'Be pennywise in forex spending'

A high-powered meeting Sunday on Bangladesh's macroeconomic situation suggested cautionary measures in spending foreign currencies in view of higher import trend and the cascading Russia-Ukraine war fallout.

With a pen-picture of the national economy and new budget outline on the table, the planners categorically discussed the necessity of carefulness in opening letters of credit (LC) so as to avoid unnecessary imports to save foreign-currency reserves as one of the potential thrift measures, sources said.

The prolonged Sri Lankan economic crises that forced the island nation to declare itself defaulter on foreign-loan repayment also figured high during discussion at the meeting.

Finance Minister AHM Mustafa Kamal presided over the virtually held meeting of the coordination council on fiscal, monetary, and currency exchange. Top officials of the Ministry of Finance, the National Board of Revenue, Economic Relations Division, and the central bank were present.

High subsidies on electricity, gas and fertiliser prices also came into focus at the meeting-and the participants viewed that unless their prices are adjusted upward immediately, the spending as subsidy will shoot up significantly. And the government identifies this factor as a big challenge for the economy.

Unless the prices are adjusted, an allocation of Tk 180 billion will be needed as power- sector subsidy in fiscal year 2022-23, the meeting was told.

Also, the requirement of subsidy for LNG import and interest subsidy on incentives package is estimated at Tk 173 billion, agro-subsidy Tk 150 billion, and food subsidy at Tk 67.45 billion.

An outline of the budget for next fiscal year was placed in the meeting with estimated total outlay of Tk 6.77 trillion and total revenue earning Tk 4.33 trillion inclusive of Tk 3.7 trillion to be realised by the NBR in taxes.

The size of gross domestic product (GDP) is estimated at Tk 44.12 trillion, GDP growth targeted at 7.5 per cent, budget deficit 5.5 per cent of the GDP, and inflation at 5.5 per cent.

In the next budget Tk 764 billion will be spent as salary and wages, Tk 802 billion as interest on loans, and Tk 1.77 trillion as subsidy, incentives and loans to state-owned enterprises, and Tk 383 billion for products and services sectors.

A senior finance ministry official who attended the meeting told the FE that the government "sees containing inflation as a big challenge in the coming days and months".

Thus the meeting emphasised enhancing distribution of open-market sale (OMS) foods, including that by the Trading Corporation of Bangladesh (TCB).

Also, a steep value appreciation of the US dollar was discussed in the meeting where the central bank officials described how they are taking measures to tame the greenback.

In official channels the dollar is now traded at over Tk 86 while cash dollars sell over Tk 90.

The meeting was also told that the exchange rate of the international trading currency (USD) "may go down to some extent as remittance inflow is rising ahead of Eid-ul-Fitr".

Sources said the meeting also discussed yawning trade deficit as a concern as it crossed over $22-billion mark in the first eight months of the current fiscal year.

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