Originally posted in The Financial Express on 7 June 2024
Dr Debapriya Bhattacharya, a distinguished fellow at the Centre for Policy Dialogue (CPD), says the budget fails to recognise ongoing economic problems properly as it lacks adequate measures to overcome them.
He said no coherent pathway has been laid out for controlling inflation, managing debt distress, improving revenue collection and ensuring quality of public expenditure.
“The budget as well as the medium-term macroeconomic framework doesn’t allay our fear about the challenges of macroeconomic management.”
One of the major concerns is both public and private investment. Although the GDP growth rate has been fixed at 6.75 per cent for FY25, it is much higher than the current estimate of 5.82 per cent for FY24.
One wonders whether there will be adequate finance to support the investment requirement, comments Dr Bhattacharya.
The private-sector credit growth has been kept at 9.0 per cent, which is less than last year’s.
Moreover, the availability of credit will be constrained by the huge borrowing by the government. About 60 per cent of the government’s expenditure will be financed by the banking sector.
Export growth has been projected to be similar to that of last year’s, i.e., 8.0 per cent.
Import will pick up a bit, but remittance growth is expected to fall to 7.0 per cent from 10 per cent.
As a result, Dr Bhattacharya said, the current account balance would remain marginally positive, less than 0.6 per cent of the GDP.
On the other hand, foreign-exchange reserves are supposed to increase by more than $3.0 billion. One is not sure that the pressure on taka is going to ease in the upcoming fiscal year.
“Debt management will remain a critical issue next year. The entire ADP will be financed by borrowed resources, which is a major issue,” added Mr Bhattacharya.