Home ›› 29 May 2023 ›› Opinion
Out-of-control inflation keeps galloping. Interbank dollar rate hit record high of Tk108.75 a dollar on May 22. It was up by Tk24.28 per cent from a year back, according to Bangladesh Bank data. The current month has seen continuous rise in dollar exchange rate. The reason has been attributed to more than one factors – higher import payments, slower-than-expected remittance inflow and export earnings and Russia-Ukraine war.
To stop erosion of the foreign exchange reserve the government restricted imports. This import restriction has brought disaster for the domestic industries as they can’t import raw materials and capital machinery bringing down local production significantly. It then went on to create disequilibrium between supply and demand pushing up the prices of products.
The measure not only pushed up the prices of local products it also brought down export earnings significantly. Export earnings dipped by 16 per cent year-on-year in April with overall receipts growing by 5.38 per cent to $45.67 billion in the first 10 months of the ongoing fiscal year. Following the restriction on imports, import bills dropped by 12.33 percent year-on-year to $53.93 billion in the first nine months of 2022-23. As a result trade deficit declined by 41.6 percent year-on-year to $14.61 billion during the period of July to March.
The government has not been able to rein in inflation while the global outlook seems good now. The United States and the European Union might have avoided recession. Besides, the inflation is showing downward trend in the developed economies. But we are still where we were one year back when inflation began to take heavy toll on the economy.
Still remittance inflow is on the decline. It declined by 16.27 percent year-on-year to $1.68 billion. After the money inflation remittance inflow began to drop as expatriate Bangladeshis got much less than what they received when they sent money through illegal channel. Again with the exacerbation of their living standard because of global inflation they started to rely more and more on hundi cartel.
The government tried to stop illegal channels. On November 29 the Foreign Exchange Policy Department of Bangladesh Bank in a circular allowed Mobile Financial Service Providers (MFS) like bKash, Rocket and Upay to directly repatriate wage remittances in association with internationally recognized online payment gateway service providers, banks, digital wallets, card schemes and aggregators abroad. But it didn’t yield any positive result.
Amid this economic volatility the government’s allocation for social safety is reportedly not likely to increase much in the next budget. Social safety programmes are likely to receive Tk1.2 lakh crore which is 15.76 percent of the total budget of Tk7.61 lakh crore for 2023-24. The allocation is a bit higher than Tk1.13 lakh crore allocated in the current budget. But in the current budget the allocation is 16.75 percent of the total budget of over Tk6.78 lakh crore. The amount sounds a big allocation but there is a jugglery of figure.
The full allocation doesn’t mean for the poor. Of the total allocation, 25 percent will go to retired government employees and their families as pensions. The rest of the money will be distributed among the poor. That too is questionable. Because of political interference this entire money doesn’t permeate into the bottom level. Even the International Monetary Fund (IMF) asked the government not to count this as social safety net expense.
Even the World Bank report of 2021 citing BBS data said the eligibility criteria were not met by 26.6 percent of the beneficiaries of allowance for the elderly and 38.4 percent of those in employment generation programme. Isn’t it depressing, shocking and incredibly deceptive? What is left then? Who are the beneficiaries? The social safety programmes are only meant for poor, not for any other sections of the society. The government has 141 social safety net programmes. OMS (Open Market Sale) and VGD (Vulnerable Group Feeding) are not also going to see any rise when amid this economic downturn social safety net programmes are more important than anything else.
In the current budget the education sector that should always be prioritized was utterly neglected. Out of the total budget of Tk678, 064 crore the allocation for the education sector was Tk81,449 crore. It was 12 percent of the total budget which was 11.9 percent in the previous year. In terms of GDP ratio it was 1.83 percent. It was lower than the previous year. This was one of the lowest in the world. It was much lower than the recommended minimum 4-6 percent of GDP and 20 percent of the national budget. Everywhere in the world this sector is given utmost priority while in Bangladesh it gets less priority. This sector demands at least 25 percent allocation of the national budget.
The agriculture sector is another most important sector that in no way should be downplayed as it has immense contribution to our GDP. Its contribution to GDP is 60 percent. But over the past decades its share of GDP has declined in terms of percentage of the total budget. It is not getting its due share. Fair price of agro-products for farmers must be ensured. To this end subsidies for fertilizer and pesticides can help poor farmers greatly.
It is well known that how black money is eating away at our economy. So far we have never seen any steps taken by any government to recover the black money which is roughly about 35-40 percent of our GDP. This astonishing amount money, if recovered, can play a big role to revive the country’s economy. Reportedly the government is not going to give unquestioned amnesty to black money. Good news indeed! But are they questionably going to enjoy the opportunity? This lenient attitude to the black money holders who are playing havoc on our economy is questionable. The key aim should be recovered the black money stashed abroad.
In the current budget controlling inflation was the key target of the government with GDP growth and inflation rate 7.5 percent and 5.6 percent respectively. The current fiscal year is almost near the end with the government not even any closer to its targets. The fiscal policy set for the current fiscal year is going to end up having a stagnant private investment, negative economic growth and runaway inflation. Amid this dismal picture the country is going to have a new budget.
If social safety net programmes can’t be expanded, if education sector allocation is not increased, if black money can’t be recovered, if inflation can’t be reined in, if agriculture sector is not given priority and price hikes of daily essential items are not arrested and most importantly if corruption is given a free rein again then we can never come out of the vicious cycle we are in.
The writer is a journalist. He can be contacted at [email protected]
