Proposed budget lacks direction about inflation

The proposed budget for FY23 has been placed at a time when the country, and admittedly most of the world, is reeling under inflationary pressures. It was expected that the proposed budget would announce measures to combat inflation. Economists in the countdown to the proposed national budget suggested containing inflationary pressure and providing relief to the poor and the low- and fixed-income groups.

Indeed the budget speech cited fighting inflation as a top priority. However, the budget mentioned no specific measure to contain the uncontrolled price pressures.

Bangladesh is always vulnerable to import-induced inflation because it relies on external markets for key commodities–energy, capital machinery, edible oil, wheat etc. The lead report of The Business Post published yesterday said that in the budget, there was no move to eliminate or reduce import duties on essential food items and other vital commodities. The glaring lack of such measures has frustrated people from all walks of life, particularly the marginalised, lower-income, and middle class.

The need for higher allocation for the social safety net programmes (SSNPs) has been felt strongly in recent times, mainly due to intense inflationary pressures. The SSNP allocation as a percentage of the GDP has remained almost the same for a long time. Unfortunately, this year's proposed budget is no different. The Business Post report points out that social safety net programmes proposed no significant allowance hike to adjust to the inflationary pressure in the segment. Pensioners, fixed-income groups, and day-laborers will have no respite following the budgetary proposals. No hand-out was announced, or allocation earmarked for the new poor and sandwiched consumers belonging to the lower and middle classes. One more issue that must be noted is that there are no details on implementing the much-touted Universal Pension Scheme.

We do appreciate the fact the proposed budget is a business-friendly one. Corporate tax has been slashed by 2.5 per cent, and tax for all exporters has been cut to 12 per cent. The private sector contributes immensely to the country and is the largest provider of jobs. We are all for any measures that boost the private sector.

However, budget is not meant only for the business community. This is called "national budget" for a reason. A budget is not only about collecting taxes from various sources and utilising those resources for economic activities. The national budget should also reflect the government's vision for sustainable development. Bangladesh is a welfare state, and we believe that the national budget should spell out measures to alleviate the suffering of the masses.

The budget will be approved for implementation from July 1, this year. So there is still time to allocate hand-outs in the original budget for people suffering the most under inflationary pressures. We believe that, during economic crises of monumental proportions, the affected poor people should have more direct cash and food support rather than bank loans.

The government must take adequate steps to reduce import dependence especially in the agriculture sector. The high import dependency means that the Bangladesh economy is feeling the heat of the Ukraine war has triggered high food inflation rate. The Ukraine Russia war was a wake-up call for the country's agricultural sector. The price of wheat flour increased sharply as Bangladesh imports wheat mainly from the Black Sea region. So have the prices of edible oil. The extent of impacts may last even after the war.

To minimise import dependence, the obvious way forward is to increase production. Mechanisation of agriculture should be further enhanced. More incentives from the government are essential to encourage the farmers. The authorities concerned must devise a way increase the farming acreage. There should be cultivation of fallow land. Oil seeds farming should get priority. The agriculturists should focus more on high-yield seed development.

Only fiscal measures– government expenditure, public borrowings, and taxation– are not enough to control inflation. Effective governance is also equally important. The government has to exercise its authority to keep an eye on essential items, strengthen its monitoring cells, provide subsidised staples for the lower-income consumers, and take adequate measures to keep errant traders in line.