‘4 challenges may destabilise macroeconomic stability’

Staff Reporter  :
The government will have to be more pragmatic in addressing four major economic challenges in implementing the proposed budget and any failure to address them properly may destabilize macroeconomic stability, experts said.

The challenges are restoration of macroeconomic stability, revenue mobilization, prudent financing of the budget deficit and protecting social sector spending, they said.

They, however, said that despite Russia-Ukraine War, high inflation, rising commodity prices, dollar crisis, slowdown in business investment and employment because of Covid-19 pandemic, and other global uncertainties, the government has taken a challenge of implementing development budget of Tk 277,582 crore which is very encouraging to move forward for a fast developing country like ours.

But, several rules, incorporated in the proposed income tax law, are rich-friendly, they observed.
They further said no necessary changes have been made in the budget to deal with the current abnormal situation of the economy.
The significant fall in reserve is deemed as a matter of serious concern for the economy, which is facing difficulties to meet the NIR (net international reserve) target of $24.46 billion within June, as set by the International Monetary Fund (IMF).

As of April 27, the country’s foreign currency reserve was over $31.06 billion, the Bangladesh Bank (BB) data showed.

Experts said the downward trend in the foreign currency reserve continues because of low export and remittance earnings compared to import payment.

Besides, the high revenue collection target has been set in the proposed budget, which is unrealistic. The government has set a target of Tk 430,000 crore for the NBR in the proposed budget.

The National Board of Revenue (NBR) has collected Tk 280,776 crore posting 11 per cent year-on-year growth in July May period of the current fiscal year against the annual target of Tk 370,000 crore.

It means the revenue board will have to collect around Tk 89,000 crore in June, which is impossible.

Farid Uddin, former member of the NBR, said, “Bangladesh’s economy will have to face an unusual situation due to the ongoing foreign currency reserve-crisis, dollar-crisis and inflation. The government should have taken the issues into consideration in preparing the proposed budget.”

“But, we have not seen any basic changes in customs and VAT in the budget. As a result, the revenue collection is unlikely to reach the expected level in the coming year,” he added.

Experts believe that this big jump in revenue collection in a span of one year is not possible without major reforms in the revenue sector.
On the other hand, the inflation rate in the country remained unchanged at 9.94 percent in May, according to the Bangladesh Bureau of Statistics.