AMID growing income inequality, high unemployment rates and unprecedented food inflation, economists have rightly pointed out that the budget for the next financial year should prioritise the economic woes of the ordinary people. Economists in a pre-budget meeting with the finance adviser on March 16 urged the government to create an enabling investment environment to boost growth in the job market. The policy emphasis on job creation is more than justified given that the unemployment rate, according to the Bangladesh Bureau of Statistics, rose to 4.49 per cent in the July-September quarter of 2024 from 4.07 per cent a year earlier. Recently, a sharp increase in high-value accounts has also been reported, suggesting a concentration of wealth and a lack of investment opportunity. In July-December 2024, private sector credit flow saw a steady decline, indicating a stagnant business environment, which is concerning when the private sector employs about 90 per cent of the workforce. The government should therefore work towards creating an enabling investment environment to facilitate growth in the job market.
Economists have also asked the government to take measures for the expansion of the direct tax, reducing dependency on indirect tax to give people already suffering from the unprecedented inflation some relief. The heavy reliance on indirect taxes, such as VAT and customs duty, makes the current tax structure regressive and less effective in drawing income from higher-income individuals and businesses. In the past, the budgetary allocation for social safety net programmes has been insignificant. According to a recent World Bank report, Bangladesh spends 2 per cent of its gross domestic product on social protection, which includes social assistance, public service pensions and subsidies. With pension and other forms of social assistance being excluded, the amount that vulnerable people receive would be 1.5鈥�1.7 per cent of the gross domestic product. It is widely reported how most of the social assistance programmes have limited coverage and do not often reach the target population. In this context, economists have urged the government to revisit the loopholes in the social safety net programmes so the past abuses of power and corruption are eliminated from the process and the benefits of such programs reach their intended population.
As the interim government is preparing the national budget for the upcoming financial year, it should consider bridging the income inequality as its priority policy goal and ensure that budget serves the interest of the people. In doing so, it must work towards creating an enabling investment environment to facilitate growth in the job market and reform its tax regime, which is largely dependent on indirect tax. The expansion of social safety net programmes also deserves equal policy attention.