Budget proposed with attention to curbing inflation: Economist Abdur Razzaque
However, he also said if the finance minister wants to achieve high growth, bringing inflation down to 6.5% will be very tough.
Finance Minister Abul Hassan Mahmood Ali has paid attention to curbing inflation in the proposed budget for fiscal year 2024025 (FY25), economist Dr Mohammad Abdur Razzaque said today (6 June) in an immediate reaction to the budget.
"The finance minister has been quite straight-forward in presenting the challenges ahead for the Bangladesh economy… He has paid much attention to curbing inflation. I find it quite positive," Razzaque, chairman of the Research and Policy Integration for Development (RAPID), told The Business Standard.
However, he said, "Our current inflation rate is nearly 10%. The finance minister wants a growth rate of 6.7%. If he wants to achieve such growth, bringing inflation down to 6.5% will be very tough. We may see a compromise there."
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"The finance minister wants to check inflation. And that is why he has reigned in the growth rate of budget expansion. Perhaps he has not been directly involved in the policy measures that resulted in the current macroeconomic crisis. But he has taken the responsibility to salvage the situation."
The RAPID chairman said the finance minister appears to be going for contractionary fiscal measures, like the ones taken in monetary policy. "It will be hard to achieve given the current fiscal deficit. If high growth is pursued, there is a risk of increasing the inflation rate."
Speaking about the devaluation of taka against the dollar, he said, "We have seen that taka has been devalued in the past year… Even though the government is saying that the budget deficit is decreasing, they have to take out loans to fill the gap.
"And the interest payment for these loans is about 16% of this budget. Also, there will be a 14% subsidy. Moreover, 10% of the budget will go to the salary payments of government serviceholders. About 40% of our budget will be spent in these sectors."
Stating that in the last few years, Bangladesh's development budget has been dependent on borrowing, he said it is pushing the costs of implementations upward.
"In the education, health and social welfare sectors, the absolute amount of the budget will increase. But the percentage of GDP for these sectors will remain stationary," Razzaque said.
