Inflation forces government to frame contractionary budget

Inflation control remains pivotal priority alongside shunning unwanted spending as the government decides to frame contractionary budget for the upcoming fiscal year, as Bangladesh crosses critical pass-through following the changeover.

A panel meeting Tuesday decided to prepare the smaller budget for financial year 2025-26 keeping in mind the trend in revenue earnings and the inflow of foreign aid, officials said.

The meeting of the committee for coordination on fiscal, monetary and currency exchange, chaired by finance adviser Dr Salehuddin Ahmed, made the decisions, against the backdrop of lax execution of the current one.

Sources said at the meeting, held on zoom platform, the finance adviser asked the officials to expedite efforts to increase revenue earnings as the National Board of Revenue (NBR) was lagging far behind the budgetary targets.

At the meeting, the adviser also asked them to eschew unnecessary spending and unproductive projects to save public money from being misused.

The meeting also reviewed the trend in foreign-aid inflow in the current fiscal year, but found that the flow not satisfactory.

The adviser expressed dismay over the low-rate implementation of the annual development programme (ADP), according to officials who attended the meeting.

Sources said the meeting decided to prepare a Tk 7.9-trillion budget for the next fiscal year, lower from the current outlay of Tk 7.97 trillion. This is for the first time in the country's history the government is preparing a fiscal budget smaller than the previous one.

Finance Ministry sources said the National Board of Revenue has been given a task of collecting Tk 5.18 trillion in the next fiscal year, up from the unachieved target of Tk 4.80 trillion in the current fiscal year.

The size of the ADP for the next fiscal year has been set at Tk 2.30 trillion, also lower from Tk 2.65 trillion in the current budget.

Gross domestic product (GDP)-growth target has been set at 5.5 per cent for the next fiscal year, compared to 6.75 per cent in the outgoing

fiscal year.

The government has set a target to shoot down the rate of inflation to 6.5 per cent in the next fiscal year, similar to the current budgetary target.

Finance officials were upbeat that the target will be achieved in the next fiscal year as the inflation has eased to some extent during the last couple of months.

Also, the government decided to keep budget deficit at 3.62 per cent, amounting to Tk 2.26 trillion, compared to 4.6% of the GDP in the current fiscal year. The size of GDP in current price for next fiscal year has been estimated at Tk 62 trillion, officials said.

syful-islam@outlook.com