After letting down the economy to nadir in all measurable variables like export-import, revenue collection, foreign direct investment, misappropriation in banking sector, shrinking stock market, or expenditure spree on big projects and corruption — the economy is near to bankrupt. The government is insisting on excessive borrowing from foreign and local sources. The government has no worry about the reality of economic disaster waiting round the corner. Bangladesh’s inadequate revenue stream in comparison to the size of the economy and development works is of great concern. At 9.2 percent, Bangladesh’s tax-to-GDP ratio last fiscal year was one of the lowest in the world and well below peers in the region. The ratio is likely to shrink further this fiscal if the collection trend of the first four months continues and the upward slant of GDP growth are considered.
Value-added tax, the largest source of revenue, was up just 1.79 percent during the period. No wonder that the VAT collections growth thus far has been lower than a year earlier. The VAT law was supposed to be supplemented by automation, but that has not come through yet. And because of the revenue shortfall, the government had to dig into banks’ funds this fiscal too. By December 9, it has borrowed 99.5 percent of its target for this fiscal, choking out private investment along the way. Already, private sector credit growth hits a nine-year-low of 10.04 percent in October, 3.16 percentage points lower than the central bank’s target for the first half of this fiscal. Capital machinery and industrial raw material imports have shrunk too. The situation of defaulted loans in banks has only gotten worse in 2019.
The new finance minister does not appear to know how to bring any improvement in the economy. Like the rest of the government he also thinks people’s hardship does not matter. The people will not tolerate everything unprotested for an uncertain period.
