Inflation, macroeconomic stability — main concerns in FY25 budget: Debapriya

Dr Debapriya Bhattacharya, a distinguished fellow at the Centre for Policy Dialogue (CPD), has said the top challenge in the budget for the 2024-25 fiscal year will be taming inflation and attaining macroeconomic stability.

"Investment has stagnated over the past 10-15 years due to interest rate issues and other underlying problems. These issues have persisted for a long time and are now manifesting in more severe ways," he said at a discussion on the forthcoming budget on Thursday (16 May).

The Federation of Bangladesh Chambers of Commerce and Industries (FBCCI) and NTV jointly organised the event held at Pan Pacific Sonargaon Dhaka. 

Debapriya said there has not been a budget in the past 15 years faced with such a critical financial scenario. Rising global commodity prices, regional and geopolitical factors, and adverse weather conditions worsen this complexity. 

Investment has stagnated over the past 10-15 years due to interest rate issues and other underlying problems. These issues have persisted for a long time and are now manifesting in more severe ways

Dr Debapriya Bhattacharya, a distinguished fellow at the Centre for Policy Dialogue (CPD)

Bangladesh's involvement in an International Monetary Fund (IMF) loan programme has also contributed to these intricate circumstances, he said.

The government needs to boost its spending resources. Additionally, there is a lack of transparency in the actions taken based on IMF recommendations, making it unclear which sectors are facing cuts or expansions, Debapriya added.

FBCCI President Mahbubul Alam, who moderated the discussion, highlighted the numerous challenges faced by the new government. 

"Although the economy is on a solid foundation, various challenges have emerged due to the pandemic and the Russia-Ukraine war. Specifically, challenges include inflation control, fluctuations in the dollar exchange rate, interest rate hikes, energy shortages, and the transition from LDC status," he said.

The upcoming budget presents further challenges to the economy. Creating a business and investment-friendly environment is crucial at this time, the FBCCI president added.

Zaidi Sattar, chairman and chief executive of the Policy Research Institute of Bangladesh (PRI), said, "The upcoming budget will continue to prioritise development. There can be no compromises when it comes to development; the budget must align with this goal.

"Sustaining this progress necessitates macroeconomic stability, which entails managing inflation, ensuring a balanced balance of payments and fiscal policy, and diligent policy monitoring."

Speaking from a virtual platform, Omar Hajjaj, president of the Chittagong Chamber of Commerce and Industry (CCCI), said, "Prices are experiencing inflationary pressure, with global tensions adding to the challenge. Taxes currently constitute a low proportion of GDP. It is essential to broaden the tax base beyond current taxpayers to include those not currently covered by taxation."

Syed Nazrul Islam, first vice president of BGMEA, said, "Budgetary initiatives are required to foster labour-friendly industrialisation. It is imperative to sustain the garment industry within a global framework."

Saleh Uddin Ahmed, former governor of the Bangladesh Bank, said, "The daily struggles of the common people often go unnoticed by policymakers. Similarly, growth should not solely rely on the service sector; instead, it should stem from small and medium industries, which are vital for generating employment. We require a budget that is both people-friendly and industry-friendly."

"Investors' issues must be solved swiftly. The challenges facing banks are well-known and must be addressed firmly. The central bank should change decisions abruptly; decisions should be made cautiously to retain the confidence of ordinary citizens, depositors, and investors," said the former governor.

Amin Helaly, senior vice president of FBCCI, said, "For progress, it is crucial that the National Board of Revenue [NBR] and the banking sector are conducive to business. Facilitating investment in the SME sector is imperative."

Ashraf Ahmed, president of Dhaka Chamber of Commerce (DCCI), said, "A vibrant capital market is indispensable for development. Unfortunately, our capital market is dwindling and under strain. To bolster it, we need to enhance tax benefits in this sector and provide incentives to expand the bond market."

Prime Minister's Economic Affairs Adviser Mashiur Rahman said, "The government is committed to advancing the welfare of the people. Enhancing project execution capability is crucial. Typically, the actual implementation of the development budget falls short by 10-15% of the allocated amount. Consequently, any reduction in budget allocation could lead to contractionary progress, which would not be favorable."

State Minister for Finance, Waseqa Ayesha Khan, said, "Bangabandhu introduced sector-wise budgeting, assigning equal importance to agriculture and industrial sectors, the benefits of which are evident today. The FY25 budget will uphold the promises outlined in the Awami League's election manifesto."

She further stated, "The budget deficit will be maintained at a manageable level, with a primary focus on stabilising the overall economy by controlling inflation. Initiatives that positively contribute to GDP growth will be incentivised, and there will be a particular emphasis on improving education and healthcare services."

Mohammad Hatem, the executive president of BKMEA, representing knitwear exporters, said, "As a citizen, I am pleased to see a big budget. However, as a businessman, I am concerned because the NBR has been assigned a lofty revenue target. Traders feel burdened by NBR's strict regulations. We need smoother import, export, and trade procedures."

"Shortages in power and gas, along with decreasing cash assistance, are worrisome. The ambiguity surrounding advance income tax (AIT) is troubling. It should either be finalised or eliminated," Hatem added.

Shaheen Ahmed, president of the Bangladesh Tanners Association, emphasised the need for simplifying business processes and ensuring freedom from harassment.

Akbar Ali, president of the Rangpur Chamber of Commerce, advocated for the establishment of the Rangpur Economic Zone.

Abu Yusuf, a professor at Dhaka University, said, "Budget allocation for education and health needs to be increased. Currently, a significant portion of the education sector allocation is directed towards expenses such as salaries and building construction. It is essential to allocate funds for skill development. Similarly, hospitals should be enhanced by boosting the allocation in the health sector."