Bangladesh unveiled a $28 billion budget on Thursday, with a series of populist tax and spending measures designed to woo voters before general elections due this year.
The 2.225-trillion-taka plan for the year beginning on July 1 forecasts a 17.5 percent rise in spending, with a range of infrastructure developments earmarked.
Finance Minister A.M.A. Muhith forecast 7.2 percent growth for the 2013-2014 financial year, even though there are signs the economy is slowing down sharply amid political violence and slower than expected growth in the garment sector.
Muhith announced the budget in parliament, the last by his ruling Awami League party before the country goes to the polls.
“We have refixed the real economic growth target at 7.2 percent for the financial year 2013-14,” the finance minister said.
The budget includes $8.3 billion in development spending including new bridges, roads, and power plants, aimed at boosting growth to over 7.0 percent.
Muhith also unveiled populist measures including a permanent commission charged with raising the salaries of the million-strong public service, as well as raising the minimum tax-free income threshold and expanding welfare spending for the poor.
Muhith said an expected rise of more than 20 percent in tax receipts would keep the budget deficit at 4.6 percent of GDP. The shortfall will be financed by domestic borrowing and loans from rich nations and development lenders such as the World Bank.
The government targeted the same growth in the outgoing fiscal year. But the economy grew only 6.03 percent, the slowest in four years, amid a stagnating farm sector and slower garment exports.
Experts branded the latest growth target ambitious given that the garment sector, which makes up 80 percent of exports, has been hit by a series of disasters in recent months.
Also, the worst political clashes in the country’s history have hit consumer spending.
Some 1,129 people were killed in April when a nine-storey factory complex collapsed outside Dhaka, highlighting appalling safety conditions in the sector.
Some Western buyers including Walmart have since announced they would not buy from factories with poor safety records, while many others have signed an accord designed to overhaul safety at factories.
Political violence over the last five months has left more than 150 people dead, after opposition activists protesting war crime verdicts against their leaders clashed with police
“We’ll be lucky to achieve anything beyond six percent growth,” said Ahsan H. Mansur, a former head in the Middle East of the International Monetary Fund.
“Consumer spending, which accounts for 80 percent of GDP, has sharply contracted due to political instability and poor investment,” he told AFP.
“If it remains weak, it’ll be a major setback for achieving the stated GDP and revenue growth targets.”
Bangladesh unveils $28b pre-poll budget
