Rejects adverse impact of credit inflow to private Sector

Staff Correspondent

Finance adviser AB Mirza Azizul Islam said Tuesday the proposed budget deficit was much smaller than in India and other neighbouring countries.

The adviser also brushed aside fears of an adverse impact on credit inflow to the private sector as the government planned to borrow about Tk 13,000 crore from the banking sector to narrow the deficit, which is Tk 30,580 crore.

"In the July to March period of the current fiscal year, we internally borrowed around Tk 2,000 crore more than in the same period of the previous fiscal year. Yet, private sector credit inflow grew over 17 percent," Mirza Aziz said during a post-budget dialogue, organised by the Centre for Policy Dialogue.

Internal borrowings should not negatively affect the country's private sector and, broadly, the economy, the adviser explained.

The dialogue on "State of Bangladesh Economy and Analysis of Budget for FY2008-09" chaired by CPD's trustee board member M Syeduzzaman was attended by politicians, economists, business leaders and representatives of donor agencies and civil society.

In his speech as chief guest, Mirza Aziz said: "I don't hesitate to agree that inflation would be much higher than the projected 9 percent."

On implementation of the budget, he said it would be a challenge for the government.

"We as well share the concern with you and the government is fully conscious about that."

The adviser said implementations would be easier this time as a large part of the budget was development spending.

CPD's executive director Mustafizur Rahman made the keynote presentation at the dialogue.

Speaking as special guest, economist Wahiduddin Mahmud said the proposed budget seeks short-term solutions.

"Problems will occur in areas where the underlined causes are not short-term but mid-term and long-term."

The proposed budget needed to be "continuously reviewed", he said.

"It is necessary to have some mid-term corrections such as the recent price adjustment of urea fertiliser," added Wahiduddin.

Workers' Party chief Rashed Khan Menon criticised the government's move to raise fertiliser prices to channel subsidies into agriculture.

Menon questioned the rationale of providing dearness allowances only for government employees, which he said was discriminatory against private sector employees.

The politician stressed a rationing system in "all walks of life" as the fixed income group was hardest hit by the soaring prices of commodities.

IMF's resident representative Jonathan Dunn said certain proposals of the budget had potentials to weaken the country's revenue base.

"A very strong revenue base would be needed to pull the country together to support the poor."

He added that it was appropriate to expand the social safety net as the lower income group was facing immense pressure.

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