Budget has to reduce heat of inflation
Mahfuz Emran: On the one hand, people of all classes and professions are burning in the heat of inflation, on the other hand, it is an election year. There is a dollar crisis. Electricity and fuel situation is also not in a good position. Export earnings, remittances have decreased. Reserves are also down. In this situation, the budget of the new financial year (2023-24) is coming. Economists think that inflation should be given the most importance in the budget of the new financial year in this complex situation of the macro economy.
They say that in the budget of the new financial year, main importance should be given to controlling inflation. Along with this, attention should also be paid to increasing revenue collection. However, as it is an election year, this budget will be quite complicated and difficult for the government. A moderate or controlled budget should be given without being ambitious. If possible, the coverage of the social safety net should be increased. If that is not possible, one crore people will have to be given benefits for the next fiscal year.
According to the latest data of Bangladesh Bureau of Statistics (BBS), the inflation rate was 9.33 percent in the last month of April. Keeping this pressure of inflation in mind, the Ministry of Finance has drafted an expenditure of Tk 7 lakh 59 thousand 955 crore for the next financial year. This is 15.20 percent of the estimated gross domestic product (GDP) for the next financial year. For the current (2022-23) financial year, a budget of Tk 6 lakh 78 thousand 64 crore is given. Accordingly, compared to the current fiscal year, the size of the next fiscal year’s budget will increase by about 82 thousand crores.
In this budget, additional allocation may be kept for subsidy in fertilizer, gas and electricity sectors. In the main budget of the current financial year, Tk 82 thousand 745 crores were kept in the subsidy, incentive and cash loan sector. Later in the revised budget it was increased to Tk 1 lakh 2 thousand crores. In the budget of the new financial year, the allocation for these sectors can be increased to Tk 1 lakh 9 thousand crores. Of this, Tk 33 thousand crore can be allocated for the power sector. In the main budget of the current financial year, 17 thousand crores of rupees have been allocated for this sector.
Meanwhile, in April of the current financial year, the target of export income is $505 million. According to the data of the Export Development Bureau, the export income in April this year was $395.6 million. Accordingly, 21.67 percent of the target income has decreased. Not only did it fall short of the target, but the export earnings also decreased a lot compared to last year. Export income in April last year was $473.86 crore.
According to the data of Bangladesh Bank, remittances came in the last month of April $1.68 billion. In April 2022, remittances came in at $2.01 billion. Accordingly, the remittance flow decreased by 16.28 percent in April this year compared to last year.
In such a situation of the economy, when asked where the main importance should be given in the budget of the new financial year before the election, eminent economist and former financial advisor of the caretaker government AB Mirza Azizul Islam told Daily Industry that the main importance should be given in the budget on controlling inflation. Efforts should be made to control inflation. But inflation is largely due to the external world, it is quite difficult to control it through our internal measures.
He said, our reserve situation is getting worse. We need to send more skilled workers abroad to improve the reserves. How to increase the export income should be tried.
He also said that there has been a talk of gratuity of government officials. It’s only the government officials, what about the others who are affected? What gratuity will be given to those working or not working in the private sector? It’s a discriminatory policy, so I don’t support it.
The economist said, International Monetary Fund (IMF) has said and I have been saying for a long time that our revenue collection is proportionally half of Nepal’s. Whereas Nepal’s per capita income is much lower than ours. So, revenue collection should be increased.
Inflationary pressure on one side, election year budget on the other. Overall, how should the budget for the fiscal year 2023-24 be? In response to such questions, the executive director of the Policy Research Institute (PRI) economist Dr. Ahsan H. Mansoor said, this year is a year of crisis. We have not been able to manage the crisis that started last year. The crisis has not spread like wildfire, but it is burning, but not extinguished or gone.
“In this context, what we see is that the growth will not be that high this year. Imports have been greatly reduced. Imports will remain low, unlikely to increase. Remittances are not increasing, export earnings are also going down. Overall, the macroeconomic environment is very complex from a budgetary perspective. In this context, the budget that is coming, it can be said that it will be moderate. The Prime Minister has also said that this year’s budget will be small in size,” said the prominent economist.
He said, even if the budget is small, there will be problems. Revenue targets may not be met and expenditure cuts may need to be made further. But elections are ahead, so it is difficult to cut costs. Spending cuts will not be very politically acceptable. This budget is in a difficult situation in all aspects.
The policies adopted by the government so far are not very confidence-inspiring. The dollar crisis is still ongoing. Inflation is above 9 percent and shows no signs of abating. Since the overall situation has not improved, this budget will also be difficult for the government. Power situation has not improved. Load shedding has also started in Dhaka. The problem of electricity and fuel continues.
Ahsan H. Mansoor said, to reduce the pressure of inflation, first the hardships should be a little more, then the results will be met. We do not yet have any such measures to reduce inflation. To reduce the inflationary pressure, the interest rate should be increased. Interest rates remain unchanged. It is being discussed after so long. Just talking will not do, action must be taken. The government and Bangladesh Bank still think inflation will come down, the dollar crisis will end. But that is not happening. Don’t hope, you have to work.
He said that one crore people are being given benefits under the social safety net. it’s ok One crore people should be given this facility in the next budget as well. But the distribution should be proper. That is, those who are poor should get it.
Prominent economist Dr. Zayed Bakht also thinks that the new fiscal year’s budget should give more importance to inflation control. “The bottom line is we’re under inflationary pressure and it’s not going away anytime soon,” he said. So, government expenditure should be kept under control. The expenses which will be towards production should be given importance. So that inflationary pressure can be kept bearable.
He said, this is the election year budget. Therefore, the existing social safety net programs should be strengthened. They are already needed. And more is needed in an election year.
Our tax-GDP ratio is very low. The government also wants to increase it. But it was not possible earlier due to various reasons. Now there is pressure especially from international organizations. Moreover, in the current state of the world economy, it will be difficult for us if we do not increase our revenue.
This economist said that this year’s budget deficit should not be too high. Our budget deficit has always remained within 5 percent of GDP, and there is no reason to cross it in the future.
Regarding the gratuity of government officials, he said, there has been inflation, the cost of living has increased. Now it is difficult to make a new pay-commission. That is why benefits like gratuity are given in these cases. Maybe the government can do that this time too.
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