Budget doesn’t reflect reality

The proposed budget has not properly addressed the pressing issues – higher inflation and the US dollar crisis -- that are causing immense macroeconomic imbalances, said economists in their immediate reaction.

"It seems to the me that the proposed budget has not paid enough attention to two macroeconomic imbalances- inflation and dollar crisis. The budget has been rather oblivious to these although there has been mention of inflation in the budget," said Zahid Hussain, a former lead economist of the World Bank's Dhaka office.

One of the main elements of inflation is increased domestic demand.

"But there is not enough measure to contain domestic demand," said Zahid.

Reducing budget deficit is one way to contain inflation.

"But we see an increase in the budget deficit from the revised budget. This will stoke inflation," he said, adding that austerity in expenditure would have helped curb prices spike and US dollar demand.

"We have not seen that in the budget."

Zahid went on to say that the duty and higher taxes on some products, also used by the middle-income groups, may fuel the inflationary pressure.

However, he welcomed the initiatives to promote exports.

"The export benefits have been unified. It will encourage other exporters to diversify the export basket."

Selim Raihan, a professor of economics at the University of Dhaka, said, "Although the budget acknowledges the global context, the domestic context is not well-analysed and addressed."

He said they did not find adequate initiatives in the budget to protect the marginalised groups from the onslaught of inflationary pressure.

"The budget acknowledges the rising inflationary pressure. However, the expectation of containing the average inflation to 5.6 percent in the next fiscal year is quite ambitious, given the current situation and shifting global economic factors."

The budget did not reflect the challenges facing micro and small enterprises, he said.

Prof Selim, however, called the plan related to the sales through the Trading Corporation of Bangladesh to mitigate the effect of inflation on the low-income people commendable.

"The budget also promises to continue taking actions against hoarders, but does not offer a detailed plan."

Professor Mustafizur Rahman, a distinguished fellow of the Centre for Policy Dialogue, said the budget did not meet the demand of the hour.

He, however, applauded the initiative aimed at reducing the corporate tax rates.

The reform initiatives in the financial sector should be implemented properly, he said.

Binayak Sen, director-general of the Bangladesh Institute of Development Studies, voiced concerns about the decrease in the tax-to-GDP ratio.

"It's alarming."