There will be no dreadful situation where GDP growth will slump to 2-3% as projected by the World Bank.
The national budget for the next fiscal year might not be announced in June this year as the coronavirus pandemic has stalled the budget formulation process, Finance Minister AHM Mustafa Kamal said.
"If the coronavirus situation does not ease soon, we may seek to keep the current budget valid till August in consultation with the law ministry," he said yesterday.
Once the pandemic crisis is over, the country's economy will not take more than 2-3 months to return to the pre-outbreak stage, the finance minister said, rejecting outright the World Bank's prediction that Bangladesh's economic growth could fall to as low as 2% to 3% this year.
Normally, there is an obligation to get the budget for a new fiscal year passed in the parliament by June 30.
The Constitution says that the budget can be delayed for two months in an emergency situation, the minister said, adding that data required for framing the budget could not be collected while domestic and global situations could not be assessed yet. "Still we have two-and-half months in hand."
The finance minister shared his thoughts on next year's budget with The Business Standard a day after the World Bank forecast that the pandemic could slow Bangladesh's GDP growth to 2 to 3 percent this year from 8.15% last year.
"Because of the strong performance during the first eight months, I see no reason why growth will plummet to two to three percent when the fiscal year ends no matter how much losses we face in the last four months," he explained.
The shutdown in place to contain the coronavirus outbreak will certainly have negative impacts on manufacturing and service sectors, but the Gross Domestic Product (GDP) growth will not decline to the dreadful situation as forecast by the World Bank, he asserted.
Our growth has been 7.8 percent or more during the first eight months (to February) of the current fiscal year when coronavirus had not broken out yet, the finance minister said.
He said there would certainly be negative growth in the industrial sector in the remaining four months, and the same situation will prevail in the service sector too.
But there will be no heavy impact on the agriculture sector, Kamal asserted.
So, there is no reason to be scared over the World Bank report, he said.
Kamal said Bangladesh at present has achieved the highest GDP growth in the world. Still, the country will be in the leading position in Asia in terms of GDP growth regardless of the amount of losses the country faces in the next four months because of coronavirus, he believed.
The minister said the economy started facing adverse impacts when coronavirus broke out in March, but the agriculture sector's situation was good until February.
He said the state of affairs of industries was not bad either although exports registered a four percent negative growth.
"But revenue collection was good, and growth was 8.25 percent. Remittance growth was around 20 percent until February while foreign exchange reserve was about $33 billion.
"Inflation was also stable. I do not understand how the World Bank made such a forecast," Kamal said.
He described the Asian Development Bank's recent forecast of 7.8 percent growth as logical.
"I think the Asian Development Bank's forecast is well-founded," he said.
"Everyone is questioning how the World Bank projects that our growth will be 2 to 3 percent. We were certainly ahead of India in all indicators of the economy in the last five years. Now the World Bank is suddenly forecasting that India will outperform us," said the minister.
He said that once the pandemic situation was over, Bangladesh would recover fast from the losses. "By then, our economy as well as businesses and factories will turn around. We will then lead South Asia, Southeast Asia and, in fact, the whole Asian region," Kamal reiterated.
"Based on the World Bank data, the World Economic Forum said we are above everyone else in terms of GDP growth and growth in per capita income. We have achieved so much in the last five years, but now, all of a sudden, the forecast is that our growth will fall to two to three percent. I do not know how," he said.
Based on figures of the last eight months, our projection is that growth will be 7.8 percent or more, said the minister.
When asked how much assistance Bangladesh has sought from the World Bank's coronavirus aid package, Kamal said the global lender has promised Bangladesh a very large sum.
"They will give us as much as we can spend. So, we will not run into financial trouble," he said.
The minister said the government itself is capable of covering the stimulus packages announced by Prime Minister Sheikh Hasina, and no extra assistance will be needed in this regard.
He said the Bangladesh Bank is trying to increase liquidity supply in banks by cutting statutory liquidity reserve (SLR), cash reserve ratio (CRR) and repo rate.
The government is also subsidising loans, said Kamal.
"We have already announced bailout packages equivalent to 2.5-3 percent of the GDP. Until now, many countries have not announced stimulus packages as big as ours."