As inflation roars FinMin pins hope on falling global prices

The persistently high inflation is a cause of concern for the government, but it has not yet gone out of control, Finance Minister AHM Mustafa Kamal said on Friday. 

Efforts are underway to address the causes of inflation and tax exemption on imported goods is one of the measures that would provide relief to the public by reducing the prices of essential commodities, he said at a post-budget press conference at the Bangabandhu International Conference Centre. 

Additionally, the government plans to facilitate the easy import of daily necessities to ensure a steady supply in the market, he maintained, acknowledging that inflation cannot be entirely curbed since it is a global issue. 

The finance minister expressed hope that the falling global prices will eventually lead to a decrease in prices within the country.

However, when journalists inquired about the declining purchasing power of private sector workers amidst rising inflation, none of about a dozen of ministers or secretaries present at the press conference, including the finance minister, gave a reply.

The average annual inflation rate for the current fiscal year is over 8%, with April recording a rate of over 9%. In such a situation, the finance minister has estimated inflation at 6% for the upcoming fiscal year. Economists, however, express concerns that the budget lacks sufficient measures to achieve the targeted inflation control.

To address inflation, the government has undertaken steps to import fuel at lower prices. The local government minister, Tajul Islam, said that the prime minister had successfully negotiated agreements with Qatar and Oman to import fuel oil at reduced rates. This move is expected to alleviate inflationary pressures, he added.

Tajul went on saying that previously, Qatar had exported fuel oil to European countries, including Belgium, at a price of $60 per barrel. However, Bangladesh did not receive oil at that price until the prime minister visited Qatar and negotiated a lower price. As a result, a 15-year agreement has been signed to import oil from Qatar.

Regarding food security and shortage concerns, Agriculture Minister Abdur Razzaque assured that no one had died of starvation and there had been no food shortages during the 15 years of Awami League governance. 

If natural calamities or high product prices lead to food shortages beyond people's purchasing power, the government will prioritise increasing the food supply, even if it means reducing allocations to other sectors, he said.

In terms of budget deficit financing, the government plans to borrow Tk1.32 lakh crore from the banking system for the next fiscal year. 

Bangladesh Bank Governor Abdur Rouf Talukder revealed that Tk2 lakh crore had already been transferred from the banking system to the central bank through the sale of $30 billion to banks. If this money had remained in the banking system, it could have been utilised for loans to the government, eliminating the need for excessive printing of money.

Why frequent load-shedding despite tariff hikes?

Asked to explain the reasons for the outstanding subsidies and power outages for 8-10 hours a day despite the increase in electricity and fuel prices in several rounds, Local Government Minister Tajul Islam said prices of electricity and fuel in the country have increased due to an increase in fuel prices in the international market. 

"Neighbouring countries are also experiencing inflation. In such a context, the government is rationally trying to sustain the power and energy sectors through subsidies," he said.

The 12th general election is scheduled to take place in the middle of the forthcoming fiscal year. When asked about the potential connection between the proposed budget and the elections, the agriculture minister stated that the Awami League aims to win all elections. 

"Both the budget and the elections are ultimately for the welfare of the people."

'Budget to benefit all'

During the press conference, the finance minister emphasised that this year's budget has been designed to benefit the people of the country. 

Various initiatives have been undertaken to optimise resource utilisation for the welfare of the citizens. The foundation of all these efforts is the people of the nation. 

Regarding the feasibility of achieving the revenue target set in the next fiscal year's budget, AHM Mustafa Kamal responded by highlighting the remarkable progress made in revenue collection since the Awami League government assumed office in 2009. 

"The revenue collection has increased to Tk2.95 lakh crore in the current financial year from Tk59,000 crore in 2019. Therefore, the target set in the budget is not unreasonable and can be achieved."

How will employment target be achieved?

AHM Mustafa Kamal had previously announced the creation of 3 crore jobs by 2030 in the budget speech for the fiscal year 2019-20. In the new budget, he mentioned the creation of 1 crore jobs.

When questioned about how these jobs will be generated, Mustafa Kamal stated that he has fulfilled all the promises he made thus far, resulting in the creation of 2.45 crore jobs since 2019. The concept of "Made in Bangladesh" has been instrumental in generating employment opportunities, he added.

State Minister for Planning Shamsul Alam, however, expressed scepticism about the feasibility of creating 3 crore jobs, pointing out that it is not part of the Seventh Five Year Plan. Considering that 18-20 lakh people enter the labour market annually, achieving such a high level of employment seems implausible. He advised the questioning journalist to examine if any mistakes were made in the information.

The journalist requested to review the page in the budget speech of FY20 where the job creation promise was made, asserting that they were not mistaken in their inquiry.

In response, Agriculture Minister Abdur Razzaque highlighted that employment is not limited to the government sector alone. The government's policy support has also fostered job creation in the private sector.

"Mechanisation has been encouraged in the agricultural sector, leading to the introduction of combined harvesters, which has created employment opportunities. Furthermore, labour costs have risen significantly in the agricultural sector, resulting in increased employment and improved incomes across the economy."

'Tk2,000 mandatory income tax to make people partners in development activities'

When asked about the rationale behind the mandatory payment of Tk2,000 for return filers as income tax, NBR Chairman Abu Hena Md Rahmatul Muneem explained that individuals with high incomes or wealth, such as importers, exporters, trade license holders, city corporation house owners, and car owners, are required to obtain a Taxpayer Identification Number (TIN).

He added that the decision was made with the intention of involving these individuals as partners in the government's development activities through their contribution of Tk2,000. The measure will not affect the poor, as they do not need a TIN and will not face any difficulties.

'Budget not based on IMF recipe'

In reply to another question, the finance minister said the government has not framed the FY24 budget based on the prescription of the International Monetary Fund (IMF).

"The IMF has given an overall prescription. We will accept the portion of it that we need to accept. The rest we will implement on our own," he said.

He said that the entire budget has been made keeping in mind the benefits of poor people, and the middle class.

Everyone has to pay taxes and the government will not allow any kind of injustice or tax evasion attempt anywhere, he added.

Mustafa Kamal mentioned that the current financial year's budget offered special provisions for disclosing undisclosed money. However, despite waiting for an extended period, no one has taken advantage of this opportunity. Based on this observation, the government assumes that there is no undisclosed amount within the country. Consequently, no provisions have been made in the proposed budget regarding undisclosed funds.

Why corporate rate unchanged?

When questioned about keeping the corporate tax rate unchanged, the finance minister responded by highlighting the continuous reduction in the corporate tax rate over the years.

In this regard, the NBR chairman said the corporate tax rate had been gradually reduced to 27% from 35% in recent years.

However, he also emphasised that there is no obligation to reduce the tax rate every year, as excessive exemptions could negatively impact revenue collection. He expressed the goal for Bangladesh to become a developed country in the future and stressed the importance of avoiding the mentality of evading or minimizing tax payments.

Why no initiative regarding capital market?

When questioned about the absence of any statement or initiative on the capital market in the budget, the finance minister initially redirected the question to someone else. As no immediate response was given, the finance minister expressed surprise and asked if anyone would address the question.

Subsequently, Finance Secretary Fatima Yasmin took the microphone and stated that the governor of the Bangladesh Bank would answer the query. The governor, however, appeared somewhat unprepared but eventually mentioned that sufficient policy support had been provided and would continue to be provided for the development of the capital market.

Regarding the development of stable reserves of foreign exchange, the governor said that due to import control, it is possible to pay five months' import liabilities with the reserves currently available. The current account and financial accounts are improving, he noted and expressed hope that the financial account will be positive soon.

Banking sector reform

In response to a question about the unfulfilled commitment to establish a commission for banking sector reform, the finance minister deferred to the governor for an answer.

The governor stated that several laws, including amendments to the Bank Companies Act, had received final approval from the Cabinet and were expected to be presented in Parliament soon.

Additionally, efforts were being made to reduce defaulted loans, and the implementation of BASEL-3 regulations was expected to contribute to a decrease in non-performing loans. The governor outlined the target of reducing non-performing loans in private banks to a maximum of 5% and public sector banks to 10%.

Fighting corruption

When asked about initiatives in the budget to combat corruption, the local government minister highlighted the government's transparency in procurement processes.

However, he acknowledged that irregularities could occur in isolated cases, attributing it to exceptions rather than the norm. The minister mentioned that projects were subject to thorough scrutiny. However, the recent increase in construction material prices had resulted in an escalation of project costs.

Present on the stage during the press conference were Commerce Minister Tipu Munshi, Education Minister Dr Dipu Moni, Planning Minister MA Mannan, Finance Adviser to the Prime Minister Mashiur Rahman, Cabinet Secretary Mahbub Hossain, and ERD Secretary Sharifa Khan.