Staff Reporter :
Economists at a discussion on Thursday emphasized the need for a harmonised policy approach to control inflation and maintain economic growth for a sustainable future.
The experts described the proposed budget for the financial year 2024-25 (FY’25) as “a budget full of good intentions but lacking clear directions.”
The discussion, organized by the Research and Policy Integration for Development (RAPID) at the National Press Club, highlighted skepticism about the government’s ambitious target of raising private sector investments from 23 percent to 27.3 percent of GDP amid challenging economic conditions.Dr. MA Razzaque, Chairman of RAPID, presented the keynote address, noting significant economic hurdles.
He pointed out that the average inflation rate for the first 11 months of FY24 was 9.73 percent, with food inflation exceeding 10 percent.
Dr. Razzaque emphasized the difficulty of reducing inflation to the target of 6.5 percent given potential further depreciation of the taka, continued import control measures, and the overall macroeconomic situation.
“With the current inflation level at 10 percent, achieving the high growth rate target of 6.75 percent for FY25 seems unlikely,” Dr. Razzaque stated. He also deemed the goal of increasing private investment to 27.3 percent of GDP, amid an average bank lending rate of 14.5 percent, as unrealistic. “Can we realistically expect to raise the investment by 4.0 percentage points in just a year?” he questioned.
The keynote highlighted the decline in foreign reserves to $18.7 billion (as per BPM6 standards), with expectations of a further decrease when measured by the net international reserve (NIR) metric.
Additionally, a challenging revenue collection target of Tk 4.8 trillion for the National Board of Revenue (NBR) has been set, necessitating a 37 percent growth in revenue collection.
Despite high inflation, the allocation for the Open Market Sale (OMS) program has been cut by 63.5 percent, raising concerns about the support for low-income groups amidst rising living costs.
However experts have raised alarms over rising non-performing loan (NPL) ratios and suboptimal operational efficiency in the financial sector. These critical issues were notably absent from the budget’s directives.
Prime Minister’s Economic Affairs Advisor Moshuiur Rahman emphasized the uneven nature of inflation across different sectors and the critical importance of food security. He advocated for lower or no taxes on unprocessed food to keep prices affordable for the population.
Rahman noted that the budget primarily focuses on three areas: macroeconomic stability, loan management, and mid-term fiscal planning.
Binayak Sen, Director General of the Bangladesh Institute of Development Studies (BIDS), remarked that the government has adopted a policy of adjustment in response to both global and internal conditions.
He highlighted several corrective steps taken, including a review of the exchange rate, the withdrawal of interest rate controls, and adjustments in fiscal expenditure.
Despite these measures, Sen expressed disappointment with the universal pension scheme, citing issues from both demand and supply perspectives and urging the government to reconsider its approach.
Shams Mahmud, Director of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), underscored the garment sector’s critical role in the economy.
While acknowledging the sector’s performance and the incentives it has received, Mahmud expressed concerns about broader macroeconomic stability.
He also pointed out the concentration of commodity imports among seven to eight major importers in Chattogram’s Khatungonj, a shift from the hundreds of traders previously engaged in this activity.
“So we should find out the problem with the newer system of imports, whether it is causing higher prices or not,” Mahmud added.