Photo : Collected
The country’s budget for the fiscal year 2024-25 will be unveiled through an austerity programme, designed to tackle the prevailing economic crisis and rein in inflation. Contrary to earlier projections, the overall budget size will not witness a substantial increase.
The forthcoming budget is set to see a modest 4.62 percent hike. However, the size of the main budget for the current financial year increased by 12.30 percent compared to the previous year.
According to related sources, the reason for the low rate of increase in the size of the budget is the difficult conditions of the increased loan support of the International Monetary Fund (IMF) and the severity of the country’s financial crisis. The main objective of the new budget will be to coordinate fiscal policy with revenue policy to control inflation. Apart from this, the budget is not increasing due to low revenue collection, a drastic decline in expatriate income, and a poor import and export situation.
Keeping in view the overall financial affairs of the country, the Finance Division has fixed the main budget size of Tk 7,97,000 crore for the next financial year. The main budget size for the current financial year was Tk 7,61,785 crore. At the same time, the growth target has been fixed at 6.75 percent. At the moment, the importance of achieving growth is reduced, and more attention is paid to controlling inflation. The inflation target has been increased to 6.50 percent. Growth is being moderated in line with IMF conditions.
On Thursday, the coordination council regarding financial currency and currency exchange rate and the budget monitoring, budget management, and resources committee meeting decided on the size of the budget for the next financial year. Finance Minister Abul Hassan Mahmood Ali presided over those two meetings. Meetings held virtually are usually strictly confidential. The meeting discussed the negative impact on the economy due to a reduction in remittances. Apart from this, there was also a discussion on increasing the interest rate on the government’s loans because the government is spending a lot on interest payments.
According to sources in the Ministry of Finance, the likely total expenditure in the upcoming budget is estimated at Tk 7,97,000 crore, income at Tk 5,40,000 crore, and deficit at Tk 2,57,000 crore. In this case, the size is increasing by Tk 35,215 crore compared to the current budget. The revenue target is expected to increase by around Tk 50,000 crore. The foreign aid and loan target have been fixed at Tk 1,00,000 crore. The rest will be met with internal resources and loans from banks. A senior official of the finance division involved in this process said that the budget growth is estimated at 10 to 12 percent every year.
This time it will increase below 5 percent. The reason for this is that if the budget is to be given, the revenue must be collected in such a way. Revenue collection is low, imports, and exports are decreasing. Considering these issues, it is not possible to give a large budget. Economists have said that due to the existing political and economic situation in the country, the budget for the next financial year 2024-25 will not be fully implementable. That is why only Tk 35,215 crore can be increased from the original budget in the current financial year.
In this regard, AB Mirza Azizul Islam, the former caretaker government’s finance advisor, told The Daily Messenger, “There is no point in proposing an expansionary budget given the prevailing inflation and dollar crisis. However, it remains to be seen how much of the estimate is implemented. Currently, the country’s political situation is not conducive to fostering a strong economic image. Political uncertainty persists after the election. In this case, achieving a 6.75 percent GDP growth will be difficult.”
He also mentioned that during this time of Eid, there is no usual crowd of people in shops and markets because people lack disposable income. Furthermore, the country’s inflation remains above 9 percent, showing no signs of abating. Meanwhile, the finance division holds the view that bank loan interest rates are increasing to control inflation. Currently, the interest rate is fixed at 13.5 percent.
Imports are being reduced, unnecessary expenditure is being curtailed, and measures are being taken to decrease the money supply and the import of luxury goods. Furthermore, activities such as purchasing cars, land acquisition, and building construction are being halted in the current budget, and this trend is expected to continue into the next financial year. There is a significant reduction in demand-side expenditures.
On the supply side, measures are being taken to control inflation by increasing the supply of goods through programmes like TCB and OMS, as well as strengthening market monitoring. Dr Zahid Hussain, the former chief economist of the World Bank’s Dhaka office, told The Daily Messenger, “The government is not in a position to propose an ambitious budget in the current context. The government faces pressure from both internal and donor agencies, and the fragile state of the economy necessitates a very cautious budget.” He further emphasised that instead of presenting an overly optimistic budget, it would be prudent to formulate a realistic and feasible budget. Moreover, with no electoral hurdles in front of the government, there is no need to provide false hopes to the people. Rather, the primary goal of the next budget should be to address the economic challenges faced by the common people.
Messenger/Fameema
