Economists on Saturday suggested increasing the social safety net in the upcoming national budget for fiscal year 2022-23, as it will become very difficult for the government to control inflation due to various global and domestic reasons.
They also advised keeping effective guidelines to ensure proper use of the money allocated in this sector.
These recommendations came from a pre-budget discussion titled “Macroeconomic Uncertainties and Budget Priorities for Bangladesh” organized by Policy Research Institute (PRI) and Ekattor Television.
Ahsan H Mansur, executive director of the PRI, and moderator of the discussion, said: “We want a fair and balanced budget to be formulated, keeping in view the current context, especially inflation and foreign exchange reserves. Although I disagree with calling it a crisis, there is instability in the market."
"I hope in the upcoming budget there will be a clear direction to overcome this. There is no substitute for thinking about improving the quality of life of the marginalized and middle-class people to fix macro stability," he also said.
AB Mirza Azizul Islam, economist and former financial adviser to the caretaker government, said: "Inflation has increased a lot in our country. However, it is also the case in different countries of the world and also in the countries around us. And when inflation rises, contractionary policies are not possible for the government."
Asked what the government could do in this situation, the economist said that the government has to plan a way that more people can be brought under the social safety net.
It can be done by creating new sectors and giving extra allocation to the existing sectors such as freedom fighters, old age and the very poor, so that the present situation becomes tolerable for them, he also said.
Asked about the current decisions taken by the Bangladesh Bank and the government towards the dollar rate instability in the economy, Dr Zahid Hussain, former lead economist at the World Bank's Dhaka office, said that the country was currently in a dilemma.
"On one hand, inflation is on the rise, and on the other hand, the exchange rate of the dollar is behaving erratically. However, I applaud the latest policy of the Bangladesh Bank regarding the dollar exchange rate. If the exchange rate is fixed, then the central bank has to release more dollars from the reserves to keep the market normal. This will deplete the reserves, especially when we have reserves to set the import bill of only 4.5 or 5 months approximately," he further commented.
"On the other hand, inflation is also rising in other countries. Many countries are short on dollars. Overall, import prices have also increased. I hope the budget will be expansionary even if it does not go for a contractionary policy. However, in doing so, one must think about the amount of deficit," Hussain also said.
The economist also advised the government to make accurate calculations about subsidies in the next budget.
"You have to make the right decision about subsidies, especially when inflation is rising. Suppose you subsidize vegetables. But you have to keep in mind that its prices do not affect other commodities. But if prices of diesel, gas or electricity go up, it will definitely affect different sectors,” he explained.
Syed Mahbubur Rahman, managing director and CEO of Mutual Trust Bank Limited (MTB), said that the Bangladesh Bank should look at all banks with the same vision.
"One day I went to Bangladesh Bank and did not get any dollars to buy. But now that the decision has been made about the free-floating rate (of the dollar), I think it is a good thing. Remittances will increase if the government continues this thinking even in the budget that is coming with the state of the dollar,” he also said.
Moreover, the banker thinks that remittances will increase even before the upcoming Eid-ul-Azha.
Selim Raihan, executive director of South Asian Network on Economic Modeling (Sanem), said: “Surprisingly, our budget is not growing in proportion to its true GDP. This time the proposed budget is probably 14%. But at one time the budget was 28% of our GDP."
"Moreover, we have seen spending cut by at least 20% over the proposed budget in the past. I think the size of the budget should be increased," he added.
Dr Ashikur Rahman, senior economist at PRI, said: "Of course, subsidies must be increased. Oil prices are now a cause of concern. We have to fix the subsidy in such a way that there is no pressure on the marginalized people for at least the next six months."