Money printing won’t solve economic crises

If Bangladesh Bank (BB) tries to solve the country’s ongoing economic crisis by printing money, it will only provoke further inflation and price hikes, prominent economist AB Mirza Azizul Islam has said.

Although people are suffering due to the rising commodity prices across the country, there is no clear direction in the next fiscal year’s national budget to control the inflation. As a result, the increasing income inequality may lead to social discontent, he said.

Azizul was speaking at a shadow parliament programme on the proposed budget for FY2023-24, titled “Whether This Year’s Budget will be Helpful for Sustainable Development,” by the Debate for Democracy on Saturday. Debate for Democracy Chairman Hasan Ahmed Chowdhury Kiran presided over the event.

Azizul, the former finance adviser to a caretaker government, said, “Depreciation of the taka against the dollar due to a decline in reserves leads to inflation. Our reserve calculation is exaggerated, which is also not of international standard. Although the GDP target is 7.5 per cent in the proposed FY24 budget, it is far from reality.”

Tax collection in Bangladesh is the lowest in the world. Therefore, a clear plan is needed to collect more taxes. Private sector investment will be disrupted if good governance is not established by eliminating the problems of electricity and gas, he said.

In this year’s budget discussion, the comment made by the finance minister regarding the non-return of smuggled money to the country is not correct, the economist added.

Due to the lack of good governance in the banking sector, the amount of non-performing loans is increasing. If this situation does not pass, the lack of confidence of the depositors will increase, he said.

Also, because of the dominance of the ruling party in the national parliament, there is no effective discussion on the budget and public participation in the budget approval process is not satisfactory, Azizul opined.

Hasan Ahmed Chowdhury Kiran said that in the context of current inflation, keeping the price of goods within the purchasing power of common people is a big challenge for the government in the election year budget.

He said although the government has tried to meet the challenges of the proposed budget, it has not had a positive impact on public life and the life of ordinary people is becoming more difficult due to the rising prices of commodities, electricity, water and gas.

Hasan said the government has shown enough courage in the proposed budget to maintain the continuity of development despite domestic and international uncertainties. However, the country’s current economic reality has not been reflected in the proposed budget.

Meanwhile, the provision of tax payment of Tk 2,000 to every TIN holder whose income is below the taxable limit may discourage people from getting a tax identification number and paying tax, he said.

Hasan also said that the government’s attempt to deal with the financial crisis by printing money will increase inflation. In the FY24 budget, the government plans to take a huge loan of Tk 1,32,395 crores from the banks and it will fuel inflation as well. Also, if the government borrows more from the banking system, it will reduce the flow of credit to the private sector. As a result, private investment will take a hit.

The ongoing dollar crunch and import restrictions will hamper revenue collection targets in the new fiscal year. Lack of good governance in the financial sector and failure to curb corruption will make implementation of the proposed budget difficult, he added.