Country Report Bangladesh July 2000 Updater

Economic policy outlook: Fiscal policy

Privatisation efforts will stall, as the prospect of a general election in less than a year prevents the ruling party from selling state assets. Despite a decline in losses at SOEs in recent years -- they fell from Tk14.1bn (US$276.5m) in fiscal year 1996/97 (July-June) to Tk8.3bn in 1998/99 -- they remain a severe drain on the government budget. The bulk of these losses are financed through borrowings from NCBs. A failure to reduce expenditure or increase revenue by broadening the tax base or through privatisation will maintain pressure on the fiscal position. The fiscal deficit in 2000 is estimated to be more than 6% of GDP. This will prevent Bangladesh from moving out of its cycle of high non-productive expenditure, which has come at the expense of development.

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