Contain inflation, be business-friendly

The upcoming budget should target containing inflationary pressure to provide much-needed relief to consumers and be business-friendly to help the business community overcome the crisis stemming from the Russia-Ukraine war, said a number of businessmen and economists yesterday.

"Primarily, curbing inflation and ensuring macroeconomic stability are being expected from the budget for the upcoming fiscal year," said Selim Raihan, executive director of the South Asian Network of Economic Modeling.

He called for effective action plans aimed at improving foreign currency reserves, generating more revenue, and reducing non-performing loans.

In Bangladesh, a higher inflationary pressure has persisted for a long time as the prices of commodities have increased abnormally in the domestic markets, driven by escalated costs in the global markets and imperfections in the local markets.

Owing to market imperfections, the prices of many essentials have not declined in line with their reduction in the international markets.

And Raihan said the market monitoring of the government has not been effectively executed, so the price fall of the essentials in the international markets is not reflected in the local markets.

He urged the government to take up some programmes for low-income groups, which have been hit hard by the cost-of-living crisis.

Overall inflation in Bangladesh fell slightly to 9.24 per cent in April, driven by a decline in food prices, although it still remains at an elevated level compared to historic trends. Before the war broke out, inflation averaged less than 6 per cent.

Sayema Haque Bidisha, a professor of the economics department at the University of Dhaka, says measures need to be taken to contain inflationary pressure.

She suggested more allocation for the poor under the social safety net programmes.

"Besides, the middle-income groups need to get a relief from higher tax burden and a major reform is also needed in the taxation system."

Md Jashim Uddin, president of the Federation of Bangladesh Chambers of Commerce and Industry, said businesses are going through a bad patch for multiple factors.

In the past one year, businesses and industries in Bangladesh have been hit by the gas shortage and power outages as well as the difficulty in opening letters of credit (LCs) because of the US dollar crisis.

A fall in demand at home and abroad driven by the lingering cost-of-living crisis has also hurt their earnings.

Jashim suggested facilitating local industries so that they can produce more import-substitute goods and cut import dependence.

He said the government needs to withdraw the advanced income tax on the import of basic commodities and agricultural products to control inflation effectively.

Md Saiful Islam, president of the Metropolitan Chamber of Commerce and Industry, requested the government not to increase any tax and VAT rates as businesses are passing a difficult time.

Islam suggested facilitating export-oriented sectors so that they can easily open LCs to import industrial raw materials.

The MCCI chief called for slashing the source tax to 0.50 per cent from 1 per cent now.

Sameer Sattar, president of the Dhaka Chamber of Commerce and Industry, thinks the government should reduce corporate tax further and expand the tax net.

"A quota of US dollars needs to be set aside for the import of basic commodities."

The harassment businesses face at the hands of VAT officials needs to be eliminated, said Mohammad Ali Khokon, president of the Bangladesh Textile Mills Association.

"The budget should be business-friendly and there should be policy support and incentives for the backward linkage industry in the textile sector."

Faruque Hassan, president of the Bangladesh Garment Manufacturers and Exporters Association, also called for setting the source tax at 0.50 per cent for five years.

A 10 per cent incentive should be given on the shipment of garment items made from manmade fibres while all taxes and duties levied on the import of solar panels and on the use of recycled products should be withdrawn, he said.

"The government should take measures to help workers retain jobs."

Mohammad Hatem, executive president of the Bangladesh Knitwear Manufacturers and Exporters Association, demanded the withdrawal of the 10 per cent tax imposed on the incentives received against export receipts.

He suggested removing the 30 per cent taxes realised against the payments sub-contractors receive since most small factories are engaged in such work.