No good news for lower, middle income groups in budget: CPD

The Center for Policy Dialogue (CPD) has found no good news for lower and middle-income groups in the newly announced budget, voicing doubt about government’s ability to lower the inflation rate at 5.6 per cent.

Finance Minister AHM Mustafa Kamal placed the budget for FY2022-23 expecting inflation rate to come down to 5.6 per from over 6.29 per cent (in April as per BBS). Experts and economists believe the inflation has hit over 10 per cent.

As a result, lower, middle class and fixed income groups will face challenges to run a family as the commodity prices are unlikely to come down if the inflation trend remains higher.

The CPD made the observation at a press conference in a city hotel on Friday, a day after presentation of Bangladesh’s national budget of Tk6.78 trillion for the upcoming fiscal year starting from July 1.

“The prices of all kinds of goods including fuel oil and food products are increasing in the international market. Commodity prices have been rising in the world market since the Covid-19 situation began to normalize,” said Dr Fahmida Khatun, executive director of CPD.

She said, "The budget has not taken adequate steps to reduce the prices of essential commodities. It was necessary to reduce the prices of 29 commodities including rice and pulses, but it did not happen. The CPD had recommended a reduction in taxes to reduce the prices of commodities. But that too was not kept.

Budget offers no good news for lower, middle income groups: CPD
Though the finance minister mentioned the challenges the economy faces, he did not mention the pathway to face the challenges, she said.

The private sector credit growth has been set at 15 per cent which will be affected if the government borrows from the banking system to meet the budget deficit, CPD said.

The exchange rate is expected to appreciate and reach Tk86.2 for per US dollar on an average in FY 23, does not reflect the reality on the ground. How the target would be achieved is not narrated in the budget.

The think tank appreciated the budget for increasing subsidies in the agriculture sector and food production.

But it noted that there is no allocation for the youth employment and skills development in the budget, though the age of around 57 percent of the population is below 25 years.

CPD urged the withdrawal of tax on English medium schools and importing of foreign books and journals as it used in knowledge activities. Many middle class families send their children to English medium schools, and so they require tax exemption as it is a knowledge developing sect.

Fahmida said the provision of whitening smuggled money is not good for the economy at all.

She said both options of smuggling money abroad and bringing it back are completely immoral.
She said bringing laundered money back home won’t be feasible.

The move, she said, will be discouraging for the regular tax payers. On the other hand, there will be no tax exemption for the poor - it is not acceptable for social justice, she said.

Replying to a query professor Mustafizur Rahman said if the provision is kept to legalize laundered money in such a way, the total illegal system will get legal and an organized group will be encouraged to launder illegally earned money out of the country.

He said individual taxpayers are paying tax around 25 percent, corporate tax payers paying around 40 per cent tax, then 15 per cent tax for legalizing illegal money is really discouraging for the legal tax payers, he said.

Khodaker Golam Moazzem, research director, Towfiq Islam Khan, senior research fellow, Syed Yusuf Saadat, research associate of CPD, among others, spoke on different aspects of the budget.