'No steps to lower inflationary pressure in the proposed budget'

Lowering the inflation rate to 6% would have benefited us all, particularly low-income households. But the reality is different.

Why have the policies and steps of the government failed to rein in the growing inflation rate over the last one year? To some extent, they were not even implemented.

The monetary policy failed to fix the interest rate timely.

While the fiscal policy required tariff and tax adjustment, internal market management failed in taking proper steps especially to fix the imperfections in the domestic market.

Only a portion of business groups cashed in on the delays while accessing huge amounts of loans at cheaper rates. Some of them may appear as defaulters someday. Multiple exchange rates also have hugely benefited a segmented group of businesses.

Despite the fall in international market prices, inflation was on the rise in Bangladesh whereas some Asian countries including India, Indonesia and Vietnam have successfully controlled inflation.

Ahead of the national elections, a 'people-centric' budget will need an inflation-restricting policy.

In the proposed budget, however, there are no steps to address the hurdles in the monetary and fiscal policy implementation and internal market management to make us hopeful about lowering or improving the inflationary pressure in the next six months.

Overall, some targets including GDP growth rate, private investment-GDP ratio and inflation rate seem unrealistic.

The proposed budget requires a 33% investment-GDP ratio and 27.5% private investment-GDP ratio to achieve 7.5% GDP growth. When the persisting private investment-GDP ratio is 21.5%, the target for GDP growth means the policymakers and the finance minister are expecting a dramatic change or a high jump in private investment in the upcoming fiscal.

I don't know where the investment will come from and whether our banks are prepared to arrange private sector financing or not when the government itself is planning to borrow a huge amount of funds from the banks.

Eventually, the size of the banking sector is not big and the capital market is very weak. Even if the government doesn't borrow a big amount from the banks and plans to finance the deficit budget from the central bank, the central bank will need to print currency to pay the government. It will again add fuel to the inflationary pressure.

The policymakers are trying to show a hope of increasing growth with huge investment and eventually, the inflation will fall soon. But there is no clear indication of improvement in the proposed budget.

How long will we blame the Russian-Ukraine War for our inflation? Prices of many products including petroleum have dropped in the international market. But we have not seen any reflection in the domestic market. This is a big mismatch.

Many people often compare the economy of Pakistan and Sri Lanka with Bangladesh. I disagree with this comparison. They are mostly failed states in terms of politics and economy. Bangladesh's economy can be compared to India, Indonesia and Vietnam. These countries with prudent policies allowed their bodies to adjust to the international market prices.

But in Bangladesh, a high market imperfection exists because the market players, profiting excessively, are non-accountable to the government. Until we make the market players accountable, domestic market management will not work properly here.

There are several regulatory bodies including the Competition Commission, Tariff Commission and the Directorate of National Consumer Rights Protection, but they are working with a shortage of manpower and inadequate budget.

We do not need multiple organisations when only a single one with adequate power, jurisdiction and liberty can solve many problems.

Lastly, even if the government fixes a unified interest rate and exchange rate, it will not bring results fortnightly.

Because there are accumulated problems. It will take time to solve. I fear a high inflation rate will persist till December of this year which is not good for our economy.

Selim Raihan is a professor of economics at Dhaka University, and the executive director of the South Asian Network on Economic Modeling (Sanem)