The proposed budget is not time-befitting in the context of the ongoing global and domestic economic crises, economists said, warning that it would fuel inflation further while forex reserves will feel increased pressure due to wider deficit.
They were also sceptical about the capability to achieve the 7.5-percent economic-growth target set for the upcoming fiscal year (FY 2023-24).
Dr Debapriya Bhattacharya, a Distinguished Fellow at the Centre for Policy Dialogue (CPD), in an instant reaction said this budget failed to reflect the ongoing economic challenges.
From that perspective, he said, the issue of stabilising the economy and bringing the inflation under control did not get due importance in the budget placed in parliament on Thursday.
The budget did not come up with any integrated pathway to achieving the inflation target but talked in a very desperate manner about austerity measures, control of imports, providing support to production, agriculture promotion, and using the monetary-policy tools like the Repo and Reverse Repo rates as well as relaxing the interest rate.
“It really does not bring together any convincing framework and pathway. This is one of the major problems of the proposed budget,” he said.
Dr Bhattacharya said the other problem is, of course, the issue of the fiscal framework which is based on very “illogical assumptions” and guided by “very optimistic projections” that is very far from the global and domestic realties.
For example, it talks that the private investment next year will be 27 per cent of GDP – something which “never in life we had”. “I find it was neither very professional nor adequately thought through the whole thing.”
This is a pre-election budget but unfortunately “does not create any enthusiasm” for that, he said, adding: “In fact it does not show any new measures to energise the voters rather it proposes very unreasonable Tk 2,000 tax even for those who are not within the taxable income (group).”
Dr Zahid Hussain, former lead economist of the World Bank’s Dhaka office, said people always expect that the budget will be time-befitting, “but this one is not that type in any way.”
In the present macroeconomic situation of the country, he said, people expect the government will lower inflation and lessen dollar crises through budgetary measures.
“But the expansionary budget with high deficit ultimately will further deepen the two problems. In this macroeconomic situation, such a large budget cannot be prepared,” he added.
Mr Hussain forecasts inflation will increase further in the next fiscal year due to the budget deficit as well as the strategies taken to enhance revenue collection. “The technique is hugely inflationary because the revenue will mostly come from the indirect tax.”
He said that the government has proposed higher taxes on various essential items like mobile phones, dates and kitchenware, and there is a big list whose price will go up thus inflation will rise. “On the other hand, the list of tax cuts is very small.”
Mr Hussain said the government needs to enhance revenue collection by 19 per cent to meet the IMF’s requirement, but in the proposed budget a target of 29-percent hike is set.
“The budget deficit will mostly finance imports thus an additional pressure on the dollar market will be created from the government’s side,” he noted.
Mustafa Kamal Mujeri, Executive Director at the Institute for Inclusive Finance and Development (InM), said both the real sector and financial sector of the economy are under severe pressure now.
He said the economic-growth target set for the next FY would not be achieved unless the present global and domestic situations are favourably changed and qualitative changes take place in the government policies.
Also, he underscored the need for raising both private-and public-sector investments to support the growth. “We could not achieve our revenue target so far this year and I am sceptical about what will happen next year.”
Dr. Habibur Rahman, chief economist at the Bangladesh Bank, said the proposed budget is a ‘constrained’ one considering the local and global economic situation.
“In the past, there was over 20-percent surge in sector-wise allocations but this time a 15-percent rise was observed on average,” he added.
However, he said the banking sector may face troubles if the government fails to borrow the amount it targeted from the external sources.
He noted that the government seems to lower its dependency on borrowing from the national savings certificates.
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