Noted economists of the country at a dialogue held in The Daily Star last Thursday expressed their concern over the performance of the economy. The issues that came out in sharp focus from the discussion revolved mainly around high rate of inflation coupled with dipping of the foreign currency reserve due to financing of the import bill for rental power plants.

Officially, the inflation has often been attributed to external factors, especially to the growing financial crises in the US and the EU nations. True, our imports from these countries are huge and inflationary trends in those economies have their impact on us. The former World Bank Official Sadiq Ahmed, for instance, disagreed with the view that the inflation was imported. In fact, the domestic factors propelling the inflation are too obvious to be wished away.

Beyond the abstract theoretical economic jargons, to which the man in the street is not privy, the best way to have a feel of inflation is to go to the marketplaces where the common people have to visit everyday to buy the essential commodities. The prices are galloping up not in a matter of weeks or months. Those are skyrocketing in days. From the kitchen markets to the transport fares to house rents to utility prices, everywhere the costs have gone for as it were a hyper drive without any let up. Except to those who have unearned money to

remain insensitive to this accelerating rise in the cost of living, the common people from the day labourers to those belonging to the lower and middle income groups, life is becoming unbearable. Is the origin of this exponential rise in the living costs entirely external in origin?

Is it not strange that the value of Taka is plummeting vis-a-vis dollar and other foreign currencies, when in many developing economies the opposite is happening? Are those countries also not hooked to the same overseas economies to be impacted by them?

Understandably, the economists at the dialogue pointed to the domestic factors including high level of government borrowing from the banks, unhealthy credit growth, swelling import bills from oil imports, sudden spurt of Annual Develop Programme (ADP) spending in the closing months of fiscal year, falling rate of investment, increase in consumption spending of foreign exchange, especially the remittance dollars and so on are militating against the stability in the market as the economy as a whole. But over and above these, political intervention in the financial institutions has been making things further worse.

To get rid of the predicament the major prescription of the economists has been to curb inflation by all means. But that needs drastic monetary policy, which has to be restrictive

in nature. That also involves restricting growth. However, the growth has already got stuck in the mud of infrastructural constraints like shortage of power and fuel. So far as fiscal management through budgetary measures is concerned, it, too, may require some restrictive steps. That traditionally involves raising revenues through increasing taxes, which would entail hitting the common people further below the belt. It would also affect economic growth. The government has already been borrowing extensively from banks to

finance government programmes. Job creation for the poor needs increased government spending which, again, would lead to further pushing the inflationary pressure upwards. So, the government is already in a tight spot in striking a balance between restrictive budgetary and monetary policies.

It has to be borne in mind that raising tax rates is not the only way to increase revenue earnings. The government has long been talking of expanding the tax base to include greater number of people in the tax net. And to that end, measures taken so far include easing and streamlining the process of filing tax returns. Other steps like tax fairs to popularise taxgiving among the people have also been taken. But who are these people that the government has been targeting to enhance revenue receipts? Most of them belong to the middle income

group.. But have they not already been taxed too much by the high living costs driven by unbearable price spiral? The very rich, on the other hand, cannot be unaware about the importance of paying taxes. But they are hardly willing because the administration is being rather soft on them.

The economists at the dialogue has suggested taking harsh, unpopular measures to address the present economic situation and the ways they have indicated were spelt out in rather general terms like arresting inflation, containing price spiral, cutting subsidy, discouraging rental power and so on.

But what about being harsh on the tax-dodgers from among the rich?

An example of harsh step could also include getting a correct report on the wealth status of the very rich section of the population. And if their wealth is properly taxed, that would go to boost to the government's revenue earning.

The pervasive corruption in each and every department of the administration is one of the biggest sources of the unearned black money. The money earned through this illicit means is usually spent in buying lands, buildings, expensive cars, going for foreign tours and in conspicuous consumption.

A close watch on these transactions and spending would help to home in on the holders of the black money. To track down and then catch these ill-gotten money-holders would require tough measures. Has the government the political will to go that length?

The writer is Editor, Science & Life, The Daily Star.