Austerity will continue to control inflation, budget deficit will be reduced: Finance Minister

Finance Minister Abul Hasan Mahmud Ali said inflation is one of our major challenges. Various austerity programs including supportive fiscal policy, i.e. expenditure reduction, disincentive of less important expenditure have been adopted in order to control the issue and obtain macroeconomic benefits. Yet domestic inflation remains stubbornly above 9 percent due to import-induced price hikes and domestic supply chain disruptions.

He said, in the budget of the next financial year, we will continue fiscal consolidation i.e. reduction of budget deficit and budget belt tightening i.e. austerity even if limited. However, in the long run this approach may slow economic growth; That is why we will aim to gradually increase government spending in the second half of the next financial year. This will be possible if the revenue collection can be increased. To that end, we will focus on phasing out tax exemptions as well as increasing revenue collection.

According to Finance Minister Abul Hasan Mahmud Ali, there are six major challenges in the macro economy of the country in the next financial year 2024-25. Among these, the main challenge is keeping inflation under control.

In his budget speech presented in the National Parliament on Thursday (June 6), the Finance Minister mentioned these challenges and some strategies to deal with them.

Abul Hasan Mahmud Ali said that the Russia-Ukraine war that started in February 2022 has increased the prices of daily necessities worldwide and has also affected Bangladesh. As interest rates rise in developed countries to curb inflation, pressure is created on the exchange rate of foreign currencies against the rupee, and at the same time foreign exchange reserves tend to decrease. This resulted in significant depreciation of the rupee against foreign currencies leading to import-induced inflation.

He said, global inflation is coming down. Last April, the rate of inflation was 3.47 percent in the United States and 4.83 percent in neighboring India. Global inflation will fall to 3.9 percent by 2027, the IMF said. However, the inflation rate in Bangladesh is above 9 percent despite the global inflation trend.

The finance minister said that supply-chain error in the country's market is one of the causes of inflation. But another major reason is the depreciation (depreciation) of the rupee against foreign currencies. The rupee depreciated by 25.5 percent against the US dollar from July 2022 to May of the current fiscal year. It has increased the price of imported goods. which increased inflation.

He further said that contractionary monetary policy is being followed to reduce the rate of inflation and supportive fiscal policy is also being adopted. Family Card, OMS etc. programs have been strengthened to protect the common man from the pressure of inflation. As a result of these policies adopted by us, we expect inflation to come down to 6.5 percent in the next financial year.

Bangladesh /MP