This budget is not based on IMF prescriptions and it is implementable in Bangladesh’s current economic fundamentals, Finance Minister AHM Mustafa Kamal said Friday while defending its full course of fiscal measures.
He admits that the government accepts those suggestions of the International Monetary Fund which are necessary for the country.
“I don’t see any problem [about conditionalities] as the IMF advises us for better project management, and it is beneficial,” Mr. Kamal said while replying volleys of questions from media people at a post-budget press conference held in Dhaka’s Bangabandhu International Conference Centre.
The programme had a pause for around 20 minutes following sound-system faults.
The government placed in parliament on Thursday the budget of Tk 7.62 trillion with an estimated aggregate revenue-earning target at Tk 5.0 trillion. The arithmetic leaves a deficit of Tk 2.62 trillion, which has to be managed by borrowing from home and abroad.
The IMF checks balance sheet, trial balance and so on. “We solve such problems [suggestions/prescription] through flexible way,” the finance minister mentioned, ditching scepticism.
“We are all aligned whether it’s import or export, we will always need someone.”
He considers this interdependence a positive aspect, as it not only provides financial assistance but also offers valuable suggestions.
Local think-tank Centre for Policy Dialogue (CPD), at a press briefing the same day, said the shadow of the IMF conditionalities is visible, although not explicitly mentioned in the budget speech or other documents for FY24.
It said one of the reform suggestions of the IMF was the adoption of a periodic formula-based price-adjustment mechanism for petroleum products within December 2023.
A roadmap is being formulated to establish a permanent system of formula-based price adjustment in the energy sector and it will be finalized by September, the minister said in his budget speech.
The IMF, which approved a $4.7-billion loan for Bangladesh in January, suggested that the government reduce subsidies to lessen pressure on its resources.
The finance minister said the target of resource mobilisation in the fiscal year (FY) 2023-24 is achievable as the present government had started off with a revenue collection of Tk 590 billion which stood at Tk 2.95 trillion last year.
However, the ministers who attended the press briefing and the Bangladesh Bank Governor blamed international price hikes for the ongoing inflation in Bangladesh.
The finance minister said he himself worried over the higher inflation in the world, adding that the prices of oil and other commodities are falling in recent times.
“We’ve estimated inflation for FY 2024 at 6.0 per cent as the prices of many commodities in the international market are falling.”
Minister for Local Government, Rural Development and Cooperatives Md. Tazul Islam, who attended the function, said the government would take all steps to contain the inflationary pressures.
Commerce Minister Mr. Tipu Munshi said the government has been providing necessary food to 10 million people.
About price rises the commerce minister said the global prices of necessary commodities remained high, adding that this will not be solved overnight.
Agriculture Minister Mohammad Abdur Razzaque said that inflation remained high in all economies. “Turkey is a big economy that has a 78-percent inflation rate and this is due to the world market,” the agricultural minister added.
Bangladesh Bank Governor Abdur Rouf Talukder said the next monetary-policy statement to be issued on June 18 will intervene in the market to reduce the demand side as part of keeping inflation tolerable.
The central bank governor also said the inflation in Bangladesh has originated following price hikes of essentials on the international market.
The governor, however, refuted that government borrowing from the central bank will not create inflationary pressure on the economy.
Mr. Talukder hopes that after the amendment of the bank company act in parliament this year the governance issue of the banking industry will be strengthened.
He said the central bank sold dollars worth $20.0 billion on the local market [as a result of forex-market volatility] and this led to a liquidity shortage in the banking sector.
The governor finds the financial account of the balance of payments as a matter of concern as it first time after 14 years entered into the deficit domain.
He says when the financial account will become positive then the foreign-exchange reserves will start to increase
On corporate tax, the finance minister said the corporate tax would be reduced gradually at a time when it will be necessitated.
Chairman of the National Board of Revenue (NBR) Abu Hena Md Rahmatul Muneem said that the government had reduced the corporate tax three years in a row.
“Our tax-GDP ratio is very low. So, in the interest of revenue mobilisation, this [unchanged corporate tax] should be accepted.”
On a mandatory minimum of Tk 2000 for return filing, the NBR chairman argues that this is for the rich people—those who have trade licences, commission agents, and have houses in the city areas need TIN.
“To my mind, minimum Tk 2000 should be considered a matter of pride as they are going to be partner of development.”
Industries Minister Nurul Majid Mahmud Humayun, Education Minister Dr Dipu Moni, Planning Minister Abdul Mannan, State Minister for Planning Dr Shamsul Alam, and Finance Secretary Ms. Fatima Yasmin also spoke, among others, in the press briefing.
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