Dual economy drives inequalities beyond limits

Economists Sunday deplored gaping economic disparity that they likened to the one in the pre-liberation era and urged the government to take appropriate policies to steer a reverse course to lessen inequalities.
They came up with the observations at a pre-budget seminar titled 'Macroeconomic Stability and Next Budget', organised by the Economic Reporters' Forum at its office in the capital.
"Those 3.0 million people who lost their lives in the liberation war under the leadership of Bangabandhu expected that their past should not be our future," said Professor Mustafizur Rahman, a distinguished fellow of the Centre for Policy Dialogue (CPD).
"That past was of exploitation, that past was of dual economies," he said, adding, "Now I am seeing similar dual economies in Bangladesh as well."
Mr Rahman notes that the inequality is rising and it has been creating tensions instead of inclusive development.
If one needs to point out five main challenges of this country-four will be found in education sector. As such, the unemployment rate is so high.
Citing an example he said the rate of unemployment among the National University graduates is 25 per cent. "It is unfortunate and if we cannot utilise our assets, how we can attain growth?"
We expect in the next budget, we should check where we can use our tax expenditure more effectively."
Mr Rahman said had the exchange rate been set properly, the interest -rate cap not given, and skills in public -sector institutions increased, the government might not have faced the present problem.
He noted only less then two years back, there was a stable economy in this country where there was high growth and low inflation. Now the country turned unstable, growth slowed, and inflation reached a double-digit peak.
"In the future, this fragile economic situation will be taught in textbooks on how a good economy turned a risky economy in a couple of years," he noted.
Mr Rahman asked why this happened. "If you look towards the fiscal budget of 2022-23, you will see, the Ukraine-Russia war began in February 2022, oil price went up twice or more then-was it very tough to forecast?"
That budget targeted 7.5-percent growth, did not consider problems in balance of payments, inflation target was set at a lower level, and the interest rates in banks were set in an unrealistic way. He said the government did not take corrective steps while preparing the budget for fiscal year 2022-23. "We are now suffering due to that wrong decision."
Mr Rahman said ahead of preparing 2024-25 fiscal budget, people expect that the budget should be prepared taking into consideration the realities. "We should not deny the realities."
He feels the minimum threshold of tax -free income needs to be increased to lessen inflationary pressure on people. During the Covid period, he said, the higher slab of income tax, 30 per cent, was lessened to 25 per cent.
The Covid is now long over but why the high tax slab not reinstated again, he questioned. He pointed out low direct tax and high indirect tax as some of the reasons of high inequality rates in this county.
"You have to collect higher tax from high-income group of people and spend them for education and health which is the way for wealth redistribution," Mr Rahman noted.
"The lower collection of direct tax is causing various inequalities-income inequalities, wealth inequalities," he said, asking about the share of inheritance tax and property tax.
Mr Rahman also suggests that digitisation of tax collection is a must which can help lessen corruption. He questioned the non-digitisation of tax collection and which vested groups are beneficiary of it.
Former finance secretary Mahbub Ahmed said introduction of 6-9-percent interest rate in banking sector was not logical by any means. "A positive impact is visible on the economy after the cap on interest rate was lifted."
He said during the last fifty years , growth was given high importance instead of distribution of resources. "That has created inequality and instability and the country's economy is paying the prices."
Mr Ahmed raised question whether inequality would continue to rise. "We need to consider it giving utmost importance."
Anwar-ul Alam Chowdhury (Parvez), president, Bangladesh Chamber of Industries, said due to the energy -price hike the industry lost competitiveness and non-performing loans increased in banks.
He said during the last six months at least 40,000 workers lost their jobs as factories were not running to full capacities.
Mr Parvez demanded continuation of incentives for the export-oriented industries even after the graduation from the poor-country club.
Shams Mahmud, director, Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said the competitiveness of export -oriented industry is lessening and challenges are rising, which will further heighten after LDC graduation. He demanded actions against those bank directors who contributed to the weakening of financial health of banks.
Speaking as chief guest state minister for finance Waseqa Ayesha Khan said the problem relating to the inflation is now global one and not alone for Bangladesh.
She said the technical education needs to be increased further for employment generation and to improve the quality of life of people.
Ms Khan said, "Budget will definitely be prepared taking into consideration the realistic scenario of the economy."

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