I loved 6.5% budget inflation target, but it’s tough to achieve: MA Mannan

The former planning minister discusses AH Mahmood Ali’s first national budget with bdnews24.com at Inside Out

MA Mannan admires Abul Hassan Mahmood Ali for his “courage and vision” in declaring a 6.5 percent inflation target in his first national budget, but says it will be “very difficult” to achieve.

The former planning minister discussed different aspects of the FY25 budget and the current state of Bangladesh’s economy with bdnews24.com at Inside Out, a video of which is available on the internet newspaper’s YouTube channel and Facebook page.

The government has not significantly cut spending on subsidies, but it has raised taxes to try and generate more revenue. But the public’s main focus is clear – what is being done about inflation?

What lies ahead? Will the last two difficult years of tightening belts and eye-watering prices ease any time soon?

Are the specifics of the budget sufficient and its targets realistic in an economy roiling under runaway inflation and global economic headwinds?

The public want to know what is being done about inflation, given that in the past two years, inflation has hovered around 10 percent. Mannan acknowledged it is a very important issue as long as it affects the people’s daily living.

“Let me begin by saying one thing. I salute the finance minister, his courage and his vision. But coming to 6.5 in one-year time, I would like to, I would love it, but I think it's going to be very difficult,” he said.

bdnews24.com asked what is making it so difficult for Bangladesh to manage to turn around like others with even higher inflation rates after the Ukraine war had begun.

Mannan said Bangladesh’s recovery cannot be as fast as that of the rich countries in the West because they are a mature economy.

“Their GDP and their production, their outputs don't increase so much as in our case. We have a growth rate of 5, 6, 7, 8 percent.

The United States, Canada, Britain cannot imagine that kind of growth. Two pr 1 percent is enough for them, more than enough. Because their pot is already full.

DEFICIT, REVENUE AND BORROWING

The budget has been praised for keeping the deficit to GDP ratio below 5 percent. However, this amount is still Tk 2.5 trillion.

Asked if that seems like a massive amount, Mannan said keeping the deficit below 5 percent of the GDP is not a must.

“Fortunately or interestingly, our economy, our finance ministers have always remained below 5. But it's not a sort of a golden rule that you have to abide by. There is no such thing,” he said.

The finance minister has set an ambitious tax collection target for this budget even though the National Board of Revenue has struggled to collect the amount of taxes that have been targeted by budgets for several years. Asked if the task is huge for the NBR, Mannan said: “Since we are a growing economy, we are all short and we don't have much underground resources like oil and gas and this and that. We don't have much above ground also like the rich countries have. In the rich countries, their money also works for them.

“Dollar is the strongest in the world. Simply by being the main currency they earn so much. So we are up against very strong positions of the very rich countries.

“We have to fight against that. There is no way of fighting. We have to work harder and harder and harder.

“We know that we are not given proper wages. We know that we are short changed. We may feel bad but there is no alternative. We must give more attention to work,” he said.

To raise their local revenue, every government sets a very high ambition for the NBR because “we need more money”, the former minister remarked.

He said the NBR indeed fails to achieve the revenue targets, but setting the goal higher keeps the board under pressure so that they collect higher revenues.

And their deficiency leads to borrowing from domestic and foreign sources like banks, other countries and global and regional lenders.

“There’s no economy without borrowing in the world,” Mannan said.

“The only way to escape from borrowing is to do nothing – don't eat much, don't drink any water, sleep at home and do nothing. So you reduce and reduce and die. That we cannot do.”

“We want to live better. We want better houses, better medical care, better roads. All of us must work and work better, produce more,” he said.

Mannan added that only working will not help produce more, so people need to develop skills.

“That is the number one thing. And secondly, good civil servants, good engineers, good economists, good planners, and we borrow and we work together. That is simple.”