Friends from the media, Colleagues, Ladies and Gentlemen,
Thank you for coming and a very warm welcome to you all to the World Bank. We are here to launch the Spring edition of the Bangladesh Development Update: Building on Resilience. As you know, these reports come twice a year, prepared by a World Bank Group team led by Zahid Hussain, our Lead Economist who will be making a detailed presentation on the findings. Before handing over to Zahid, I would like to highlight a few points:
First, Bangladesh is continuing its strong development trajectory, with growth solidly in the 6-7 percent range and benefitting from strengthening garment exports and remittance inflows. Despite having floods twice impacting agriculture, the country maintained robust growth in the current fiscal year. Its sustained development progress is reflected in the recent UN determination that the country is eligible to graduate from Least Developed Country status. While actual graduation is a few years away, this is an important milestone.
Second, actions are needed to address some emerging challenges. The fiscal deficit has been contained for the wrong reasons, namely the slow implementation of much needed capital spending. Tax revenue as a share of GDP remains among the lowest in the world. As the economy generates the wealth of a middle-income country, it also needs to generate the revenue for public services and investment of a middle-income country. The National Board of Revenue launched the Medium-Term Revenue Strategy development process last Thursday, which is a positive step in this regard.
However, the means of financing the deficit, mainly through the issuance of National Savings Certificates, has become increasingly expensive. It also brings significant distortions in the financial sector, which is facing tightening liquidity and double-digit lending rates. With the current account in deficit for the first time since 2011, and foreign exchange reserves being used to smoothen exchange rate volatility, policy makers should remain vigilant.
Third, actions are also needed to generate double-digit growth. Bangladesh can do it. Creating jobs for the 2 million young people entering the labor force each year and attracting more women to the formal labor market require investment. Further, to help raise potential growth and reduce inequality, the country needs to improve the business environment, streamline the regulatory framework, and enhance infrastructure project management. Expenditure reprioritization—towards critical infrastructure and public services—and away from regressive subsidies and repeated recapitalization of state-owned banks will help manage fiscal deficits and increase competitiveness. With the rate of poverty reduction slowing, more is needed to continue the country’s achievement in reducing extreme poverty.
Last, maintaining sound, credible data and monitoring systems to underpin evidence-based policy making is essential. These include not only data for poverty measurement and tracking, but also data on the national income accounts, inflation, and the budget. The Government has made progress, and the World Bank will continue to support efforts towards the preparation and dissemination of data that use objective technical standards, and are disseminated at predictable frequencies, enabling deeper analysis and credible policy making.