The country's economy is in the midst of multifaceted strains and it is imperative to formulate a budget with a pragmatic approach to tackle these challenges. It is important for the government to streamline its spending. Although the government has taken steps to reduce spending in some cases, more steps are needed. We cannot afford to unnecessarily spend even a single taka.
Areas where the government is subsidising, especially in agriculture, should be left as is in the next budget. Government subsidies for agricultural materials, fertilisers and electricity used for irrigation should continue. Prices of various food items have already gone up due to soaring prices in the global market. So, we need to boost agricultural production to keep the market in check.
However, subsidies in some areas need to be reduced. For example, the ready-made garment (RMG) industry is getting subsidies on electricity, loan interest and other areas, including cash assistance against export. After so many years, it's about time the sector became self-reliant; and the government should focus on reducing subsidies in this sector. The government may reflect on identifying other areas where subsidies, used in the RMG sector, can be better utilised.
It will not be wise to do any big experiment with subsidies this year. However, it is important to ensure that the subsidy in the agricultural sector reaches the real farmers. There are many middlemen and steps should be taken to eliminate them.
However, subsidies can be reduced in sectors which are in a strong position like the RMG industry.
As the price of LNG has gone up in the international market, pressure to subsidise is increasing on the government. Basically, we need to focus on alternative fuel sources to LNG. The amount of subsidy given here should continue. As the economy is already under pressure, reducing subsidies for LNG will push traders to hike prices of goods.
The rate Bangladesh Energy Regulatory Commission has recommended to increase the wholesale electricity tariff is not tolerable for any sector. Be it the consumers or the industrial sectors, neither has the ability to pay electricity prices at such a high rate. However, the subsidies currently being offered are also public money. Although the consumers do not pay the subsidy directly, the fact of the matter is it is spent from people's money, irrespective of the sources the government collects it from.
The power sector has many problems, including the burden of overcapacity and a lack of institutional capacity. As a result, even though there is no power generation, the government is paying the rental power plants. The government needs to focus on streamlining it.
Electricity prices should not be increased at this time. If the government must take the decision, then it must focus on making it tolerable for everyone. The government can seek expert opinion on this.
Inflation has already risen sharply in the domestic market. There will be pressure in the next budget to bring marginalised people under the social safety net due to the rising prices of consumer goods.
The government will have to spend extra money to increase the scope of subsidies and social security. This will require additional revenue collection. But as in the past, it will not be possible to meet the revenue collection target and, as a result, the government will have no choice but to adjust with subsidies in the end.
The country's revenue sector is in deep trouble. Efforts to eliminate these problems and increase the tax-to-GDP ratio are stuck only on paper and in word of mouth.
The last few five-year plans and perspective plans called for reforms in the sector, but nothing was done. The government is also admitting that it is not able to make necessary reforms in the revenue sector. Maybe the government itself is not very interested in reforms in the sector because of the vested groups.
The biggest problem for the country at the moment is low revenue collection. Due to this the government is not able to spend the necessary money in critical sectors, including the health sector. The government's political will is needed to turn the plans for the revenue sector into reality.
Major reforms are needed in both tax infrastructure and tax policy. Traders have also at various times spoken out in favour of revenue reform, while some have adopted a stand against it.
It is difficult to cope with the huge economic pressures with such a small amount of revenue and also a matter of great concern as to how we will achieve the Sustainable Development Goals by 2030 with so little revenue.