Finance minister AMA Muhith on Thursday set a target to keep inflation in the next 2019 fianncial year at 5.6 per cent despite rising prices of fuel oil and commodities in the international market.
The average inflation in the outgoing FY18 was 5.8 per cent till April.
Economists said that it would be tough to contain inflation within 5.6 per cent in FY19 because of a rise in commodity prices in the international market and election-centric spending in the country in the first half of the financial year.
It is expected that the development spending of the government and spending by aspirants to parliament would increase in the run up to the general elections scheduled for by December, they said.
Highlighting the economic growth for the outgoing FY18, Muhith expressed discomfort over the rising prices in the international market.
‘Our sense of comfort [due to economic growth] is tainted by some worries. Supply did not increase in tandem with the increase in demand,’ he said.
He said that global commodity prices had increased in the first three months of 2018 and acccording to the World Bank forecast, crude oil prices might reach $65 per barrel in 2018 which was $53 a barrel in 2017 on average.
After three years of stability, the prices of agricultural and metal products have been projected to increase by 2 per cent and 9 per cent respectively in 2018 in the global market, he said.
‘Besides, there is an upward trend in the rate of inflation in the neighbouring countries including India and China,’ said Muhith.
Dhaka University economics professor MA Taslim said that it would be tough to contain inflation within 5.6 per cent considering the rise in import payments, exchange rate and rising current account deficit.
‘This is an election year, so the spending of the government will rise during the first half of the next financial year. So it will be tough to contain the inflation within 5.6 per cent,’ he said.
He said that the import payment capacity of the government was declining while the taka was depreciating against the dollar.
Policy Research Institute executive director Ahsan H Mansur, however, said that inflation rate might remain within the target of 5.6 per cent as the country had imported a lot of food items in recent months and the rice prices remained stable.
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