With inflation soaring and revenue targets falling short, the Centre for Policy Dialogue (CPD) has urged the government to prioritise macroeconomic stability in the national budget for upcoming fiscal 2024-25.
At a media briefing on Saturday, the independent think tank observed that the government must take stern reform measures in the upcoming budget, as the first year of the new term is the most appropriate time for taking strict measures.

The briefing, titled “CPD's Recommendations for the FY2024-25 National Budget”, identified inflation control as a top priority.

Due to a lack of proper market management and implementation of laws, prices of different products have increased abnormally, CPD Distinguished Fellow Prof Mustafizur Rahman noted, adding “merely imposing fines cannot be a solution in this case.”

The CPD also recommended forming an independent commission to eliminate corruption and ensure accountability in administration activities.
Meanwhile, the revenue collection has yet to meet the target for the first six months of the ongoing FY24.

To meet the overall target in the remaining six months, revenue collection must be around 54.4%, which is exceptionally challenging, mentioned the think tank. Hence, the country may face a revenue shortfall of Tk82,000 crore, it added.

Prof Mustafizur said, “Inflation is a big issue now. The weakness of internal management is responsible for inflation hikes. The value chain operators should be brought to the book as per laws. If someone can make a profit of Tk50 crore in a week through ‘manipulation’, the fine of Tk50 lakh or Tk1 crore cannot stop. Last several years, we noticed that such fines did not bring any good results. So, implementation of laws (up to life imprisonment) is needed.”

He also added that the banking system has been weak due to a lack of good governance.  However, it will be better for the country’s economy now, if strong banks can help weak banks through good governance.

CPD Research Director Dr Khondaker Golam Moazzem said most of the ministries and departments concerned did not take proactive measures to tackle the current economic challenges after forming the new government.

“Institutional capacity should be strengthened to tackle the challenges of LDC graduation. Transparency and accountability are also important matters. Now we should focus on attracting more FDI in renewable energy,” he also said.

Dr Moazzem also laid emphasis on the reformation of the tax structure.
During her PowerPoint presentation at the programme, CPD Executive Director Dr Fahmida Khatun recommended strengthening the role of the Competition Commission.

She emphasised the necessity of hiring skilled professionals, especially to regularly monitor markets for essential commodities.

“The Commission should create a database, monitor the operations of prominent market players regularly, investigate market control and manipulation (if any), and take appropriate actions. To this end, the Ministry of Commerce should also work in tandem with the Commission. The Commission should adopt a strong stance against cartels and a zero-tolerance policy towards collusive practices,” she added.

Dr Fahmida added that the Competition Act 2012 should be revised to directly address monopolies and include specific anti-trust clauses, along with concrete penalties for violators.

“The volume of essential commodities sold through the open market system (OMS) should be increased. The government should set higher targets for foodgrain procurement and food distribution programmes. To this end, adequate resources should be allocated in the FY25 budget,” she recommended.

She also said the distribution of these commodities must be managed efficiently and without corruption so that only the eligible can obtain the essential items at lower prices. The government should provide additional support for subsidised credit programmes for the agriculture sector (both crop and non-crop) to incentivise production during the next fiscal year.

Major challenges
Dr Fahmida Khatun said in the FY25, a major challenge will be to cater to the envisaged financing from foreign sources.

“In the case of foreign borrowing, the bulk is tied with ADP design and implementation capacities of the government agencies; in the case of budget support, the majority is contingent upon policy reforms; non-bank borrowing targets are unlikely to be met; bank borrowing will likely be under pressure to finance the budget deficit,” she added.

Dr Fahmida said in the backdrop of the liquidity crunch of the commercial banks and the government’s commitment not to opt for borrowing from the central bank, the fiscal space available for the government will be somewhat limited if private sector borrowings are not to be crowded out.

She added that the country’s macroeconomic challenges include a decline in revenue collection, a liquidity crisis in banks, reduced exports and remittance income, and a decrease in foreign currency reserves.
Other recommendations

The CPD recommended that the Minimum Wage Board should consider increasing the minimum wages in all industries so that workers earning minimum wages may at least afford basic food.

“Instead of relying on only the withdrawal of import tariffs and other taxes on essential items, it is crucial to identify and address obstacles that hinder the smooth operation of the market. To create fiscal space, the government should reduce wastes, use resources efficiently, and stop economically wasteful payments such as capacity payments to IPPs,” it also said.

The think-tank said the government should continue providing stimulus to small and medium enterprises to help them survive the difficult times. The government should extend the scope of direct cash/kind assistance programmes for low-income population groups.

The CPD said the national budget needs to focus increasingly on fiscal and financial measures for enhancing clean energy use to lessen the fiscal pressure as well as address climate vulnerabilities. Promoting clean energy in Bangladesh largely depends on creating a favourable business environment conducive for the private sector to invest in different segments of the renewable energy supply chain.
“Tax incentives for renewable energy investments are currently not competitive with those for fossil fuel-based power plants, which can enjoy a tax holiday of up to 10 years,” CPD added.