Contractionary monetary policy to curb inflation to 6.0pc

Inflation will fall significantly in the next fiscal for various balancing measures, finance officials predict, as the coming Tk 7.55-trillion budget sets the target at 6.0 per cent.

The target was set at a meeting of the fiscal coordination council and resource committee, organised Wednesday virtually by the ministry of finance with finance minister AHM Mustafa Kamal in the chair.

The meeting was told that the central bank would announce a contractionary monetary policy next June to regulate money supply to the market which will help lessen inflation to some extent.

The target is much lesser than the present rate of inflation that climbed up to 9.33 per cent in March and over 8.0 per cent since October this fiscal year.

Since February last year, when Russia invaded Ukraine, prices of essential commodities have soared worldwide, pushing the limited- income group of people onto the roadsides. Higher inflation is eating up their purchasing capacity and also forcing them to spend from savings.

The total outlay of the forthcoming new budget is set at Tk 7.55 trillion, officials said.

Of the aggregate budget, the allocation for annual development programme (ADP) is estimated at Tk 2.6 trillion, up from the current year's Tk 2.46 trillion.

The total revenue-earning target is set at Tk 5.0 trillion, with a 5.3-percent deficit.

The meeting set economic-growth target at 7.5 per cent for the fiscal year 2023-24-significantly up from the current revised targets forecast by the government and 'development partners'.

The spending for subsidy is set at Tk 1.11 trillion and some Tk 1.3 trillion will be spent on social-safety-net recipe.

Officials said as the high rate of inflation could continue in the next fiscal year, the government is raising allocation for social- safety net to give the poor people relief from the inflationary pressure to some extent.

In the new budget the allocation for agriculture subsidy will be Tk 170 billion.

In the next budget food subsidy will be increased by Tk 13 billion compared to the current budget, especially due to increased allocation for the Trading Corporation of Bangladesh (TCB) and Open Market Sale of goods by the different government departments.

Sources said allocation for debt servicing in the next fiscal year is set at Tk 1.02 trillion--way up from the current fiscal's Tk 803 billion, as many of the foreign loans have become mature in recent months.

A senior finance official, who attended the meeting, said, "The government is finding large subsidy and debt servicing as major challenges for the next fiscal year."

Sources said the finance minister at the meeting claimed that Bangladesh's economy "is in a very well position compared to other economies".

Bangladesh Bank governor Abdur Rouf Talukder at the meeting said from next July the rate of interest on bank loans would be market-based instead of the present style of setting interest rate.

"Also," he said, "measures are underway to enhance the foreign- currency reserves in the coming days."

At the meeting, chairman of the National Board of Revenue Abu Hena Md. Rahmatul Muneem said in the coming months revenue collection would increase significantly though the collection was dull during the last couple of months.

syful-islam@outlook.com