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The necessary support will be maintained for agriculture, industry, and services to ensure growth does not suffer, he said
Published : 07 Jun 2024, 04:59 PM
Finance Minister Abul Hassan Mahmood Ali says that top priority will be given to controlling inflation and this means that the government will continue to pursue contractionary policies.
“Since inflation control is our highest priority, contractionary policies will continue for some more time,” he said at a post-budget press conference at the Osmani Memorial Auditorium in Dhaka on Friday.
However, the government will also be careful to ensure that growth does not suffer too much in the context of this policy stance, he said.
"All the necessary support has been continued so that our agriculture, industry and service sectors can continue their normal activities.”
“As a result, growth of 5.82 percent has been achieved in the current financial year despite a contractionary policy. We will be able to achieve 6.75 percent growth in the next fiscal year.”
Finance Minister Mahmood Ali intends to tamp down inflation to 6.5 percent as reserves are dwindling, the global economy remains unstable, and the government is steadily increasing the price of electricity by withdrawing subsidies according to the loan conditions from the International Monetary Fund.
In the outgoing 2023-24 fiscal year, former Awami League finance minister AHM Mustafa Kamal announced a goal of restricting inflation to 6 percent. Later it was revised up to 7.5 percent. But even that goal could not be met.
According to data from the Bangladesh Bureau of Statistics, the 11-month average inflation rate in the current fiscal year till May stood at 9.73 percent, the highest in many years. This naturally means intense pressure on lower and middle-class families to afford daily necessities.
Economists are sceptical that the current finance minister will be able to stick to his confident target of 6.5 percent average inflation when it has remained above 9 percent for two years.
But Mahmood Ali remains optimistic.
"We have taken all the necessary steps to control inflation and are reviewing what further steps can be taken."
“The measures taken by us have made it possible to keep inflation at 9 percent. In the budget speech presented yesterday, I mentioned the steps taken under monetary policy and fiscal policy."
Highlighting the context of inflation due to the Russia-Ukraine war after the COVID-19 pandemic, the finance minister said, “Inflation is still at 9 percent in our country. If the developed countries of the world increase interest rates in their countries to control inflation, the capital flow in our country will continue to decrease. At the same time, the volume of international trade also increased to a great extent.”
“This results in a large deficit in our current account balance. All in all, the pressure on the foreign exchange reserves increased and this led to a significant depreciation of the taka against foreign currencies. This is one of the main reasons why we have high inflation.”
Recalling the formation of the Awami League government in 2009, the finance minister said, "I want to remind you that inflation was at a high level after we came to power, but we brought it under control within two years.
"I would like to firmly inform you that the steps we have taken will reduce inflation in the future."
He hoped these measures would start to bear fruit before 2025.
“We expect it to begin to decline by the end of this year. Let’s see. We must try. And, as you have noticed, we have reduced the scope of the budget a lot so that there is no pressure on prices.”
Mahmood Ali also noted that steps are being taken to protect poorer families from the bite of inflation.
"All the programmes that are being implemented to protect the common people from inflation, including OMS and Family Card, will be continued and, if necessary, the issue of expanding their scope will be taken into consideration."
