Budget recognises inflation, skips jobs

As in previous years, the proposed national budget for the next fiscal year has triggered exciting discussions among the various stakeholders. The pre-budget debate has now transformed into post-budget analyses. Some have started to criticise the proposed budget, which was put forth by the finance minister in the national parliament on Thursday, mainly focusing on its drawbacks and limitations. To them, there are not many good things in the annual public spending outlay of Tk 7970 billion for the next fiscal year (FY25). Some have already found a lot of good measures that will boost economic growth by over six per cent soon. To them, the budget has a few shortcomings, and one does not need to worry about it.
In between, there are third group of critics who find the budget as a mixed bag where both good and bad are mingled. To be specific, it is impossible to get a 'super budget' or 'worst budget' as the annual public spending itself has several structural limitations. It is an annual financial plan based on various assumptions, estimations and projections. With the expansion and diversification of economic activities, the budget size also expands and it needs to accommodate the demands from multiple stakeholders. To be more accurate, those who are responsible for budget making, the finance minister have to go through various challenges at the preparation and finalisation stage. Once the proposed budget gets endorsement from the parliament, the implementation becomes the core challenge until the next budget. So, it is a continuous process.
Nevertheless, budget analysis is both an exciting and hectic exercise. Economists and think tanks, business leaders and trade bodies, various professionals and relevant associations try to review the budget from multiple perspectives. The outcomes are several analyses, commentaries, notes, and briefs, along with suggestions to make changes in some areas before endorsing it in the parliament.
The proposed budget for FY25 holds significant weight as it is the maiden budget for the new finance minister Abul Hassan Mahmood Ali. It is also the first budget of the Awami League government in its fourth consecutive term in power since 2009. Over the past one and a half decades, the size of the national budget has increased by six times - from Tk 1.13 trillion in FY09 to Tk 7.97 trillion in FY25. This represents a modest increase in the annual budget in recent years, with the proposed national budget for the next fiscal year being increased by 4.73 per cent over the original outlay of the previous fiscal year. The finance minister also revised the budget for the outgoing fiscal year (FY24) by around 6.45 per cent to Tk 7.15 trillion.
Whatever the size, one relevant question is how people-friendly the proposed budget is or whether it is a populist budget. The reason behind the question is the prevailing socio-economic crisis in the country due to high inflation coupled with a lack of decent jobs. For the finance minister, there is no way to deny the persistently high inflation as official statistics bluntly show that the country has been struggling with high inflation for the last two years. General inflation in May increased to 9.89 per cent, mainly due to a rise in food prices. Food inflation stood at 10.76 per cent in last month, which was 10.22 percent in April.
The impact of inflation is not evenly distributed. Unlike many developed and developing countries, including the distressed Sri Lanka, which managed to contain inflationary pressure through effective policies, Bangladesh has yet to gain from the policy and institutional efforts to curb inflation. What is more worrisome is the disproportionately negative effect of inflation on the poor and low-income people. Their real purchasing power has eroded heavily, leading to a situation where people in Bangladesh are now spending more on food than in other richer countries due to the persistent rise in the prices of essential food items. For instance, the average annual expenditure on food eaten at home per person in 2022 was US$924 in Bangladesh, compared to US$882 in Brazil and US$874 in Colombia, both of which have a GDP per capita more than twice that of Bangladesh, according to the Centre for Policy Dialogue (CPD).
In his budget speech, the finance minister acknowledged that the inflation rate in the country 'remains stubborn at above 9 per cent' and added that to control inflation, various steps are being taken to make the monetary policy successful. He also expressed optimism that the inflation rate would come down to 6.5 per cent in the next fiscal year as an outcome of the policy strategies that the government has adopted. The target seems ambitious, and it may not be achieved.
Another crisis is the lack of decent jobs or jobs with decent wages. Though official statistics claim that the country has been witnessing a low rate of unemployment, the real world provides a different picture. The desperate effort among a large number of youth to go abroad by taking risk, including hard work conditions, indicates that the economy still needs to catch up to accommodate a big segment of job seekers. Moreover, the rise in informal jobs reflects that people are doing whatever they can for their livelihood. The growing number of street vendors and rickshaw pullers are some examples in this connection. Most of them are earning low wages and struggling against high inflation.
The finance minister seems complacent about the current employment situation. In his long speech, which had more than 40,000 words, he mentioned 'unemployment' only once, though he did not fail to mention the fourth Industrial Revolution (4IR). He, however, outlines a number of measures and initiatives to create employment at home and abroad. Some of those steps are continuation of previous years.
In sum, the finance minister has made some efforts to curb the fast-rising inflationary pressure, which is reflected in the proposed budget. However, it is uncertain to what extent his efforts will be effective and when people will get some respite from the high inflation. His less attention to the job situation may ultimately make his fight against inflation more difficult.
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