Staff Reporter :
Investor confidence is waning amid mounting uncertainty over the country’s fiscal direction, largely due to a lack of dialogue between political parties and the interim government, according to Debapriya Bhattacharya, Distinguished Fellow at the Centre for Policy Dialogue (CPD).
“Without political consensus and policy continuity, private investors will remain hesitant,” Bhattacharya said during a pre-budget discussion for the 2025-26 fiscal year, held at the Bangladesh Film Development Corporation in Dhaka on Saturday. The event was organised by Debate for Democracy.
He expressed concern over the absence of meaningful consultation between the interim administration and political stakeholders ahead of the national budget announcement, scheduled for 2 June. “Such discussions could have fostered the continuity and predictability that investors seek,” he remarked.
Bhattacharya underscored the urgent need for fiscal discipline, banking sector reform, and inclusive political dialogue to create a stable policy environment. “Only under these conditions can the national budget serve as a tool for economic recovery rather than mere survival,” he added.
His comments come at a critical juncture, as the economy faces persistent headwinds amid political transition.
He criticised the government’s growing reliance on domestic bank borrowing, warning that high interest rates and a weakened banking sector are stifling private investment.
“Investment and employment are closely linked. Without policy stability, macroeconomic confidence will continue to deteriorate,” he said.
Turning to revenue challenges, Bhattacharya highlighted Bangladesh’s tax-to-GDP ratio, which has fallen below 8 percent-one of the lowest in the world. “Even Nepal, with a lower per capita income, collects more tax than we do,” he noted.
He cautioned that the over-reliance on indirect taxation is exacerbating inequality, placing a disproportionate burden on lower-income groups. Advocating for a more equitable tax regime, he called for greater emphasis on direct taxes, particularly on luxury goods and high-value transactions.
“Two-thirds of our taxes come from indirect sources. This must change,” he asserted, proposing new levies on second vehicles, luxury services, and digital financial activities.
Bhattacharya also pressed for reforms in tax administration, including digitisation and the integration of tax identification numbers with national IDs, bank accounts, and social welfare systems to reduce evasion.
“Tax compliance is a collective responsibility. Citizens must demand receipts, avoid cash transactions, and reject the culture of evasion,” he said.
He criticised the Implementation Monitoring and Evaluation Division (IMED) for focusing primarily on financial disbursements rather than performance outcomes. “Budget accountability should shift from inputs to impacts. Otherwise, public trust will continue to erode,” he warned.
To bridge fiscal deficits, Bhattacharya proposed recovering illicit wealth, including untaxed and laundered funds, and assets from loan defaulters. “Confiscating and monetising such assets could be a breakthrough towards building a more ethical economy,” he suggested.
While acknowledging some recent improvements-such as the repayment of $5 billion in foreign debt and a stabilised exchange rate-Bhattacharya cautioned that without structural reforms, the forthcoming budget risks being a repetition of previous frameworks.
Debate for Democracy Chairman Hasan Ahmed Chowdhury Kiran, who moderated the discussion, echoed similar concerns. He said that corruption, inequality, and inefficiencies in tax administration remain major impediments to effective budget implementation.
Kiran urged the interim government to take decisive action against corruption and loan defaulters.
Without substantial tax reforms and increased allocations for health, education, agriculture, and social protection, he warned, the 2025-26 budget may end up as “old wine in a new bottle.”
He concluded that restoring fiscal stability would require a politically neutral and socially just tax structure.
In the debate competition segment of the event, Bangladesh University of Business and Technology emerged as the winner, defeating Ananda Mohan College from Mymensingh.
