Rise in budget deficit won't fuel inflation
Experts yesterday asked the government to increase the public expenditure in areas such as food and fertiliser to minimize public sufferings following a huge surge in prices of essentials.
They also asked the government not go by with the IMF prescription on maintaining the budget deficit within 5 percent of gross domestic product (GDP) as they think an increase in budget deficit would not fuel inflation.
They made the suggestions at a pre-budget discussion organized by the Bangladesh Institute of Development Studies (BIDS) in Dhaka.
"India has a budget deficit of around 8 to 9 percent without having much inflation," Prof Wahiduddin Mahmud, who was a finance adviser in the 1996 caretaker government, told the seminar on "National Budget 2008-09: Challenges and Response".
"We need a higher budget deficit this year to finance the additional costs," another former finance adviser Dr Akbar Ali Khan said.
Khan said budget deficit would not a major problem for Bangladesh.
"We should not be intimidated by inflation despite having a good reserve," he added.
Bangladesh has been maintaining the IMF ceiling on budget deficit for the last several years, but this year it may not be followed in the wake of additional expenditure of the government.
This year's fiscal deficit has been estimated in the budget at 4.2 percent of GDP, including about Tk 7,000 crore loans of the petroleum corporation. According to finance ministry sources, during the first nine months of the current fiscal year, the deficit has already gone up at 4.7 percent of GDP mainly for subsidising additional costs for food, fertilizer and petroleum products.
Chaired by BIDS Director General Quazi Shahabuddin, the seminar was also addressed by Finance Adviser AB Mirza Azizul Islam, and Dr Mahabub Hossain, executive director of Brac.
The speakers asked the government to prioritise agriculture, power, food security and private sector development in the coming budget for fiscal 2008-09.
Wahiduddin Mahmud asked the BIDS to conduct a short survey on the country's employment scenario so that the government could take its action plan in the next year's budget.
He also said private sector credit has to expand this year as it was in the recent past. Like Dr Mahabub Hossain, he also viewed that subsidy to energy products needs to be adjusted.
Hossain, who is a former DG of BIDS, said the coming budget should focus on widening the direct tax networks.
Admitting a slowdown economy this year, Finance Adviser Azizul Islam said the situation is not as bad as the media reports.
"No doubt we are passing a tough time, but the picture is not as grim as media report," the adviser told the seminar.
He said all economic indicators are performing well excepting import of capital machinery. But he did not comment on the soaring inflation that is almost in double digit since July last year.
BIDS directors and fellows presented seven papers at the seminar.
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