Economists at a discussion on Thursday called for a unified policy to control inflation and sustain economic growth. They described the proposed budget for 2024-25 (FY25) as well-intentioned but lacking clear direction.
There was skepticism about the government's goal of increasing private sector investments to 27.3% of GDP from the current 23%, given the challenging economic conditions.
Experts were speaking at a "Discussion on Proposed Budget for FY2024-2025," organized by The Research and Policy Integration for Development (RAPID) at the National Press Club.
Dr MA Razzaque, Chairman of Rapid, presented the keynote, highlighting that in the first 11 months of FY24, the average inflation rate was 9.73%, with food inflation exceeding 10%.
Reducing inflation to the target of 6.5% would be difficult due to the potential further depreciation of the taka, continued import control measures, and the overall current macroeconomic situation. Achieving the high growth rate target of 6.75% for FY25 with the current inflation rate of 10% also appears unlikely.
Dr Razzaque criticized the target of raising private investment to 27.3% of GDP, calling it unrealistic given the current average bank lending rates of 14.5%.
He questioned the feasibility of increasing investment by four percentage points in a single year. The keynote also noted that foreign reserves had declined to $18.7 billion and would likely be lower when measured by the net international reserve (NIR) metric.
The revenue collection target of Tk 4.8 trillion for the National Board of Revenue (NBR) requires a 37% growth, which is highly ambitious. Additionally, despite high inflation, the allocation for the Open Market Sale (OMS) program has been reduced by 63.5%.
Concerns were raised about the financial sector, particularly rising non-performing loan (NPL) ratios and suboptimal operational efficiency, with no clear budgetary measures to address these issues.
Prime Minister's Economic Advisor, Moshuiur Rahman, highlighted the uneven nature of inflation across sectors and stressed the importance of food security.
He advocated for lower or no taxes on unprocessed food to keep prices affordable. He mentioned that the budget focused on macroeconomic stability, loan management, and mid-term fiscal planning.
BIDS Director General Binayak Sen noted that the government has adopted policies based on global and internal conditions, including an exchange rate review, withdrawal of interest rate controls, and fiscal expenditure adjustments. He expressed disappointment with the universal pension scheme, citing issues from both the demand and supply sides.
Shams Mahmud, director of the BGMEA, emphasized the garment sector's crucial role in the economy. He noted that while the sector has received incentives and performed well in exports, broader macroeconomic stability remains a concern. He also pointed out that fewer importers now handle commodity imports, potentially contributing to higher prices.
Dr M Abu Yousuf, executive director of Rapid, stressed the need to expand the tax net and take LDC graduation seriously to avoid macroeconomic weaknesses.
He suggested that the NBR collaborate with city corporations to identify 10 million new taxpayers. He also noted that restrictive monetary policies hinder investment, which is vital for sustainable development.
A balanced approach is needed to manage inflation and stimulate economic activity.
DCCI President Ashraf Ahmed criticized the approach of reducing inflation by raising interest rates, arguing that it restricts money flow and hampers desired investments, potentially leading to a recession. He echoed Dr Yousuf's call for expanding the tax net instead of increasing taxes on existing taxpayers.
