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Published : 02 Jun 2023, 10:09 PM
The government is concerned about inflation much as the economists and the public are, but the key economic indicator is not out of control, Finance Minister AHM Mustafa Kamal has said.
He faced a barrage of questions about efforts to control inflation in the budget for 2023-24 fiscal year in a press conference on Friday after analysts criticised the Tk 7.6 trillion spending plan for “its failure to address” price rises.
After the average inflation stood at 8.84 per cent against a target to keep it below 5.6 per cent in the outgoing financial year, Kamal set a goal of bringing the indicator to 6 per cent in the budget for the next fiscal year.
“We’re also worried about inflation, but it’s not out of control,” Kamal said at the post-budget briefing.
“We’ll be able to control inflation. We had brought it down to 6 per cent from 12 per cent once and we’ll do it again in the next fiscal year.”
The rate of inflation was 12.3 per cent in FY2007-08. Despite intermittent global economic recession in the last 14 years and a rise in food and fuel prices in the world markets, the government was largely able to keep inflation in check. In FY2021-22, average inflation was within 6.75 per cent.
Even in the last fiscal year, the average inflation was 6.15 per cent. Although the inflation increased due to the Russia-Ukraine war, the government has been making an all-out effort to check inflation and mitigate its impact on the people, Kamal said in the budget speech.
The government has taken a slew of measures at the advice of the International Monetary Fund under a $4.7 billion lending progamme, cutting subsidies for the energy sector and hiking the fuel price.
The government increased gas prices for industrial units and power producers on Jan 18. Thereafter, power prices were hiked thrice between Jan 31 and Feb 28, each time by an average of 5 percent at the retail level, directly raising the prices of essential goods.
In this situation, economists and members of the public expected Kamal to announce steps to control inflation in the budget, but a lack of particular measures to keep prices down has frustrated analysts.
A journalist asked how Kamal planned to curb inflation when wars and economic rivalries have continued to shake the global economy.
“The IMF says prices will fall on the international market, which is indeed happening now. We believe prices will decrease in Bangladesh as well,” Kamal responded.
“We’re going through a tough time when inflation is rising globally. This is why we’ve taken a flexible path. We’re trying to control the factors that cause inflation. We’re giving waivers on imports wherever they are necessary.”
Economists criticised the government for its plan to finance 17 percent of the Tk 2.61 trillion fiscal deficit in 2023-24 with loans from domestic banks. They say such borrowing will fuel inflation as the loans will inject more money into the economy without increasing its size.
“It’s not that the supply of currency causes inflation. The Bangladesh Bank has got Tk 2 trillion by selling dollars. Our [broad money reserve] is at the lowest level in proportion to GDP in Asia. Even if the government takes loans, and we print and release money in the market, inflation won’t rise,” Governor Abdur Rouf Talukder said.
He said inflation increased in Bangladesh due to global price rises. “It’ll come down if we can ensure a proper supply of goods.”
BUDGET, ELECTION ‘INTERTWINED’
Before the budget was placed in parliament, officials said the government was not thinking about the election ahead while making the spending plan because Prime Minister Sheikh Hasina believes all budgets should equally focus on the people’s welfare.
Kamal, however, said budgets and elections are “intertwined”. “Our budget is for the people, and so is the election,” he remarked.
“They [budget and election] are ineffective without each other. We’re working on keeping both operational.”
Agriculture Minister Abdur Razzaque said the government wants to ease people’s sufferings to retain power with their support and this view is reflected in every budget. “It’s nothing wrong.”
He also said the government would increase subsidies for social safety net programmes further if it is required to prevent “people’s struggle to get food”.
“If food production falls due to natural calamities, other programmes will be stopped and special allocations will be made for the poor. The prime minister told us time and again to ensure that no one suffers due to a lack of food.”
