Asian Regional Public Debt Management

Summit
Meeting Government Financial Needs in
Turbulent Times

03 - 05 November 2009
Presented by

Mahmuda Begum
Director
Foreign Aid Budget and Accounts Branch
Economic Relations Division
Sponsored by M/O Finance

Asian Development Bank

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 Tokyo

Karachi
Shanghai

Dhaka

Manila
Hanoi

Bangkok

Kuala Lampur

Jakarta

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 At a Glance Bangladesh
1. Population 145 million
2. Area 147000 s km
3. Population Density 952 / s km
4. Life Expectancy 65 Years
5. Literacy Rate 65%
6. Poverty Rate 40%
7. GDP US$ 89.70 billion
8. GDP Growth Rate 5.9%
9. Per-Capita Income US$ 621.00
10. Export US$ 15.55 billion
11. Import US$ 20.30 billion
12. Financial Year July-December
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 Table:1 Basic Economic Indicators
2004-05 2005-06 2006-07 2007-08 2008-09 2008-09 2009-10
Actual Actual Actual Actual Original Revised Projection

GDP (US$ 60018 62038 67714 78950 90161 89701 98100

million)
GDP per Capita 438 447 482 554 618 621 637
($)
Real GDP Growth 5.38 6.63 6.51 6.21 6.5 5.9 5.5
(%)
a. Agriculture 2.2 4.9 4.6 3.2 4.0 4.6 5.0

b. Industry 8.3 9.7 8.4 6.8 7.5 5.9 5.5

c. Service 6.4 6.4 6.9 6.5 6.5 6.3 6.0

CPI Inflation 9.9 7.2 7.0 9.9 6.7 6.5 6.5

Gross Domestic 24.2 24.2 24.5 24.2 25.2 24.2 23.6

Investment (%
of GDP) 30.2 32.4 28.7 30.2 33.6 32.4 32.5
Gross National
Savings(% GDP)
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 Table 2: Government Finance
2004-05 2005-06 2006-07 2007-08 2008-09 2008-09 2009-10
Actual Actual Actual Actual Original Revised Projection

Total 10.3 10.3 10.2 10.8 11.3 11.2 11.6

Revenue
(% of GDP)
Total 14.0 14.1 13.4 15.9 16.3 15.3 16.6
Expenditure
(% of GDP)
Fiscal -3.7 -3.6 -3.2 -5.1 -5.0 -4.1 -5.0
Balance (%
of GDP)
Domestic 1.9 2.1 2.1 3.5 2.8 2.3 3.0
Borrowing
External 1.8 1.5 1.1 1.6 2.2 1.8 2.0
Borrowing

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 Table 3: Balance of Payments
2004- 2005- 2006- 2007- 2008- 2008-09 2009-10
2005 2006 2007 2008 2009 Revised Projection
Actual Actual Actual Actual Original

Export Growth 14 21.5 15.8 15.7 16.5 15.6 17.5

(%)
Import Growth 20.6 12.1 16.6 25.6 21.0 20.3 24.9
(%)
Current -0.9 1.3 1.4 0.8 -0.9 2.5 2.8
Accounts
Balance/GDP
Workers’ 3.8 4.8 6.0 7.9 9.5 9.7 10.6
Remittances ($
billion)
Foreign 2.9 3.5 5.1 6.1 6.0 7.5 8.5
Exchange
reserves ($
billion)
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 Table 4: Indebtedness
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
Actual Actual Actual Actual Actual Projection

Government 50.6 50.5 49.6 47.0 45.1 44.4

Debt
Outstanding/GDP
External 31.9 31.3 30.3 27.0 24.4 23.4
Debt/GDP
Domestic 18.7 19.2 19.3 20.0 20.6 21.0
Debt/GDP
External Debt 1.09 1.09 1.06 0.97 0.92 0.91
Service/GDP (%)
External Debt 4.7 4.07 3.7 3.6 3.3 3.9
Service/XGS (%)
Exchange Rate 61.4 67.1 69.0 68.6 68.7 70.0
Tk/US$

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 Table 5: Projections of Major Economic Indicator

2007-08 2008-09 2009-10 2010-11 2011-12

Actual Revised Projected Projected Projected

Real GDP Growth (%) 6.2 5.9 5.5 6.0 6.5

CPI Inflation 9.9 6.3 6.5 6.0 6.0

Gross Domestic 24.2 24.2 23.6 24.3 25.2

Investment (% of GDP)
Gross National Savings(% 30.2 32.4 32.5 33.1 33.6
GDP)
Total Revenue (% of 10.8 11.2 11.6 11.3 11.5
GDP)

Total Expenditure (% of 15.9 15.3 16.6 16.1 16.2

GDP)

Fiscal Balance (% of GDP) -5.1 -4.1 -5.0 -4.8 -4.7

Domestic Borrowing 3.5 2.3 3.0 2.6 2.3

External Borrowing 1.6 1.8 2.0 2.2 2.4

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 Overcome first round crisis
Previous tables show that Bangladesh was
largely untouched by the first round effects of
the global financial crisis:
Enormous agricultural production;
Limited exposure to the global financial system;
Fiscal stabilization - maintained internal and external
balances ;
High economic growth;
Robust growth in exports and remittances;
Healthy foreign reserves;
Social safety nets for vulnerable people;
Increase budgetary allocation for pro poor.

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 Leading Challenges
The effect of the global economic crisis on the
economy is now significant:
¾ Declined of growth of exports and remittances; effecting
the economy, and household;
¾ Revenue collection also affecting;
¾ GDP growth in current year projected to decline from
6.5% to 5.5%
¾ Slowdown in industrial activities and services;
¾ Sharp decline in the opening of Letters of Credit for
capital machinery;
¾ Affecting poverty through job losses, wage cuts and
slowdown of remittances growth;
¾ Progress in poverty reduction has also been affected.
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 Initiative/Strategies to meet the
challenges
To address the impact of the global crisis government
strategies are:
™ Task force headed by the Finance Minister - formed to
provide guidelines and advice after continuously
monitoring national and global situations;
™ Managing macroeconomic environment for pro-poor
growth, control over commodity price hike;
™ Increase in investments in critical areas for pro-poor
growth;
™ Food security through higher domestic production;
™ Ensure social protection through extending social safety
nets programs for the vulnerable and disadvantaged ;

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 Initiative/Strategies to meet the
challenges (conti..)
™ Introduced Public- Private Partnership (PPPs) - developing
a new business climate (Tk.3500 million budget for current
year);
™Stimulus package was expanded in the budget to give
incentive to exports, energy and social safety nets program.
™ Support for young entrepreneurs and SMEs, by access to
credit;
™ Employment creation in rural areas;
™ To create an investment-friendly environment by
simplifying investment related laws and regulations;
™Enhancement of agricultural credit;
™Improving execution of Annual Development Program
(ADP)
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 Way Forward
Escaping from financial crisis Trap through a “High Push” require
large increase in infrastructure and social sector investment :
But challenges are :
¾ No opportunity to borrow from international market;
¾ Weaker revenue collection;
¾ Limited scope for domestic borrowing ;
¾ Limited scope for grant and soft loan.
To meet the extra demand the government has requested
Development partners for budget financing support;
Asian Development Bank committed to provide budget support
through:
a) Public Expenditure Support Facility (PESF)- US$ 240 million (100
million OCR)
b) Countercyclical Support Facility (CSF)-US$ 500 million (not soft loan)

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 Conclusion
It is expected that foregoing initiative, enabling the
government to scale up of its countercyclical
programs;
9 Government capital spending will rise , create jobs and raise
income;
9 Reduce the infrastructure gap;
9 Promote higher long-term growth;
9 Scaling up social protection programs;
9 Support for affected export sectors;
9 Ultimately, will help alleviate the negative impact of the global
crisis.
Finally, the experience of the East Asian and other
countries could be a valuable lesson for us;

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Welcome Comments,
Questions……
Thanks for a patient hearing

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