The Asian Development Bank (ADB) has listed many policy challenges facing the Bangladesh economy though it has kept the growth projection unchanged at 6.7 per cent for the current fiscal.

In its latest outlook the Manila-based development financier said government employees' pay hike has spurred consumption and steady readymade garment exports helped out the economy.

However, the ADB painted a grim picture of the remittance front that feeds the economy substantially.

The multilateral financier had earlier in September projected the same figure of growth for the current fiscal year (FY) 2015-16.

Private consumption is rising, spurred by wage increases in public sector. But growth in remittances remained subdued, leading to stagnancy there, the ADB noted in its release Wednesday.

The Asian bank sees many policy challenges in Bangladesh, like boosting investment and creating enabling business environment which are vital for stimulating growth to break the six-plus cycle.

"Implementing VAT Act on time, removing anti-export bias, rationalising administered prices of oil and electricity, strengthening financial sector disciplines remain the key policy challenges," it observed in the economic outlook.

ADB country director Kazuhiko Higuchi said implementing the new VAT (value added tax) law, improving the banking system, modernising tax policy and administration are import.

He said the growth is likely to be reasonably broad-based with a stronger performance by manufacturing.

He was addressing a function at the ADB office in Dhaka while releasing the Asian Development Outlook 2016 that expects that with prudent macroeconomic policy framework, macroeconomic balance will be maintained.

He said improved business environment, progress in public-private partnership, and government's project-implementation capacity are expected to boost domestic demand.

The ADB country chief suggested that the country could significantly expand its potential output through infrastructure and human capital development.

ADB Principal Country Specialist and Bangladesh team leader Mohammad Parvez Imdad made a power-point presentation on the 'Development Outlook 2016'.

He said the growth in 2016 may be slightly higher than that of the previous year because of stronger garment-export activity.

The ADB specialist indicated that much higher investment and reforms for improving business environment, resource mobilization, and financial discipline are needed to graduate from the lower-middle to middle-income status.

He assumed that domestic political calm would build consumers and investors' confidence supporting the growth momentum.

Agriculture growth in 2016 is expected to undergo little change down at 3.2 per cent from 3.3 per cent in 2015.

"Industry growth will be slightly faster at 9.8 per cent in the year under review on better performance in the ready-made garment exports, manufacturing for the domestic market and construction," Mr Imdad said.

Services will rise to 5.9 per cent with expansion in industry and tourism, telecommunications, health, education and IT sectors.

Average inflation is projected to slow to 6.2 per cent in 2016.

The export growth is expected to rise to 8.0 per cent in FY2016.

The remittances are expected to grow by 5.0 per cent in FY2016 and further by 7.0 per cent in FY2017.

Replying to a query from reporters as to whether the government will be able to achieve the revenue target in the current fiscal year, the ADB Principal Country Specialist said they feel that the government's target for revenue collection could be achieved based on expanding the scope and the VAT law being implemented and also for modernising, streamlining and improving the methods of revenue collection.

Mr Imdad made a mention of the government effort for exploring new overseas job markets, especially non-conventional markets.

He thinks the slowdown of sending workers to Malaysia can be offset by the expansion of new markets.

Responding to a question on the recent Bangladesh Bank reserve heist, the ADB man said the government is investigating the matter. "Let's see what comes out of it."

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Source: The Financial Express