Economists recommend contractionary budget

Mahfuz Emran : Economists have suggested contractionary budget for the next financial year 2024-25. At the same time, they suggested to take steps to increase the stability of macro economy and employment without giving importance on growth. They also advised to keep the budget deficit low and take less foreign debt.
They gave this opinion in the pre-budget discussion held with Finance Minister Abul Hasan Mahmud Ali at Rashtriya Guest House Padma on Sunday (March 10) night.
Eminent economist Rehman Sobhan, former Bangladesh Bank Governor Salehuddin Ahmed, Bangladesh Institute of Development Research (BIDS) Director General Binayak Sen, CPD Executive Director Fahmida Khatun and several other economists participated in the discussion.
At the end of the discussion, the finance minister was asked by the journalists what advice he got? In reply, the finance minister said, ‘The advice is very good, we are on the right track. Everyone appreciated. I never say no problem. But we got a lot of compliments from them. They said – you are tackling well. Everyone knows what the problem is, they said like themselves. So far so good, but in the future your time is running out. So far so good, but you have to try.’
What do you mean by the end of time? When journalists asked such questions, the finance minister said, “Time is running out, the necessary reforms must be done.” There is no need to reform various fields.
Growth is happening, but compared to that employment is not happening? Abul Hasan Mahmud Ali said, “Who said that employment is not happening?” Employment should be increased. The problem of our foreign exchange is ongoing, it is not yet 100%. But it will.
When asked about the discussion of the meeting, Salehuddin Ahmed said, “We have said that now our main issue is the stability of the macro economy. Just looking at the aggregate index will not help or look at the growth. It has been suggested to increase the allocation in education, health sector if necessary. We often don’t have big projects, it takes a long time to get results. Reduce them a bit. However, so that there is no disruption in the health, education and infrastructure sectors.
He said, ‘Taxes should be increased. Do not rely on indirect or VAT. Increasing direct taxes and increasing tax net. Revenue should be increased. And allocation which is to reduce wastage. Allotment should be on the basis of rights.
What did the finance minister say? When journalists asked such questions, Salehuddin Ahmed said, “He said we will look at them.” How much I am taking your suggestion, I will tell you when we sit again.
He said, “We have said that the deficit should be kept low. Reduce foreign debt a little. The defaulted loans of the banking sector should be reduced. The governor was there, he said we are trying.
Salehuddin Ahmed also said, ‘My personal opinion is that inflation cannot be controlled in Bangladesh with interest rates. Small traders suffer when interest rates are raised, contractionary monetary policy is implemented. Banks do not give loans to small traders. If contractionary monetary policy is implemented, they will suffer more.
Regarding the discussion, Fahmida Khatun said, ‘More importance has been given to increasing tax collection. Not only the CPD, every other economist who was here said – the tax collection system has to be automated, a technical one. This automated will not happen if manually automated. It appears that automation has happened somewhat, but there is human interface. For which I can not remove the problem of tax system. Its institutional reforms.
He said, ‘Making tax policy and collecting tax – these two should be separated. Another thing is that tax officials have been given so much power over the officers to collect taxes that one can take many decisions at will. To reduce this power a little.
Have you discussed the size of the budget? Fahmida Khatun said to such a question, “Some people have given an opinion about the size of the budget. Our advice is to be a little more restrictive. It is better to reduce the cost a little. Because, we are under a pressure of inflation. Foreign exchange reserves, on the other hand, are also under pressure. Overall reduction, especially administrative costs, operational costs are reduced as much as possible. Emphasis is placed on preventing wastage.’
He also said, ‘Our tax structure is dependent on indirect taxes. Over 70 percent of taxes are indirect. As long as we are dependent on direct taxes, this unequal system of taxation will not go away. When Bangladesh becomes a developing country, even then we cannot keep such high import duty. We are giving cash incentives on different sectors, it will not be there then. We have to hand them over slowly.
Fahmida Khatun said, “We are seeing growth, but employment is not that way. This organization needs investment, investment in human resources. The quality of their education, there are so many universities in the district – but they are not getting jobs after graduation. So emphasis has been placed on human resources.
He said that the allocation in both our health and education sectors is low. As much as one percent is allotted. As a result, the quality of the services provided by the health sector is low. On the other hand, many people are going abroad. It’s the middle class, the lower-middle class, and even the policy-makers are moving to get treatment, wherever they can. If we improve the health sector, there will be no pressure on the foreign exchange.
“In this budget, the stability of the macro economy should be emphasized instead of growth. Increase employment and investment. Especially in terms of attracting foreign investment, there are policies but they are not implemented in practice. We have talked about these issues’, added the executive director of CPD.