Bangladesh Budget 2022 Analysis: Evaluating its impact on economic crisis and inflation control

Bangladesh Budget 2022 Analysis: Evaluating its impact on economic crisis and inflation control

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Prothom Hello ,

This is the fourth term of the Awami League and the first budget of the new finance minister. What is new in this budget? Broadly, how would you evaluate it?

There were a lot of expectations from this budget. Our economic problems or crisis, whatever you call it, have been going on for a long time. After the Covid pandemic, the Russia-Ukraine war and then this period of high inflation, the continuous depletion of foreign exchange reserves, fluctuations in export revenues and remittances – all these factors led to expectations that this budget would have specific guidelines to deal with these issues. But the initiatives taken in the budget are not enough to address these issues. It can be said that the expectations that were there about the budget have definitely not been met.

The targets set for growth, reducing inflation and private sector investment do not seem realistic. The additional taxes imposed on certain products and services (such as use of mobile phones, internet and other services) will fall directly on the shoulders of low-income and middle-class people.

If we talk about tax reforms, we need to put more emphasis on income tax so that the rich and super-rich pay more tax. In the budget, an initiative was taken to increase the tax rate from 25 percent to 30 percent, which is a good step. But the problem is that a large section of the rich and super-rich do not pay tax. They remain outside the tax net. So even if the tax rate is increased, the amount of income tax cannot increase unless they are brought into the tax net. Our revenue-GDP ratio is very low, much lower than even our neighboring countries.

Our first expectation was that the budget would give priority to controlling inflation. There was a need for a framework to declare war on inflation by bringing a balance in our monetary policy, revenue policy and market management.

The second expectation was that there would be stronger and more explicit initiatives for tax sector reforms. The government did not do that. It took the easy route by continuing with the existing tax system.

The third expectation was that serious steps would be taken to reform the financial sector. Strong decisions were expected on two issues – how loan defaults can be reduced and how good governance can be established in the banking sector. But there was nothing clear in any of these areas.

The budget failed to meet expectations in terms of control of inflation, reforms in the tax sector and reforms in the financial sector.

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