In the proposed budget for FY23, there is no proper direction for the people who have suddenly gone below the poverty line due to the economic crisis brought on by the pandemic and the ongoing skyrocketing inflation, according to experts.
The proposed budget didn't clarify how the growing demand for food, goods and services would be met to keep the country's macroeconomic stability during this ongoing inflation, reserve deficit and other world market crisis.
On Monday, the South Asian Network on Economic Modelling (Sanem), expressed their concern over the analysis of various data during its budget review reaction.
Sayema Haque Bidisha, research director of Sanem, presented the keynote paper and said: “The economy of Bangladesh is in the process of recovery from the dent made by Covid-19. The post-covid recovery has created supply-demand imbalances across the globe, leading to inflationary pressure. The Russia-Ukraine war has fueled global inflation and caused further disruption in the global supply chain.”
Regarding this, Sanem’s budget observations were that no specific direction is there for controlling the inflation rate. It is also not clear how demand will be restrained and both fiscal and monetary policies should work in tandem to contain inflation.
As well as, the import tax on some essential items has not been reduced and subsequent adjustments in energy prices can create inflationary pressure.
Sayema Haque said: “Some important ministries or divisions, such as health, education, social welfare, etc which directly contribute to the alleviation of poverty or improvement of the condition of the people, we have seen a slow pace of those in budget implementation. This is a big challenge again. Therefore, they are not getting as much benefit from the budget as the mass people are supposed to get.”
“So, we think there was a need to give more importance to a few sectors in the proposed budget,” she added.
Regarding the pace of the budget, Selim Raihan, executive director of the Sanem said: “This budget is big business-friendly. A corporate tax exemption has been given, which is applicable to big businesses. But in the last two years, the country's small and medium enterprises have been hit the hardest, and as they have not received much help in recovery, the tax exemption does not apply to them.”
Sanem’s presentation shows that while on one hand, the country is facing a shortage of foreign currency, inflation is also on the rise.
In April this year, when the country's reserves fell to $44.02 billion, the inflation rate rose to 6.29% but the budget proposal for FY23 shows that the government fixed the inflation rate at 5.6%.
Regarding the new poor Selim Raihan said: “Lack of information has always been a major problem. This became especially evident during Covid. At that time, the country's private research institutes conducted several surveys on poverty, but no such survey or research has been done by the government. Again, various questions are being raised about the survey of private research institutes.”
Selim Raihan suggested that the government, especially BIDS, may convene a conference with other research institutes and economists in the country where private research institutes can discuss their survey in detail.
He also added: “This year's budget is not as much about the basic structure of the budget as it is about repatriating money laundered abroad. It is immoral in every way. Sanem does not support this policy and questions should be raised as to why the money was laundered.”
The keynote presentation also informs that according to the government's eight Five-Year Plan, 2% of GDP will be allocated to the social security sector but this year, the actual allocation for the social security sector, excluding pensions, scholarships and interest, is about 1%. Even this time the allocation has been reduced compared to last year.
Regarding inequality, Saima Haque said: “There are no official statistics after 2016. According to the statistics of 2016, 36% of the total wealth of the country is accumulated in the hands of the top 10%. Inequality has increased in the Covid-19 pandemic period, although there are no official statistics in this regard.
In this context, she suggested tax reform to reduce inequality using progressive taxation.
