It is said in the budget that the highest priority will be given to contain the surging inflation. Now, let's look at some of the budgetary measures to tackle the rising commodity prices. The inflation rate for the FY2022-23 has been set at 5.6%. I feel that this target is not practical.
The assumption that worked for setting the target is that we, as well as the whole world, will get rid of the ongoing crisis this year. But the crisis is not going away anytime soon. Instead, the international agencies are lowering growth projections as the World Bank fears recession and stagflation to hit many countries.
One of the sources of inflation is led by imported inflation due to the rising cost of imports. If the world faces such a situation, how will we get rid of the crisis? It is not rational to assume that we ourselves will solve the problems, as our economy is closely related to the world economy.
There are several measures to contain inflation including generating income by creating employment. It can not be done instantly. In an emergency, the poor and lower-middle-class people are also feeling the pressure of the increasing prices. The government will have to provide them with direct assistance. The government will also have to increase the food aids as well as ramp up the Open Market Sale (OMS). Our target is not limited to the poor now, low-income people and the lower-middle-class people are facing the inflationary pressure too.
We recommended increasing the tax-free income limit which stands at Tk3 lakh now. It could be raised to Tk3.5 lakh. We have not seen such measures in the budget. The figure has been kept unchanged. On the other hand, there are many scopes for tax exemption. One of the purposes of the Ministry of Finance or the finance minister is to mobilise resources with the budget. If you do not have the resources, how will we cover the extra spending?
We could not increase the tax-free income limit by 50 thousand annually. But at some places, some facilities have been proposed like transportation allowance, house rent, health care. The poor will not get any benefit from it.
Another thing is about investment. We get a tax rebate if we invest money in savings instruments. The tax rebate has been increased from 10% to 15%. It will benefit the upper class only.
The other thing is about undisclosed assets. If someone comes with undisclosed money from abroad, a special tax facility has been proposed. Such measures are not helpful for the poor and low-income people. The proposed measures in the budget for the poor and low-income people are very inadequate.
The corporate tax has been reduced. It will be good for business and production. It is a growth-centric measure. There is nothing for the poor and middle-class people. We have seen that sufficient measures have not been taken in the budget to contain the existing inflation.
The allocation for social protection is 2.55% of the GDP. It has not increased compared to last year. Social protection also includes the pension of retired government employees. The allowance for the physically challenged has been raised to Tk850 per month. It is a good initiative. But the allowance is not increased for others.
As I have said in the beginning, inflation should be the first priority. If we see actually how much measure has been taken, we do not see that much importance in action than in words. Of course, the subsidy is not good for the economy. When the government spends money on subsidies, the government cannot spend on other priorities. Sometimes, the subsidy becomes a waste of resources.
But we have to bear in mind that we are going through a tough time. As we all are consumers, the government will have to adjust it gradually. For this reason, we have suggested the government continuing subsidies for some more months.
Of course, the challenge of the government is to generate revenue to give subsidies. The government is weak in collecting revenues. Due to the weakness in revenue collection, the government has to collect money from different sources. And due to the weakness in collecting revenues, the government cut important things like subsidies or incentives or assistance for poor people.
This is the problem of balancing. This is the problem due to the weakness of our overall fiscal structure. On one hand, we are weak in collecting revenue. On the other hand, we are weak in spending. Many times, we are weak in setting priorities. The reflection of this weakness is found in budgets.
Dr Fahmida Khatun, executive director of the Centre for Policy Dialogue (CPD)