Research and Policy Integration for Development, a private think tank, has identified lack of proper policy direction in the proposed budget for the 2024-25 financial year against the government鈥檚 intent to address macroeconomic challenges.
鈥楾he policy intent in the budget speech is clear in identifying the challenges, particularly in emphasising the need for containing inflation, but policy directions for dealing with those are not well specified,鈥� RAPID chairman MA Razzaque said on Thursday while presenting an analysis at a discussion on the proposed budget.
RAPID organised the discussion on the proposed budget at the National Press Club in the capital Dhaka.
Razzaque said that the proposed budget emphasised the need for containing inflation and acknowledged Bangladesh鈥檚 strong GDP growth, but addressing macroeconomic challenges through increased public spending presented a dilemma.
In his presentation, the economist stated that the proposed budget expected the inflation rate to slow down to 6.5 per cent, but expressed concerns that aiming for a high growth rate for FY25 at 6.75 per cent could actually fuel inflation.
He said that the target of reducing the inflation to 6.5 per cent from current 10 per cent would be a challenging one considering the possibilities of further taka depreciation, continued import control measures and the overall current macroeconomic situation.
The analysis showed that the deprecation of the taka threatened Bangladesh鈥檚 2031 upper middle-income target.
It showed that 6 per cent GDP growth, 5.4 per cent inflation rate and no further depreciation of the taka would be required for Bangladesh to become the upper middle-income country in 2031.
Razzaque mentioned that the private investment-GDP target of 27.3 per cent, given the current average bank lending rate of 14.5 percent, would be considered unrealistic by many.
He said that Bangladesh was facing three major challenges, including sluggish export growth, growing financial account deficit and decreased remittance inflows.
Amid the economic slowdown it was not realistic to set 37 per cent growth in revenue earnings in the proposed budget, Razzaque said.
The economist recommended relaxing import of basic necessities, including food grains and other essential items, to contain the rising prices and tackling any market manipulations that raise prices.
Mashiur Rahman, economic affairs adviser to the prime minister, said that the duty burden should be eased on the imports of unprocessed food stuff to check inflation.
He advocated for subsidy on agriculture, saying that increased productivity could be the logic for providing the subsidy.
Regarding LDC graduation, Mashiur said that there should be a target to sign trade agreements with the major business partners.
He also emphasised the need for enhancing efficiency of tax officials in collecting increased amount of revenue.
Mashiur said that if the collection of fine was higher than the collection of taxes, it indicated the inefficiency of tax officials.
He also stressed the need for formulating policies with the combination of knowledge and experiences to cope up with the changed global scenarios.
BGMEA director Shams Mahmud said that there was nothing to be very optimistic about the proposed budget.
Still readymade garment and textile are the main export items for Bangladesh, but the issues of the sector are not addressed in the proposed budget, he said.
Shams said that the European Union was the largest market for Bangladesh鈥檚 apparel and some of the policy measures were needed to comply with the EU green deal, but it remained completely absent in the budget proposals.
The business leader also said that after the graduation of Bangladesh, double stage transformation would be required for the RMG to get the GSP plus in the EU market, he said.
To comply with the double stage transformation criteria, Bangladesh would have to strengthen its textile base, but it would not be possible due to the severe shortage of gas, Shams said.
He urged the government to formulate policies based on realities, saying that otherwise no one would be interested to invest in the country.
Bangladesh Institute of Development Studies director general Binayak Sen underscored the need for reducing public sector borrowing from banks, saying that otherwise private sector investment would be hammered.
He said that Bangladesh was going to be a manufacturing nation and private sector investment was very important for that.
Binayak urged the government to provide subsidised food items for the workers in the industrial zones under the operation of the trading corporation of Bangladesh.
He also proposed withdrawing duty on the import of essential commodities to check food inflation.
Binayak termed the proposed budget industry friendly.
Dhaka Chamber of Commerce and Industry president Ashraf Ahmed said that without inflation it would not be possible to attain high growth.
鈥業f we try to tighten inflation more, the economy will face recession,鈥� he said.
RAPID executive director M Abu Eusuf moderated the event.
