Looking for Trade Policy directions in the Forthcoming Budget
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The FY2025 Budget, coming in the first week of June, will give us economists an idea of whether the new Government means business. In the past couple of years, the economy has confronted challenges on multiple fronts, particularly with respect to the country’s external balances. Thankfully, engagement with an IMF program creates the scope for managing the external shocks and internal instability, characterised by high inflation, with sound technical analysis and supporting policy programmes.
Among the critical economic challenges that have emerged as the economy faces impending graduation out of LDC status in 2026 and consequent phase out of International Support Measures (ISM) together with preference erosion in market access, are i) the impact of trade taxes (tariffs and para-tariffs) on export performance and its diversification and ii) the persistence of high inflation for over two years. Following the presentation of the Annual Budget, the media is usually awash with reporting on the fiscal dimensions of the Budget and its potential impacts. What appears to catch least attention is the trade policy regime emanating from it. Even monetary policy directions can be gleaned from the budgeted fiscal operations – e.g. size of the fiscal deficit and its mode of financing.
