The country's top economists have advised the government against preparing an expansionary budget for the next fiscal year, citing external and internal economic stresses.
They also suggested prioritising 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 meeting was held at the State Guest House Padma on Sunday night.
The economists further recommended that the government avoid mega-projects with long payback periods.
Besides, they emphasised 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.
Eminent 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 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, Director General of BIDS Dr Binayak Sen, and former ICAB president Parveen Mahmud, attended the meeting, among others.
Sources said that Professor 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.
Professor Sobhan blamed institutional weaknesses for project delays and cost overruns.
He also advised the minister to be tough against loan and tax defaulters, criticising 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.
He also advocated for increased allocations to education and health, as well as a reduction in the number of mega-projects with long payback periods. "I suggested raising direct taxes rather than relying on indirect taxes like VAT, which disproportionately burden the rich and poor."
"We also need to expand the tax net and prioritise allocations across different sectors to reduce waste," Dr Ahmed said.
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.
Dr 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.
Besides, she called for separating tax policy formulation from collection activities.
Ms Khatun also emphasised 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 told the newsmen.
Following the discussions, Finance Minister Abul Hassan Mahmood Ali said he had taken note of the economists' suggestions and would act accordingly.
"They suggested that we carry out reform in various sectors as needed," he said.
While replying to a query, he said the next budget will emphasise employment generation and continuation of reforms.
He did not directly commit to making the loan defaulters' list public. "Let's see what we can do."
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