Ease burden of spiralling prices: CPD

The Centre for Policy Dialogue (CPD) yesterday said the government should frame the budget for the next fiscal year with the main focus on easing the burden of rising prices of essentials and shrinking purchasing power of low, fixed and middle-income families.

The independent think-tank suggested reduction of tariffs and taxes at imports and domestic levels and stabilisation of the exchange rate to plug scopes for import cost-induced inflation resulting from high prices of various essential commodities in the international market amid supply disruptions and the Russia-Ukraine war.

It recommended generous allocation of subsidies for the welfare of people without bothering about budget deficits for the next fiscal year.

It proposed subsidies for food, fuel, social safety net and agriculture, saying that interests of consumers, farmers and producers should remain as the major concern of policymakers.

"Buying power of people is reducing. Anxiety is growing among low income people. At this time, priority should be on how burden of people can be reduced," said CPD Distinguished Fellow Prof Mustafizur Rahman at a news briefing at the CPD office.

He also warned that money laundering has been taking place through under and over invoicing.

The civil society organisation arranged the briefing to place its recommendations for the national budget for fiscal year 2022-23.

The CPD said the next budget was going to be placed against the backdrop of a number of "unprecedented challenges" for macroeconomic management.

The country is still in a recovery phase from the pandemic induced implications. At this time, rising prices of essentials put pressure on people.

All components of external balances -- trade, current account and overall balance -- are under significant pressure amid surging imports. The global economy is also going through a rough patch.

For instance, between July and February, the trade deficit, which occurs when the value of imports exceeds the value of exports, totalled $22.30 billion in contrast to $12.35 billion during the same period a year ago.

So, the government should consider issues like price spirals, fallouts of the Covid-19 pandemic, widening social safety nets and challenges of the country's status graduation from a least developed country (LDC) to a developing one in 2026, said the CPD.

While presenting the CPD's recommendations, its executive director, Fahmida Khatun, said the government should not take up any new popular, yet unnecessary projects which may cost a lot a lot of money in the time of austerity.

The apprehension is that the government may take up some popular projects to spend money ahead of the next general election although these are not vital for the country.

Rather, the government should ensure timely completion of some of the mega projects which are under construction.

The CPD also suggested for a stable corporate tax rate, continuation of tax holidays for small and medium enterprises, tax rebates, continuation of VAT reductions on import of some basic commodities so that the low income people can breathe a sigh of relief in the time of an unprecedented time of the country.

It recommended that the government increase allocation for health, education and social safety net schemes but added that public employees' pension should not be included in the social safety net.

Although the government increased the allocation for the social safety net by 17.8 per cent, this amount includes 67.3 per cent of the government employees' pension.

Currently the government pays allowances to people under 143 programmes in three categories -- children, women and pension.

The government should allocate a minimum of Tk 1,000 as allowance per person under the social safety net and the number of beneficiaries of the social safety net should be two million people.

The hidden urban poor should also be brought under the social safety net programme.

The tax-free income limit at individual level should be at Tk 3.5 lakh so that low income people do not need to pay tax on their income, said the CPD.

The subsidy in agriculture and fertiliser and the 2 per cent on remittance should also be continued in the next budget.

The subsidy for the poor people can be continued considering that the times were tough but not at a wholesale rate for all.

The think-tank also questioned inflation figures released by the Bangladesh Bureau of Statistics arguing that the current consumer price index does not reflect the actual situation in the market.

The government should also provide a healthy allocation for children in the budget as they were affected for the fallouts of the Covid-19 pandemic.

Khondaker Golam Moazzem, research director of the CPD, said a new economic and social order particularly needs to be formulated in the country for a sustainable and green growth.

To attain this, social insurance, environmental sustainability and labour rights should be prioritised, he said.

Bangladesh also needs to take preparations for facing the LDC graduation as the preparations are absent, he said.

If the preparations are not taken now, the country will enter the graduation period all on a sudden without addressing the mid-term challenges, he said.