None can fight imported inflation: Finance minister

Finance Minister AHM Mustafa Kamal has said none can fight global price hikes and it must have an impact on the local market.

"There are two types of inflation – domestic inflation and imported inflation. The government is making all-out efforts to ensure that there is no mismatch between supply and demand in a bid to bring domestic inflation under control. We are also taking actions against syndicates and even checking godowns," the minister said at the post-budget press conference at the Osmani Memorial Auditorium in the capital on Friday.

"But, when commodity prices rapidly rise in the global market, no finance minister – however good he is – can fight the imported inflation," he added.

The minister warned that Bangladesh would also face the hit of a 37% price hike on global commodity markets.

"It is true that limited-income service holders in the cities are suffering from the rising inflation as prices of different essential items, including rice, have surged," said Agriculture Minister Muhammad Abdur Razzaque at the event, also attended by Finance Secretary Abdur Rouf Talukder.

"However, there is no wailing in the country," he added and noted that the volatile global wheat market caused the local flour price to surpass that of rice.

Saying that no scarcity of food would appear even if the country fails to import rice and wheat, the minister said the local agricultural production increased substantially.

"If we withdraw subsidies on fuel oil, gas and fertiliser, the inflation rate would go up by another 4-5%," Abdur Rouf said, while adding the government would perform its duty to check the hikes.

In response to a question from The Business Standard over the lowering of social safety allocation against GDP year-on-year, the finance secretary said 100 more upazilas would be brought under the social safety net for the elderly, widows and those tortured by husbands. Once they are included, the social safety allocation will increase by Tk4,000-5,000 crore, he said.

Investment, jobs to surge, no worry about forex reserve

The proposed budget was formulated keeping the marginalised people and employment situation in mind, said Finance Minister Mustafa Kamal. "We have cut corporate tax rate, which will increase profits of companies and create scope for new investment. Employment will be generated with increased investment."

Terming the budget marginalised-people friendly, he said businesspeople and the poor would benefit from the budget.

On the forex reserves, the minister said there was no worry about the declined reserve. "If there was no war [Russia-Ukraine], our reserves would surpass $50 billion." Mustafa Kamal was hopeful that the forex reserve would increase again soon. 

"We have no plan to cut the money supply as our debt-GDP ratio hovers 34%, the lowest in the world," he added.

Finance Secretary Abdur Rouf said private sector credit flow would not be disrupted for the proposed government borrowing of over Tk1 lakh from banks as limiting inflation to 5.6% and increasing GDP growth to 7.5% would increase the money supply by 15% or Tk2.06 lakh crore.

Subsidies in line with global volatility challenging

The finance secretary also said the proposed budget allocated TK82,745 crore as subsidies (mostly for fuel oil, gas and fertiliser) to keep the essential prices at an affordable level but it would be a challenge for the government to increase the allocation in line with soaring global prices.

Finance Minister Mustafa Kamal also hinted that the prices of subsidised products might increase further in case of global volatility.

Abdur Rouf said the proposed budget tried to cut domestic demand by lowering budget outlay against GDP. Imports of the products being produced in the country would be discouraged and the less-important development projects would be postponed, he added.