Economic Growth & Poverty Reduction In Bangladesh

3948 words - 16 pages

BUS530

MACROECONOMICS

ECONOMIC GROWTH & POVERTY REDUCTION IN BANGLADESH

Prepared by
Aadil Choudhury
112 0322 660
Section 1

INTRODUCTION
The relationship between economic growth and poverty reduction is not always automatic. To achieve poverty reduction, robust economic growth is necessary but not sufficient. The financial allocation and source of finance play a crucial role in implementing the development endeavor and achieving macroeconomic objectives like growth, employment, and price stability. Investing in some sectors of the economy may contribute to rapid economic growth while others may contribute to poverty reduction. Again there are some sectors which may ...view middle of the document...

With this end in view, an expert committee consisting of foreign exchange experts drawn from trade and commerce, government officials, academicians, bankers and other relevant personnel can be considered on an urgent basis.
Challenge in governance reform
The fundamental development constraints in Bangladesh are poor governance, corruption, law and order, public service delivery, and effectiveness of public expenditures to improve human development. The civil service remains relatively ineffective and unaccountable, and lacks proper motivation due to weak incentive system. Institutional reforms are crucial in the management of the budget; anti-corruption policies and institutions; independent regulatory bodies to protect public interest; decentralization and devolution of decision making; and civil service reforms. It is important to improve the investment climate through supporting sectoral governance reforms and investments in the power sector, water and sewerage, roads, railways and urban development. The governance reforms and investments in health, education, sanitation, local government strengthening, and safety net approaches are crucial for attainment of the objectives of the Millennium Development Goals (MDGs) and improving the quality and efficiency of social service provision to the poor. Modernization of land administration procedures and greater clarity on land titles are also vital for ensuring good governance. One of most sensitive areas of governance reforms in Bangladesh is reforming the tax administration of the country. The stylized facts of Bangladesh revenue system are inadequate and stagnant revenue yield relative to GDP; high ratio of indirect to direct tax revenue; a high and constant level of dependence on imports to achieve resource mobilization; narrowly- based domestic indirect taxes; virtual exemption of agricultural sector from taxation; potential regressivity; and low revenue productivity and high administrative cost.

PERFORMANCE OF MACROECONOMIC INDICATOR
Bangladesh’s economy has experienced both macro-economic stability and robust economic growth following the transition to a democratic rule in the early of 1990s. In the backdrop of the deep macro-economic crisis of the late 1980s, a series of stabilization measures were introduced in the Bangladesh economy which largely restored macro-economic stability in the early 1990s. Subsequently, the Bangladesh economy registered an average GDP growth rate of 4.8 per cent in the 1990s, which was one full percentage point higher than that recorded in the previous decade (i.e. 3.8 per cent). Despite of such impressive growth throughout the decade, the per capita income of Bangladesh at the beginning of the new decade was not only the lowest among the South Asian countries, but also below the average per capita income of the least-developed countries (LDCs). Within the decade of the 1990s, the second half demonstrated an even more impressive growth performance (5.2 per...

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