Top economists of the country advised the government against an expansionary budget for next FY25, citing external and internal economic stresses.
They also suggested prioritizing macroeconomic stability over growth and taking effective measures to achieve it.
The economists made the suggestions at a pre-budget consultation with Finance Minister Abul Hassan Mahmood Ali.
The economists further recommended that the government avoid mega-projects with long payback periods.
Besides, they emphasized raising direct taxes instead of relying heavily on value-added tax (VAT), which disproportionately burdens the poor.
As key priorities, expansion of the tax net and reduction of non-performing loans in the banking system were also highlighted.
The economists also urged the government to take immediate steps to contain inflation, which has been putting tremendous pressure on people for a long time.
Prof Rehman Sobhan advised the finance minister to ensure accountability and good governance in fiscal management and project implementation.
He also advocated for strengthening institutions and granting them greater autonomy.
Prof Sobhan blamed institutional weaknesses for project delays and cost overruns.
He also advised the minister to be tough against loan and tax defaulters, criticizing the culture of political interference that protects them.
Former central bank governor Dr Salehuddin Ahmed said after the meeting that restoring macroeconomic stability should be the top priority for the next fiscal year’s budget.
The economist also advised ensuring strong coordination between monetary and fiscal policy, along with measures to boost the supply chain as inflation is mainly driven by supply constraints.
He argued that raising interest rates would not control inflation as it could harm small businesses. Instead, Dr Ahmed suggested making interest rates market-based.
Fahmida Khatun, executive director of the CPD, told reporters that macroeconomic stability, not growth, should be the main focus of the next budget.
She said the government’s fiscal space had gradually narrowed, requiring increased revenue collection. “The tax collection system needs to be automated,” she said.
Khatun also emphasized a contractionary budget, with reduced expenditure amid inflationary pressures and low foreign currency reserves. She said the CPD suggested making the list of loan defaulters public.
CPD distinguished fellow Dr Mustafizur Rahman said the meeting discussed various aspects of the next fiscal year’s budget, focusing on macroeconomic stability.
“We have said the implementation of the budget will be convenient if we can keep the rate of inflation under control,” he added.
Economist Professor Rehman Sobhan, former central bank governor Dr Salehuddin Ahmed, President of Bangladesh Economic Association (BEA) Dr Abul Barkat, Distinguished fellow of the Centre for Policy Dialogue (CPD) Professor Mustafizur Rahman, Executive Director of the CPD Dr Fahmida Khatun, Director General at the Bangladesh Institute of Development Studies ( BIDS) Binayak Sen, Executive Director of Policy Research Institute of Bangladesh Dr Ahsan H Mansur, Executive Director of Institute for Inclusive Finance and Development Mustafa K Mujeri and former ICAB president Parveen Mahmud, attended the meeting, among others.
