FY25 budget could be contractionary to tackle economic hardships

Former Bangladesh Bank governor Dr Atiur Rahman thinks the national budget for fiscal 2024-25 will be crucial as the ongoing geopolitical tension in the Middle East region has produced economic complications elsewhere, including Bangladesh.

“The upcoming budget will be different in manner compared to those in the past few years. The past few budgets were mostly expansive. But the upcoming budget could be a contractionary one to deal with current economic hardships,” he told the Daily Sun in a preview of the FY25 national budget.

This veteran development economist said the path of Bangladesh’s macro-economy has become tumultuous owing to the pandemic-induced economic slowdown and the Russia-Ukraine war.
Dr Atiur, a Prof Emeritus of Development Studies at the University of Dhaka, said, “Being the first budget of the new government, it will be setting the tone and show us how the policymakers are planning to navigate the macroeconomic pressures amid volatility in both domestic and international fronts.”

Finance Minister Abul Hassan Mahmood Ali is scheduled to place a budget of around Tk8 trillion for the FY25 before parliament on 6 June.

The former central bank governor opines that there is no room for an expansionary budget at a time when a contractionary monetary policy is in place to tame inflation.
“The budget must be aligned with the monetary policy. So, it is deemed that budget cuts will come, and we should welcome such contractions. We should not forget that protecting people from macroeconomic turbulence is the government’s top priority,” he stated.

“At the same time, the government must ensure that budget cuts will not cause much harm to the social sectors such as education, health and social welfare.”

Dr Atiur, also the founder and chairperson of Unnayan Shamannay, a research platform, mentioned that the budget should also focus on climate resilience because it is necessary not only for the environmental safeguard but also for the maintenance of our macroeconomic balance.
This veteran economist said climate financing is drawing attention globally.

International development partners are also keen on supporting Bangladesh’s moves towards green economic efforts.
“Therefore, it is high time to capitalise on the international interest in supporting green development in Bangladesh. The issue of climate adaptation should be a pivotal aspect in our upcoming budget as the climate change issues including heat wave and frequent cyclones are literally threatening the lives and livelihoods in Bangladesh,” Dr Atiur stated.