The government has prioritized the challenge of controlling steep inflation, proposing tax waivers on essential goods as part of its strategy to ease inflationary pressures.

Finance Minister Abul Hassan Mahmood Ali announced these measures while defending the new fiscal year’s budget during a press conference organized by the Ministry of Finance at Osmani Memorial Hall in Dhaka on Friday.

Addressing numerous questions from the press, Ali assured that inflation would begin to decline by the end of the year, stating, “Inflation will begin to decline by the end of this year.”

He emphasized that the budget’s size had been reduced to prevent further pressure on commodity prices.

The proposed fiscal budget for 2024-25 aims to reduce inflation to 6.5%, a significant decrease from the current rate, which has exceeded 9% for the past 14 months, reaching 9.73% in May.

Additionally, the budget sets a GDP growth target of 6.75% for the next fiscal year, down from the 7.5% target in the original budget for the current year, which was revised to 6.5%.

Ali attributed the rising inflation primarily to the ongoing war in Ukraine, which has affected global markets and forex reserves.

“The country’s forex reserves started dropping after the beginning of the war,” he noted, identifying this as a major cause of persistent inflation. However, independent economists also point to domestic market manipulation by oligopolies as a contributing factor.

To alleviate inflationary pressure, Ali outlined several measures already in place, including the expansion of Open Market Sale (OMS) activities to support low-income groups. He also reaffirmed the continuation of contractionary monetary policy to curb inflation.

State Minister for Finance Wasika Ayesha Khan addressed concerns about foreign exchange reserves, highlighting a recent offshore act that has led to an increase in offshore bank accounts driven by higher interest rates on foreign currency deposits.

Finance Secretary Dr. Md Khairuzzaman Mozumder added that the budget’s reduction in size aims to control inflation, with the policy rate now at 8.5%, noting that it will take time for these measures to take effect.

In response to questions about higher borrowing targets from domestic banking sources, Mozumder indicated that reliance on costly saving certificates may decrease as revenue performance improves. He acknowledged that foreign funding sources have dwindled, necessitating greater dependence on domestic sources.

State Minister for Commerce Ahsanul Islam Titu addressed the issue of high commodity prices, announcing that the budget proposes tariff reductions from 2% to 1% on key essentials. “We are aware of inflation and higher prices of commodities in the market,” he stated, mentioning the importation of onions to stabilize local market prices.

On corporate taxes, National Board of Revenue (NBR) Chairman Abu Hena Md. Rahmatul Munim expressed limited flexibility in reducing taxes due to the need to generate revenue for budget financing.