The country’s inflation target has been set at 6.5 per cent in the proposed national budget for the fiscal year 2024-2025, while the gross domestic product (GDP) growth target has been set at 6.75 per cent.
Finance Minister Abul Hassan Mahmood Ali announced this while presenting the Tk 7,97,000 crore budget in parliament on Thursday.
These proposals come at a time when the Bangladesh government is gradually raising electricity prices by phasing out subsidies to comply with IMF loan conditions.
This is coupled with tight reserves, global market volatility, and various indicators of the country’s macroeconomy being under pressure due to challenges, including currency depreciation.
In his budget speech, the finance minister said, “Bangladesh has already undertaken contractionary monetary policy in line with steps taken by other countries to control inflation. Supportive policies are being implemented in the fiscal sector as well. Government support like the Family Card and OMS programmes are being strengthened to protect the common people from adversities arising from high inflation.”
He also said, “We are expecting the inflation rate to come down to 6.5 per cent in the next fiscal year as an outcome of the policy strategies we have adopted.”
He added that steps are being taken to increase the amount of tax revenue to 10 per cent of GDP by enhancing administrative capacity, expanding the tax net, automating tax collection and revenue management, and reducing human involvement.
It is noteworthy that Finance Minister AHM Mustafa Kamal announced a goal of setting the inflation rate, one of the main indicators of the economy, at 6 per cent in the outgoing FY24. Later, it was revised to 7.5 per cent. However, even that goal could not be met.
According to data published by the Bangladesh Bureau of Statistics (BBS) last Monday, the country’s inflation was 9.89 per cent this May. This has put great pressure on lower and middle-class families.
In this context, how the average price inflation can be kept at 6.5 per cent was not detailed in the finance minister's budget speech.
The finance minister has reduced the GDP growth target for the new financial year to 6.75 per cent, compared to the outgoing FY24, as various macroeconomic indicators are under pressure due to inflation and devaluation of the Taka.
The government had previously set a GDP growth target of 7.5 per cent for the election year of 2023-2024, which was later lowered to 6.5 per cent. However, that goal was not reached.
According to BBS data, based on the first seven-month estimate, the economy is likely to grow at a rate of 5.82 per cent by the end of FY24.
The finance minister said that specific action plans will be adopted for the proper implementation of important infrastructure projects and to increase export and remittance income. He further stated that they hope these policies will result in a GDP growth of 6.75 per cent in the next financial year and increase to 7.25 per cent in the medium term.
