Inflation to cool in later part
FROM PAGE B1
The Consumer Price Index rose 9.02 percent in FY23 against the government’s revised target of 7.5 percent, the highest in 12 years. This was much higher than the 5-6 percent average inflation seen in the decade before the Russia-Ukraine war.
The government has set a target to keep the average annual inflation rate at 6 percent in FY24.
The ADP report states that moderate inflation and an increase in remittances will contribute to reviving private consumption, while the completion of a number of major infrastructure projects will increase investment.
Private investment, however, may be dampened by the initial higher interest rates following the enhancement in the monetary policy framework, it said.
“The government is managing relatively well against the external economic uncertainties while advancing infrastructure development and critical reforms to improve the investment climate,” said ADB Country Director Edimon Ginting in a press release.
The key structural reforms include strengthening public financial management, enhancing domestic resource mobilisation, improving logistics, and deepening the financial sector, which are critical for private sector development, export diversification and productive job creation in the medium term.
“Continued high oil prices also provide a good incentive to accelerate reforms to expand domestic renewable energy supply and achieve the country’s climate change goals,” Ginting said.
Speaking to The Daily Star, Khondaker Golam Moazzem, research director at the Centre for Policy Dialogue, said one part of the inflation is related to imports, but the fall of non-fuel commodity prices is not adequate to cool higher inflation.
“The reduction in fuel prices is very important for us as the exchange rate has an outsized relation to it. Besides, the reserve is depleting. And the formation of a new global fuel alliance indicates that the prices of fuel will not reduce soon. So, the pressure of fuel-related inflation will continue to hurt us.”
Moazzem thinks it is nearly impossible that the government will initiate any reform that can ease inflation.
In the case of market management, the government is not containing big business groups. Rather, the government is opting for imports, piling up more pressures on the reserve, he said.
Last week, the reserves slipped below $22 billion.
According to the ADB publication, GDP is expected to grow 6.5 percent in FY2024, up from an estimated growth of 6 percent in the previous fiscal year.
The slightly faster growth forecast reflects an improvement in domestic demand and better export growth on the back of economic recovery in the eurozone area.
The main risk to the growth projection is a further deterioration in export growth if global demand is weaker than expected, the report said.
The ADB termed the government’s budget for FY24 ambitious.
The budget aims to achieve a 10 percent revenue-to-GDP ratio and a 15.2 percent expenditure-to-GDP, with a resulting fiscal deficit of 5.2 percent.
The export growth is expected to accelerate to 9 percent.