A "special increment" should be given to all officers and employees in public and private sectors to take some pressure off people with limited incomes amid the high inflation, the Centre for Policy Dialogue (CPD) said.
During the presentation of the recommendations for the budget of the next fiscal year 2023-24 on Monday, Research Director of CPD Golam Moazzem said the inflation had especially hurt fixed-income earners, suggesting the special increment be given immediately.
Fahmida Khatun, executive director of CDP, said the price inflation of daily essential food products has increased by more than 25%, which cannot be understood using just the average price inflation data published by the government.
"Currently, a family of four in Dhaka city has a monthly food expenditure of Tk7,131 without fish and meat [compromise diet]. A regular diet with fish and meat costs Tk22,664."
In this context, she recommended giving a 5% increment in the wages of workers in various industries, as well as forming a new wage structure.
She said the price of sugar in Bangladesh was higher than that of the US market. Rice prices in the country were higher than in Vietnam and Thailand, although Bangladesh is self-sufficient in food and imports a small amount of rice.
The CPD said the budget for FY2023-24 should emphasise the need to address the serious stress within the Bangladesh economy as it is facing formidable challenges due to the adverse impacts of the rise in global commodity prices following the conflict in Ukraine and the slow recovery from the Covid-19 pandemic.
Dr Fahmida Khatun said this has accentuated the macroeconomic situation of the country and has drawn attention away from the accumulated and embedded weaknesses within the Bangladesh economy.
She also highlighted several disquieting developments, including negative growth in revenue mobilisation, slow implementation of the development projects, increased reliance on bank borrowing for deficit financing, skyrocketing prices of essentials, declining liquidity situation of banks, deteriorating external sector balance, and the state foreign exchange reserves.
"Given the current macroeconomic situation, policymakers' scope of manoeuvring policy measures has become rather limited due to the declining fiscal space," the CPD said in its analysis.
In this context, the think-tank recommended that targeted fiscal measures should take centre stage, focusing on catering to the needs of the fixed-income earning and low-income population. Such measures should be accompanied by monetary measures that focus on stability, such as market-based interest rates and exchange rates.
The CPD also emphasised that good governance and discipline were essential for these policies to bring forth their intended results.
It also said that the reform measures proposed by the International Monetary Fund (IMF) might prove to be beneficial in this regard.
The think-tank also noted that while the current scenario may be disincentivising for a political government in an election year, proper acknowledgement of the current situation should be at the forefront while formulating the budget for the next fiscal year. "Failure to do so will result in a macro-fiscal policy stance that does not meet the needs of the time."
The CPD also recommended that the budget for FY2024 should take cognisance of the emerging realities, assess the available policy options diligently, and formulate the measures accordingly.
"Further instability originating from policy missteps may be unwarranted in an election year," said the CPD.
