Impact in Bangladesh’s Economy After the Budget of Export Import on Food and Garments

Topics: International trade, Economic growth, Economics Pages: 8 (2597 words) Published: March 21, 2013

Assignment
On
Impact in Bangladesh’s economy after the Budget of Export Import on Food and Garments Course Name: Financial Management
Course Code: Bus-302
Section- 01

Submitted To
Sumaiya Zaman
Lecturer & Co- Ordinator
ULAB School of Business

Submitted By
Tamim Hossain Turjo
Id. 092011100
Md. Masud Rana
Id. 092011084
Sony Saha
Id. 092011090
Mst. Tazmina Afrin Nipu
Id. 092011096
Atiker Nesa Chowdhury
Id. 093011101

University of Liberal Arts Bangladesh

Date Of Submission: 18-08-2011

INTRODUCTION

The national budget of FY2011-12 has been announced at the midpoint of the present government’s five years occupancy, spoiled by challenges to maintain the balances and the achievement of the targets for which it was voted to power. The current situation of macroeconomic balances, particularly triggered by instability of prices and contractionary financial policies, may be further pressurized by the possibility of fiscal compress. These developments of maintaining the balances may put the government on the edge of achieving the target of growth, recovery from lethargic improvement in poverty improvement and the reversing the rising trend of inequality. The investment scenario is yet to take the desired path, particularly being underpinned by high interest rate, low FDI inflow, acute power crisis, poor governance, and political instability. The inflationary pressure has been mounting at a rising rate mostly through food inflation in the country. Furthermore, higher trade deficit and the stagnated remittance inflow are putting pressure on the balance of payment situation. The financial space squeeze has emerged by growing burden of financial support requirements especially to the power and energy sector driven by the government to finance the private generators and the global fuel price hike. The limitation of fiscal space might make it difficult for the government to seek remedy to refreshment required for revamping the economy. In addition to that, IMF’s loan with unsuitable conditionality might create severe pressure on the overall macroeconomic strength as well as attaining the targeted growth path. The government might face extraordinary challenges to reach the growth target as quoted in the budget document of FY2011-12 due to the lack of supporting base in the overall economy of Bangladesh. The fiscal space squeeze and IMFs conditions for accessing one billion dollar loan to Bangladesh might also cover the way for increasing different types of inequality; such as - geographical inequality, income inequality and social inequality in the country. Moreover, macroeconomic correlates will be further stressed due to the mounting public debt. The cost of public debt has turned out to be a major concern attributing to the rise in interest rate and a depreciating exchange rate. The government is facing difficulty in debt financing caused by the squeezing of financial space. It is necessary to mention here that if debt financing is to be met by borrowing from the central bank, it would create inflationary pressure; on the other hand, if it is met by borrowing from the commercial banks, there is a possibility of crowding out the private investment. Therefore, debt financing and its management is a critical issue for the present government that needs to be dealt skillfully. In the budget of FY2011-12, the government’s financial strategy should have emphasized the need for maintaining the overall macroeconomic stability as well as fiscal sustainability. Moreover, the government ought to boost the investment through infrastructural development in order to achieve the targeted growth as well as to eradicate poverty and inequality.

Budget of 2009-2010
1. Slow down in export growth with some sectors in negative territory: The export growth during July-March period in 2009-2010 stood at 14.5 percent which was 12.4 percent during the corresponding period of the year 2008. During this...

References: 1. Mof.gov.bd
2. www.unnayan.org
3. Books of Budget Published By NBR
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