Economist Dr Selim Raihan believes the National Budget of Bangladesh for the fiscal year 2023-24 is being presented at a difficult time, when it will be a challenge to devise policies to manage inflation while also maintaining a stable macroeconomic situation,
Dr Selim Raihan is Professor at the Department of Economics, University of Dhaka, and the Executive Director of the South Asian Network on Economic Modeling (SANEM).
Talking with UNB on the upcoming budget, Dr Raihan pointed out two major challenges--controlling inflation and macroeconomic management for the upcoming budget.
“Higher inflation for a long time creates instability in the domestic markets and lower-income people are affected severely,” he said.
The government’s measures to cut inflation have not proved effective, so new measures to reduce inflation need to be included in the budget, he opined.
Dr Raihan said the monetary policy is not working to curb inflation as there is a mismatch with interest rates - the continued delay in withdrawing the interest rate caps also prolongs inflation.
Besides, a big challenge of domestic market management is that government agencies could not implement effective market management against monopoly businesses.
As a result, prices of many essential items are higher in the domestic market relative to the global market. Notably, prices of some items increase in Bangladesh at the same time that there is a downward trend in the international market, said Dr Raihan.
Regarding macroeconomic management, he said reducing the defaulted loans and achieving the revenue collection target are big factors for stability.
Forex reserves management and foreign exchange rate fluctuation also worked for instability of the macroeconomic situation, which are required to make it stable, he said.
The International Monetary Fund (IMF) gave conditions for reducing defaulted loans to a desired level, but the latest update revealed no headway in that regard, which Dr Raihan said was alarming.
The IMF’s desired target of increasing the tax GDP ratio by 0.5 percent each year, till the 2025-26 fiscal, is also proving a challenge for the National Board of Revenue.
The SANEM chief said although the revenue collection target increased every year in the budget, in the absence of any coherent plan and institutional capacity-building initiatives for NBR, there is almost no progress towards attaining those targets. In fact, the revenue collection shortfall keeps getting wider, he pointed out.
Dr Raihan suggested joint initiatives of Bangladesh Bank and the Ministry of Finance to reduce the defaulted loans, saying the central bank alone cannot handle the issue.
He also sought the central bank’s effective measures to ensure good governance in the banking sector, averting the pressure of any influential group.
Dr Raihan also suggested increasing allocation and coverage under the social safety net, to ease the woes of vulnerable groups.