5% investment hike needed to attain GDP growth target: WB

The World Bank says Bangladesh needs to raise its investment by 5 percent to achieve the GDP growth target of 7.3 percent.

"The proposed budget for 2014-15 fiscal is promising. The 7.3 percent GDP growth target is a challenging one," said its Dhaka office's chief economist Zahid Hussain.

Speaking at the multi-lateral lending agency's post-budget discussion on Wednesday, he said Bangladesh will need to increase its investment by 5 percent to achieve the budget’s target.

"In my opinion, a 6.5 percent GDP growth in the next fiscal will be a great achievement considering the current situation of Bangladesh," said the WB official.

At present the rate of investment in Bangladesh stands at 28.6 percent of the GDP (Gross Domestic Product). The World Bank suggests it be raised to 33.6 percent.

Zahid Hussain said the size of the budget had been the subject of much debate.

“In our view a country like Bangladesh needs a lot of investment in infrastructure and energy. By that measure, it’s not big enough, compared to other South Asian countries,” he said.

“But it’s true that the size of the budget is larger than the implementation capacity.”

On Jun 5, Finance Minister AMA Muhith presented the proposed budget for FY 14-15 at Parliament, which is scheduled to be passed on Jun 29.

Hossain said Bangladesh could reach a growth rate of 10 percent by 2021.

“If Bangladesh wants to take the present 6 percent to 10 percent, production capacity has to be raised and the current production has to be used optimally,” he said.

“The power sector has made significant progress, but it’s all short-term. For the long term, Bangladesh will have to make large power plants and improve transmission,” he said.

The economist said there had been little response with the public-private partnership (PPP) initiative, chiefly because the PPP office was inefficient.

He said the challenge of implementing the budget would require vitalising the PPP initiative, reform in state-owned banks, land reform for industrialisation and infrastructure development, and decentralisation of power.

‘Confusing numbers’

Hossain said he was surprised by the statistics bureau’s forecast that the growth rate would be 6.12 percent in the outgoing fiscal.

World Bank’s last forecast said this growth rate will be 5.4 percent.

“Even after a steady political environment in 2012-13 fiscal the growth rate was 6 percent. Despite six months of political chaos, BBS is saying this year it will be 6.12 percent, which is surprising,” Hossain said.

“We have asked BBS for an explanation,” he added.

World Bank’s Country Director Johannes Jutt also spoke at the event.