Business-as-usual attitude in meeting budget deficit won’t work
A business-as-usual attitude in meeting budget deficit may stoke inflationary pressures further and deepen the US dollar crisis in the upcoming fiscal year, warned a noted economist.
Zahid Hussain, a former lead economist of the World Bank's Dhaka office, said the budget deficit has to be brought down in 2023-24. But it remains to be seen how this budget deficit would be met.
For all latest news, follow The Daily Star's Google News channel. "If we want to overcome the budget deficit in 2023-24 the way we have done in the outgoing fiscal year, both inflationary pains and the dollar crisis will be more acute."
He suggested the government refrain from relying on heavy borrowing from the central bank to meet the state's expenditure.
"At the same time, if the government borrows more from commercial banks, it will crowd out the private sector."
"So, the budget deficit will have to be kept as much low as possible and there should be heightened efforts to mobilise as much low-cost foreign financing as possible and increases their utilisation."
Hussain thinks the government would have to take the structural reforms forward to secure budget support from multilateral development partners.
Some reforms have to be carried out in the coming fiscal year in the areas of energy, revenue, expenditures, and tariffs.
"It remains to be seen how much progress we can make in these areas and advance towards to the finishing line," Hussain said.
He said raising a higher level of revenue will rely on how much taxpayer-friendly the government can make the tax administration and the tax policy.
"So far, there is no visible change in the tax policy. The tax policy should be reformed keeping in mind the national interest, economic progress, and redistribution of wealth."
The former World Bank official said the government has already raised the prices of energy in line with the international markets.
"So, introducing a formula-based pricing system should not be a problem. If the government goes for such a pricing mechanism, the prices may even decline. Then, it will give some breathing space to the people."
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