During a virtual meeting on budget revisions and projections for the next budget, the government has proposed to lower the GDP growth target for this fiscal year to 6.5% from 7.5%
However, they are planning to keep the gross domestic product (GDP) target at 7.5% for FY23-24.
The target of inflation may increase by 190 basis points to 7.5% in one blow and simultaneously the size of the next fiscal year budget may increase by Tk72,000 crore.
This was proposed in the first coordination meeting on the fiscal, monetary and exchange rates for the current financial year by the Finance Ministry on Tuesday.
According to sources, the projections made are not final yet.
However, as per Bangladesh Bank Order 1972, this meeting is held in the middle of every fiscal year.
In a report by the World Bank (WB) last October, Bangladesh's GDP growth for the current fiscal year was predicted to be 6.1%. The World Bank also estimated the GDP growth rate for the next 2023-24 financial year at 6.2%.
On the other hand, in its latest World Economic Outlook report, the International Monetary Fund (IMF) predicted Bangladesh's growth forecast to be 6% for the 2022-2023 fiscal year.
Estimates by the Asian Development Bank (ADB) are consistently slightly higher than those of the WB and IMF, which are closer to government targets.
According to ADB, the GDP growth rate in Bangladesh will be 6.6% in FY23.
It is known that it has been decided to make a budget of 7.50 lakh crore for FY24.
That means the size of the next budget will be Tk72,000 crore more than Tk6.78 lakh crore, which was set for the current FY23.
On the other hand, the budget for FY23 was made in June. At that time the government set a 5.6% Inflation target in the budget. But we have seen Inflation rose to 9.52% in August after exceeding this target after two months.
It fell to 9.10% in September, 8.91% in October and inflation was 8.85% in November.
Considering that the trend is downward, the inflation target in the next fiscal year's budget is projected to be set at 7.5%, which is about 190 basis points higher than the current fiscal year's target.
Economists weigh in
AB Mirza Azizul Islam, economist and former financial adviser to the caretaker government, told Dhaka Tribune: “An inflation target of 7.5% seems reasonable. However, the GDP growth target of 7.5% is unrealistic while there is no plan to increase revenue.”
Giving an example, he added: “Employment is related to growth. It was seen that we have increased the growth, but people are suffering from a lack of work and employment. There is no point in misleading people by spreading unnecessary hopes by talking about high growth.”
Regarding the proposed lowering GDP target, Zahid Hussain, lead economist consultant of the World Bank said: “We do not know whether there has been any positive growth in half of the year. Various signs that have been seen in exports, imports, load shedding, dollar crisis and natural calamities in the first six months indicate that it will be very difficult to achieve the revised target as well.”
“7.5% indicates a strong economy. During the first six months, we have seen that businesses are not able to return the borrowed money. So, it seems that the actual figures do not match the government's estimates at all,” he added.
“Last year, the growth was 7.25%, which will come down this year due to various crises. By lowering the target, the crisis in the economy is somewhat acknowledged.”
“It will be difficult to overcome the deficit in the first half of the fiscal year to achieve big growth for the rest of the year. Because during the crisis, some counter-inflationary measures will be needed, and there are some such measures announced by the government. Such inflationary control measures hampered growth,” he explained.
Next year's budget, dollar crisis and inflation
Various aspects of the budget for the current and next financial year were discussed at the meeting.
According to meeting sources, the meeting decided that the revenue target for the next FY24 will not be increased. It will be the same as FY23.
In the budget of the current fiscal year, the revenue target has been set at Tk4.33 lakh crore. Out of this, NBR's target is Tk3.70 lakh crore and Tk63,000 crore will be collected from non-NBR taxation.
It is also known that the budget deficit will be 6% in the next financial year. The budget deficit for the current financial year was estimated at 5.5%.
In FY23, the budget deficit is calculated at Tk245,064 crore, which will be met through internal and foreign loans and grants.
Apart from this, the size of the annual development program (ADP) in the next financial year is estimated to be around Tk3 lakh crore.
According to sources, the meeting also discussed the condition of people under the pressure of high inflation. The dollar crisis and the unusual value of the dollar were discussed.
It has been informed that the government has taken several steps to reduce imports to control the situation.
The other discussed issues were the risk of revenue fall because of nominal import. Apart from this, the country is stuck in the same place in terms of remittance. Export growth is also not as expected.
Apart from fertilizer and electricity subsidies, the Trading Corporation of Bangladesh (TCB) also provides subsidies for the sale of oil and sugar at affordable prices throughout the year.
So the additional pressure of subsidy has added more tension. It was projected at the meeting that subsidies may be more than TK1 lakh crore in the next FY24.
