Home ›› 01 Jun 2023 ›› Front
For Bangladesh’s low and middle income segment, the key expectation right now from the budget for FY24 is a return to affordability of essential commodities, as skyrocketing inflation has forced millions in the country to cut back on food and nutrition.
Businesses too are now navigating troubled waters after getting hit by economic headwinds, so retaining export growth, investments and employment generation are now more important than ever.
Industry leaders desperately want to see their much-anticipated demands fulfilled in FY24, especially a more investment friendly environment reflected by the tax policy.
To this end, the government has to offer incentives and policy support such as keeping taxes at a reasonable level or continuing existing trade facilities, while offering utility services at affordable tariff rates.
This budget, the last one in the ruling party’s current tenure, seeks to appease the people and woo voters ahead of next general polls – expected to be held in January 2024. The government has to offer a plethora of promises for both the masses and the business community.
Social Safety Net is a big tool for the government to win the people’s heart mostly in the time for the polls, while subsidies and investment friendly tax measures are also crucial for wooing investors.
In addition to these, depleting foreign exchange reserves is another concerning matter for the economy. This poses a grave threat to investment and imports as the USD crisis is hindering the opening process of letter of credit (LCs).
Slower imports of raw materials for export oriented industries and capital machinery are disrupting exports and investment. Amid these high voltage crises, Finance Minister AHM Mustafa Kamal is expected to unveil a Tk 7,61,785 crore budget for FY24 in the Jatiya Sangsad.
Keeping in mind the internal and external economic shocks, Kamal has to acknowledge conditions set by the International Monetary Fund (IMF) as part of its $4.7 billion loan agreement with Bangladesh.
To comply with IMF loan conditions, the government has to incorporate some tough initiatives and reform measures into the upcoming budget such as increasing revenue, reducing subsidies and non-performing loans.
The minister faced serious hurdles in preparing the budget for FY24, while walking a tightrope of crucial issues. Now it is time to hear from him which one should get priority – the economic recovery and growth, or the political promises to win the election.
It should be noted that the budgets for FY21 and FY22 were also challenging because of the Covid-19 pandemic with slower economic growth, while FY23 was more focusing on recovery from the downswing.
But this year, the budget is facing challenges on how to balance complex issues. Businesses need tax waivers or reduction in taxes to compete in the global market, but the IMF tagged conditions to improve revenue which goes against the trade.
However, increasing exports is imperative to boosting the foreign exchange reserves. Facilitating exports through policy support must be an integral part in the next budget.
Though the government hinted at increasing the social safety net allocation to appease people ahead of national polls, IMF conditions call for the fund to be separate from pension scheme and savings certificate interest.
In the ongoing FY23, the government allocated a total of Tk 1,13,576 crore or 2.55 per cent of the gross domestic product (GDP) for the social safety net programmes. Of this figure, Tk 7,907 crore has been earmarked for paying interests of savings tools and Tk 28,037 crore for paying pensions of retired government employees.
If the expenditure on the two sub-sectors in question is excluded, the total allocation for the sector stands at Tk 77,632 crore or 1.74 per cent of the GDP.
Sources say the government is planning to reduce subsidies from electricity and agriculture in the budget for FY24, which would affect industries, as well as agricultural production – a savior of the economy during any crucial moment.
On top of that, Kamal must address and devise ways through policy measures to tame the inflation rate, which rose throughout the years.
For soaring inflation, the Russia-Ukraine war is mostly being blamed. As an import dependent country, Bangladesh has to consider the geopolitical turmoil, and there is no scope of ignoring this particular issue while setting up policies for FY24.
As per the Bangladesh Bureau of Statistics (BBS), the general point-to-point inflation rate stood at 9.24 per cent in April. This budget will be the fifth consecutive one of incumbent Finance Minister AHM Mustafa Kamal.
So many issues are now plaguing the economy, and the finance minister has to consider all of them while announcing the budget today, truly an acid test for the minister. Kamal must find acceptable solutions for all these complex issues to make everyone happy.
