economy. For the real challenge will be to maintain the status, since with the loss of market protection that LDCs enjoy, we should be bracing ourselves for a tougher, a more competitive world. The political leadership will have to live up to that challenge.
Bangladesh’s cherished national goal of reaching the status of a middle-income country (MIC) is now quite close to being fulfilled. The World Bank (WB) has already classified Bangladesh as a lower MIC on the basis of its per capita GNI (gross national income). This indicates strongly to Bangladesh’s chances of achieving the status of a MIC by the targeted year 2021 or even earlier. It is a positive development about the nation’s journey towards prosperity and is, indeed, something to rejoice over. However, the gaining of the lower MIC status by Bangladesh is no surprise development. The annual economic growth rate it has been scoring for last two and a half decades since 1991, is a pointer to that fact.
Besides, the expanding overall economic activities, the steadily growing remittance earnings, the rise in government’s annual budgetary expenditures, etc., are demonstrative of a steadily rising GNI of the country. Otherwise, the size of the national budget could not have reached nearly Tk. 3.0 trillion in the current fiscal from that of only Tk. 4.7 billion in 1972-73. While rejoicing over the elevation of Bangladesh’s economic status, in terms of GNI, it is important to keep in mind the fact that the rise in GNI does not necessarily mean any substantive change in its current status of a least developed country (LDC) under the classification followed by the agencies of the United Nations. However, its current elevated status under the World Bank’s criteria is significant; Bangladesh will enjoy, from now on, some respect from international creditors and investors. It is thus important to cash in on the latest change in the country’s status.
However, the image-brightening status brings along with it a few challenges. Many donors, bilateral or multilateral, might feel tempted to make their lending a little bit harder because of Bangladesh’s better paying capacity. So, the policymakers would have to toil more than before to mobilise funds in the form of soft or concessional loans for improving the much-needed infrastructure facilities and carrying out other development works. The still-intact LDC status might otherwise prove handy in their task. What would really be more meaningful and therefore substantial for Bangladesh’s graduation from its current LDC status is the gaining of enough strength to withstand both internal and external shocks efficiently. Accomplishing it will require qualitative improvements in economic governance and functioning of institutions.
In its latest disclosure about the elevation of status of Bangladesh, in terms of GNI, the WB has made it pointedly clear that this does not make any substantive change on the ground as far as the economic status of all sections of its population is concerned. The poor remains poor as he or she was yesterday. Rather a few worries have lately got currency about the rising inequality in society, following the continuous growth in GNI. Though the rate of poverty has been declining at a steady rate over the last two and a half decades, the income inequality has, in fact, widened further. The Gini coefficient measurements, carried out from time to time, do confirm this fact. On this count, well-designed plans, having appropriate or specific societal targets and meticulously drawn-up developmental goals, are critically important to enable the country to untag its existing LDC status and to narrow the income inequality across the board. Accomplishing such objectives will largely depend on creating a synergy for ensuring an environment that promotes good governance, transparency and accountability.
Bangladesh has made significant strides in its journey towards development in the recent past.
This fact has been widely recognized by the international community as well. Reputed international institutions like Goldman Sachs and JP Morgan have, in fact, included Bangladesh in their lists of the frontier five and the next eleven emerging economies as having a high potential of becoming one of the world’s largest economies in the 21st century.
The US has predicted that the ‘next eleven will surpass the combined development of 27 countries of European Union by 2030.
The Guardian of London writes, Bangladesh will overtake the western states in terms of economic growth by 2050.
Besides, Moody’s and Standard and Poor’s have been rating Bangladesh quite high over the last few years. All these predictions clearly indicate that Bangladesh has a bright future, ahead.
According to the current budget, we are dependent on foreign assistance for only 1.8 per cent of our GDP (gross domestic product), meaning that we have been able to strengthen our national capacity.
The latest report of BBS shows that our per capita income has increased to US$1314 which was US$1190 last year.
Bangladesh’s position in terms of per capita income is 58th in the world. Purchasing power and average longevity of people have also gone up. Bangladesh is being shown as a middle income country based on improvement in GDP.
Most people, including experts, are of the opinion that economic development is the ultimate goal in a nation’s life.
Bangladesh is undergoing a phase of rapid change. Economic indicators suggest that the country is moving forward.
The country’s macroeconomic fundamentals are among the best in the whole Asian region.
Over the last six years, GDP growth averaged 6.2 percent and per capita GNI (US$) rose 9 percent each year.
On the other hand, inflation steadily declined, and average inflation moderated to about 6.3 percent (year over year) in August, 2015. Building on recent gains in revenue mobilization, budget size has been increased more than 4.3 times, particularly development spending has been raised three times since FY06.
Alongside, fiscal deficit was kept in control and remained close to 4 percent of GDP on average. Public debt to GDP ratio, as a result, is gradually declining over the years enabling
Bangladesh to remain at a low risk of debt distress. In the external front, export receipts remained resilient and more than tripled and were matched with newly 2.7 times increase in import payments and 3.2 times increase in remittance inflows since FY06.
Narrowing trade deficit and overall BOP surplus have strengthened the international reserve build up which has increased almost 7.2 times, the second highest in South Asia, during the last six years (USS 26.2 billion by end of August 2015).
The nominal exchange rate has also remained stable.
Progress made by Bangladesh in these areas has been recognised by various foreign organisations and the media. A report by Goldman Sachs, an American multinational investment banking organisation, contains a list of 11 promising countries of the world which have been termed ‘the next eleven. The list includes Bangladesh.
The organisation has stated that youths constitute the majority of Bangladesh population who can change the future of the country. JP Morgan has named 5 frontier economies and Bangladesh is one of those five.
According to the World Bank, Bangladesh has demonstrated all the potentials to become a middle income country by 2021.
Bangladesh has made impressive progress with regard to socio-economic development and moved ahead of its neighbours in many key social development indicators.
It has already met several MDG targets in terms of reducing poverty, attaining gender parity at primary and secondary education levels, lowering under-five mortality rates along with making significant gains in increasing enrolment, reducing infant and maternal mortality, widening immunization coverage and reducing incidence of communicable diseases.
(The writer is an Economic analyst, Columnist, e-mail: [email protected])
