Not people-friendly nor business-friendly

Budget 2024-25

Salehuddin Ahmed: A budget is not merely an account of income and expenditure of the government. The quality of life of the country and the people is also determined through the budget. Budget plays an important role in the development of the overall economic, social and political situation of the country. We have already risen to the ranks of lower-middle income and developing countries. Many countries of the world have already reached this level but are in a kind of trap. Keeping these things in mind, it can be said that this year’s budget is not business-friendly, nor is it people-friendly.

Currently, the economy of Bangladesh is facing many challenges. Issues like high inflation, decline in foreign exchange reserves and dollar crisis were not directly discussed in the budget; Some words have come indirectly. Along with this is the troubled banking sector, corruption, money laundering, various wastages in government projects, capital market conditions etc. These financial problems affect business. But I do not see any special aspects or anything new in the budget. Only a few areas of the previous budget have been markedly changed. That being said, a contractionary budget. But the budget deficit does not seem contractionary.
The government has increased its reliance on bank loans to meet the deficit. This can reduce the debt in the private sector. And if the private sector does not receive loans, how will there be employment? Small and medium industry sector will be the most affected in this situation. Inflation is still rising. This is not only about Bangladesh Bank. We are all connected to it. The measures taken may reduce inflation to some extent. However, it does not seem to fall below 6 and a half percent. Because even though the budget says to increase the production, it does not seem to increase much. Apart from that, there is no action to rein in market syndicates. As private investment is hampered, it will not be possible to ensure the supply of goods.
Currently, the banking sector is going through a turbulent phase. The amount of defaulted loans in the country is increasing day by day. Banks are not able to provide proper facilities to customers. If the financial sector does not stand up properly then there will be a major negative impact on the business very soon. If the impact on business, the government will collect taxes from whom? How to take VAT money? If the small and medium traders do not get money, then the economy of the country will be worse. But big traders will get loans due to connections, it will not solve the crisis.
The issue of employment also comes up. Thousands of people are unemployed in the country. This number is increasing every year. On the other hand, there is a large professional class in the country. Their income is not increasing, but the expenditure is increasing day by day. Commodity prices are on the upward trend. The government is struggling to solve this crisis of market management. Budgetary weaknesses will impact the market. So, the commodity price cannot be properly controlled, the syndicate cannot be stopped. So, this year’s budget will not bring benefits in market management.
We are becoming indebted day by day. The debt in the country is increasing, its interest is also increasing. Apart from this, the foreign debt is increasing at a large rate. Must be able to repay loan and interest. Our reserves are running low. So, what to pay the debt? Already the government is sitting on a huge amount of foreign debt. In the last 10 years, our foreign debt has increased by almost 70 percent. The government’s foreign debt repayment amount may increase by 63 percent this year as compared to the last financial year. In the first 11 months of the current fiscal year, the interest and principal cost of the loan has exceeded $3 billion. During July-May of the financial year 2023-24, the government has to repay the debt of $306.81 crore with interest. During the same period of the previous financial year, $246 crore had to be repaid with interest. That is, compared to last year, $60 crore more has been paid. There is a risk of increasing pressure on the country’s treasury.
Short term and medium-term loans are coming due. For example – nuclear power sector. This year the repayment period will begin. Metrorail’s debt repayment will begin in 2025-26. There will be about $4.2 billion. How will the government give it? If the government does not take strict measures, it will fall into trouble.
The decision taken by the government regarding black money is encouraging to them. Where black money is supposed to be stopped, such a decision is disappointing. 15 percent tax can legalize black money. This year’s budget includes several such decisions of the government, which will not bring benefits to the economy; Rather, it will make it more complicated.
Apart from this, the burden of various taxes is increasing. Increasing reliance on direct taxes was essential. In that case there is no option to increase the scope of tax. Where inflation is rising, reliance on VAT is not a positive thing.
Bangladesh Bank has to be strong. One policy in the morning and another in the afternoon is not allowed. Bangladesh Bank has considerable autonomy. But you have to know how to use it. Nowhere in the world is such a tendency to change decisions so frequently and to issue so many circulars.
All in all, the expectations I had about the budget were not fulfilled this time either. The issues on which the government should have taken a strong stand, have not been seen in this budget.
Dr. Salehuddin Ahmed: Former Governor of Bangladesh Bank