‘Focus on restoring macroeconomic stability instead of expansionary budget’

The country’s top economists have advised the government to refrain from preparing an expansionary budget for the next fiscal year as the economy is facing external and internal stresses.

They suggested effective measures for the restoration of macroeconomic stability. They also suggested the government not to take on such mega-projects, whose return takes a huge amount of time.

Also, they emphasised that raising direct tax instead of depending on value-added tax (VAT) puts pressure on poor people.

They came up with the suggestions during a pre-budget meeting for the FY25 with Finance Minister Abul Hassan Mahmood Ali at the State Guest House Padma on Sunday night.

Emphasising the expansion of the tax net, they also stressed the lessening of default loans in the banking system.

The economists also suggested the government take immediate steps to contain inflation, which has been putting tremendous pressure on the common people.

Eminent economist Professor Rehman Sobhan, former central bank governor Dr Salehuddin Ahmed, Distinguished fellow of the Centre for Policy Dialogue (CPD) Professor Mustafizur Rahman, Executive Director of CPD Dr Fahmida Khatun,  and Director General at the Bangladesh Institute of Development Studies Binayak Sen attended the event, among others.

After the discussion, Finance Minister Abul Hassan Mahmood Ali said he has taken the note as economists suggested and will act accordingly.

 “They suggested us to carry out reform in various sectors as required,” he said.

BSS adds: Finance Minister Abul Hassan Mahmood Ali has said the next national budget for the FY25 would put higher emphasis on employment generation, while efforts to carry out reforms in different fields are needed to be continued.

"We'll have to increase employment generation to a larger extent as efforts are underway to overcome the foreign currency reserve issue," he said.

Ali said the eminent economists present at the meeting had put forward a set of good suggestions while all of them had opined that the government was in the right direction to overcome the current economic situation.

"I've never said that there is no problem. But, we've got praise that we've been handling the situation well and so far everything is good," he said.

"Everyone knows what the underlying problems are...so they (economists) have remarked that everything is well so far, but we've to remain cautious about the problems," he added.

When asked about their specific suggestions, the finance minister said that the ongoing reform initiatives should have to be continued in various fields.

Replying to another question on publishing the list of loan defaulters following the suggestions of the economists, he said, "Let's see what we can do,"

Ali also said the Vice President of the Asian Infrastructure Investment Bank (AIIB) in a recent meeting with him, had assured him that they were ready to provide more financial support to Bangladesh.

"They (AIIB) informed us that the fund is ready; take it....," he said.

Emerging from the meeting, eminent economist and former central bank governor Dr Salehuddin Ahmed told reporters that the main focus of the budget should be macroeconomic stability.

He suggested raising allocations in the education and health sectors side by side, minimising the number of such projects that take much time to get results.

The noted economist also advised ensuring strict monitoring for implementation of the budget, increasing dependency on direct tax instead of the indirect tax like VAT, ensuring allocations in different sectors on a priority basis, and minimising wastage.

"There should be a fine synergy between the monetary policy and the fiscal policy ... Boosting the supply chain is needed as inflation is mostly supply-driven. The real sector should also be promoted," he added.

The former central bank governor opined that it is not possible to control the inflation trend with the interest rate, as small businesses are often affected by this.

In this regard, Dr Salehuddin suggested making the interest rate market-based.

Dr Mustafizur Rahman said the meeting discussed various aspects of the budget for the next fiscal year as well as how to ensure further macroeconomic stability.

"We've said that it will be more convenient to implement the budget if the exchange rate and inflation can be controlled, considering the current position of the economy," he added.

Executive Director of the CPD Dr Fahmida Khatun said the main focus of the next budget should be ensuring macroeconomic stability instead of putting much focus on growth.

"In this regard, there is a need for generating more employment, increasing investments in the private sector and also the FDI," she said.

She also said there is a need for similarity between the policies and operations of the government.

Dr Fahmida Khatun also demanded the publicising of the loan defaulters' lists.

Eminent economists Dr Ahsan H Mansur and Mustafa K Mujeri, and former ICAB president Parveen Mahmud also attended the event.

Besides, Bangladesh Bank Governor Abdur Rouf Talukder, Finance Division Secretary Dr Khairuzzaman Mozumder, Financial Institutions Division Secretary Sheikh Mohammad Salim Ullah and other high officials attended the meeting.

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