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Bold steps must to rein in inflation: CPD

Published : 03 Jun 2023 01:09 AM

The Centre for Policy Dialogue (CPD) has said the proposed budget for fiscal 2023-24 fails to provide a bold measure for taming inflation, the key challenge facing the economy.

CPD Executive Director Dr Fahmida Khatun made the statement while presenting the analysis of the national budget for the fiscal 2023-24 at a press briefing at a hotel in the capital on Friday.

Fahmida expressed suspicion about achieving the goals of inflation falling to 6 percent and GDP growth increasing to 7.5 percent given the current situation for the next budget.

“If we look at the foreign income, we will see that remittances are going down. The foreign exchange reserves are also in a downward direction. There is a huge shortage in the electricity and fuel sectors. As a result domestic production is greatly disrupted,” she mentioned.

Currently the country’s economy is going through challenging times, she said, adding that the stability of the economy of Bangladesh is gradually weakening. 

In these difficult times, there was an opportunity to take some tough measures in the budget but they were not taken, Khatun mentioned.

CPD said that the economy was not currently in a position to stimulate investment for achieving a 7.5 percent GDP growth. 

To reach this target, private sector investment would need to increase from its current level of below 22 percent to over 27 percent of the GDP.

Meanwhile, the Centre for Policy Dialogue (CPD) recommended the government withdraw proposal of implementing a minimum tax of Tk 2,000 as it is a burden for low-income people.

Fahmida Khatun said we (CPD) recommended increasing the limit of tax-free income. The limit has been increased from 3 lakh to 3.5 lakh, which is a good thing, she mentioned.

“However, while taking 38 government services, the service recipient has to submit a tax return and pay a tax of Tk 2,000 regardless of the income, it seems inconsiderate to us. Such a tax would be a burden on low-income people. This two thousand taka minimum tax should be removed,” she added.

She thanked the government for imposing a surcharge on owners of multiple vehicles for each vehicle after the first one, at rates depending on engine capacity.

"The owners of multiple vehicles will have to pay surcharge for each vehicle after the first one, at rates depending on engine capacity (in addition to the previous tax adjustable AIT). This is a timely decision. The surcharge which will be collected should be used to cut carbon emissions," she added.

She said the Total Tax Incidence (TTI) on imported raw materials to produce sanitary napkins and diapers should be brought down to zero by exempting all forms of VAT, CD, SD AIT, RD, AT and AIT.

However, Fahmida Khatun said, the FY2023-24 budget lacks new initiatives focused on migrant workers and enhancing remittance flow.

To address this, she mentioned, CPD proposed two key measures: a) increasing the cash incentive from 2.5 percent to 3 percent; b) implementing a multi-year mega project to tackle challenges faced by migrant workers across the three stages of migration: pre-departure, destination, and reintegration.

This project would involve collaboration with the 12 ministries involved in the migration process, she added.

She said such initiatives would contribute to better migration of workers, increase remittance flow, and improve the livelihood of the migrants and migrant community.

Among others, CPD Distinguished Fellow Prof Mustafizur Rahman, Research Director Khondaker Golam Moazzem and its Senior Research Fellow Towfiqul Islam Khan also spoke during the event.

The government has rolled out a smart national budget of Tk 7,61,785 crore for the 2023-24 fiscal year with a focus on tackling inflation as well as on job creation, the fourth industrial revolution and “Smart Bangladesh.”

Finance Minister AHM Mustafa Kamal placed the budget titled “Towards Smart Bangladesh Sustaining the Development Achievements in a Decade and a Half” in the national parliament on Thursday with a 7.5 percent GDP growth and 6 percent inflation projection.