Rejaul Karim Byron

Finance Minister Abul Hassan Mahmood Ali yesterday expressed hope that the government would be able to curb high inflation on the back of budgetary measures and the central bank’s steps.

The government will rely more on domestic bank borrowing than foreign financing in the next fiscal year, intensifying pressure on the economy.

With an aim to restore macroeconomic stability, reduce inflation, and contain pressure on foreign currency reserves, Finance Minister Abul Hassan Mahmood Ali is going to place a Tk 7,96,900 crore budget for the 2024-25 fiscal year tomorrow.

The overall revenue generation target will be Tk 537,000 crore in the new fiscal year that begins on July 1, which is 7.4 percent higher than that of the goal of the outgoing financial year.

The subsidies and incentive expenditures in the upcoming budget are going to be more than that of the current fiscal year.

The government has not addressed the stability issue through its fiscal policy for two years in a row although the economy is in turmoil owing to both external and internal pressures. A noted economist, however, thinks it can bring the situation under better control through the budget in the next fiscal year beginning on July 1.

Fighting raging inflation and putting the economy back on track have not been taken seriously as evidenced from the government’s delayed response, which set the scene for one of the worst economic crises in its history and an unprecedented prolonged period of higher consumer prices, said an economist. 

The government is not moving at full throttle in bringing discipline to the banking sector, implementing reforms wholeheartedly, taking measures against syndication, and bringing money launderers under the rule of law, said a top economist.

As the government wants to lower expenses, it is likely to contain the budget deficit to 4.6 percent of gross domestic product in the next fiscal year, a level seen a decade ago.

After the IMF’s loan, the World Bank is now going to provide $500 million in budget support to Bangladesh, double from what it had initially planned, by the end of June, said finance ministry officials.

The allocation for interest payments of domestic and foreign loans will likely increase by 38 percent to Tk 129,000 crore in the upcoming budget due to a significant hike in the cost of borrowing from both sources

After more than seven years of discussion, the government is set to finally undertake two projects involving Tk 8,483 crore for the Rohingya and host communities.

The government is thinking about allowing again undisclosed money to be legalised and laundered money to be brought back home through formal channels in the next budget.

It will be supported by the recent improvement of the current account balance to modest surpluses partly reflecting ongoing import restrictions, narrowing financial account deficits as business uncertainties gradually ease following the conclusion of the general elections in January, it said.

The government’s allocation to repay foreign debts may reach Tk 57,000 crore in the next budget, a 53 percent rise from the current year, putting further pressure on the country’s dwindling foreign currency reserves.

The government has to spend about 40 percent of the next budget on subsidies, interest payments, and salaries and allowances of government employees, which will limit its ability to spend on social safety net, health and education.

The government is set to increase budget allocation for quick completion of the Rooppur nuclear and Matarbari coal-fired power plant projects.

According to the Bangladesh Bureau of Statistics (BBS), food inflation jumped 35 basis points to 10.22 percent last month from 9.87 percent in March. This was the first time in five months that food inflation hit double digits.

Education and health sectors are set to get less Annual Development Plan allocation than prescribed in the eighth five-year plan.

Prime Minister Sheikh Hasina yesterday directed the finance ministry to formulate a contractionary budget for the upcoming fiscal year to control inflation.