Next budget should focus stabilisation of economy: CPD

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Staff Reporter :
The upcoming budget for 2024-25 should focus on bringing stability to the country’s micro-economy as the overall economy is currently reeling from multiple crises, said the Centre for Policy Dialogue (CPD).

The crises are tapering revenue collection, stoking liquidity crisis in banks, scaling down exports and remittance income, and depleting foreign currency reserves, the think tank added.

“Instead of focusing on achieving a higher GDP growth rate, it should focus on restoring macroeconomic stability,” CPD Executive Director Dr Fahmida Khatun said while speaking at a media briefing on “Recommendations for the National Budget for the Fiscal Year 2024-2025,” at its office in the capital on Saturday.

Projecting the revenue may dwindle to Tk 82,000 crore by the end of the current fiscal year, she said, “The revenue collection is yet to meet the target for the first six months of the ongoing fiscal year.

To meet the overall target in the remaining six months, revenue collection must be around 54.4 per cent, which is exceptionally challenging.”

The revenue collection target was 36.3 per cent. However, only 13.9 per cent of the target had been achieved by December.

Dr Fahmida, however, noted a silver lining with the budget deficit reduced to Tk7,885 crore in six months, a decrease from last
year’s Tk20,000 crore.

“Even though the deficit has decreased, the government’s borrowing from the banking system has increased.

This will have a negative impact on the growth of private sector loans,” she added.

Warning that the rising electricity prices could exacerbate inflation further, she said, “Inflation has consistently exceeded 9 per cent throughout the year.

Food inflation surpassed non-food sectors and was notably higher in rural areas than in urban areas.”

“The government’s current approach to managing inflation, such as printing money and releasing dollars into the market, or withdrawing dollars from the market, needs to be changed,” Dr Fahmida opined.

While highlighting concerns in all indicators of the external sector, the CPD director said, “There has been a sluggish growth in export earnings while imports have also declined.

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Under the circumstances, implementing stricter import controls could adversely impact medium and long-term investments.”

“Remittance growth has also been slow. Despite some recent growth reported recently, it doesn’t match the number of people going abroad, which is concerning.

Additionally, the incentives provided by the government in remittances and other sectors are becoming a fiscal burden,” she added.

Noting that the foreign currency reserves are still unstable, she said, “Efforts have been made for the transition towards a more market-based exchange rate, with Bangladesh Bank implementing a crawling peg system, although its effectiveness remains limited.”

Dr Fahmida highlighted recommendations across various sectors, including revenue collection, tax structure, inflation control, exchange rate, allocations for health and education, strategic changes in the energy sector, and environmental protection.

Focusing on the importance of proper investment, she said the government must set targets while considering the reality.

Fahmida also recommended expanding the scope of social security needs and increasing incentives in the agriculture sector.

“The focus of subsidies should center on assisting the impoverished. Wherever possible, cost-saving measures should be implemented.

Emphasis should be placed on implementing foreign-aided projects,” she said.

Recommending lowering priorities to projects that have yet to see 10 per cent implementation by March 2024, she said, “An independent commission should be formed to check if government spending is properly executed.”

Mentioning that meeting the budget deficit will also be a challenge this year, she said foreign borrowing is good for covering the budget deficit, but emphasis must be given on implementing conditions.

To prevent money laundering, it recommended strengthening the transfer pricing cell, central intelligence cell, and customs intelligence unit by making them work more efficiently and in a coordinated manner.

For environmental protection, Fahmida suggested ensuring a 1 per cent surcharge collection from polluting industries, hiking taxes on fossil fuel vehicles, and raising taxes for the plastic sector.

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