The government should focus on boosting USD inflow, and strengthen revenue mobilisation through reforms and rationalisation of taxes to curb further deterioration of Bangladesh’s economy.
Noted economists and researchers made the recommendation at a pre-budget discussion for FY24, organised by the Policy Research Institute (PRI) Study Centre on Domestic Resource Mobilisation (CDRM) in Dhaka on Sunday.
They also called for better fiscal management and implementation of projects with quality of spending of funds, and voiced their concerns regarding the lack of confidence in the country's current economic situation.
PRI Chairman Dr Zaidi Sattar presided over the event, while Executive Director Dr Ahsan H Mansur moderated the discussion. The economic projection was presented by PRI's Research Director Dr MA Razzaque.
Ahsan H Mansur said, “At present there is a lack of confidence in the economy. In this case, the strength of the measure was not what it needed. Macro-economic conditions will spiral out of control within the next five to seven months if this situation continues.
“If we don't want to avoid such a situation, this is the right time to take action. For this, the government should adopt strong policies and strengthen the economic team. If it is not possible, the economy will not come to a proper position.”
So, the country has to focus on policy reforms to improve revenue generation, and take steps to increase inflow of forex, he added.
According to the PRI estimate, in the ongoing FY23, the National Board of Revenue (NBR) may face a revenue shortfall reaching around Tk 54,600 crore against the current fiscal year’s budget target.
NBR’s revenue collection target for FY23 was set at Tk 3.70 lakh crore. However, after analysing the collection trends in the first nine months of current FY, the PRI estimated that the NBR will be able to collect only around Tk 3.15 lakh crore.
This estimate was presented by MA Razzaque. However, the revenue target set by the International Monetary Fund (IMF) for lending $4.7 billion to Bangladesh was for the country to increase the Tax-to-GDP ratio by 0.5 per cent in the next FY.
The international lender had estimated that the NBR may manage to collect Tk 3.36 lakh crore in this fiscal.
According to PRI-CDRM estimates, the NBR could face a revenue shortfall of Tk 21.40 thousand crore measured against the IMF target. The PRI blamed NBR's overall lack of capacity and implementation of needed reforms for failing to meet the revenue collection target.
Dr Razzaque stated that the country's economy is currently under pressure. The PRI has identified declining remittance inflow, export earnings and forex reserves, high inflation, and low revenue collection as major setbacks for the country's economy.
Ahsan H Mansur said the lack of confidence in the financial sector is not going to go away anytime soon, and money laundering is likely to increase instead of dropping.
He suggested that the government must take immediate steps to address these issues, especially as the next national election is right around the corner.
After analysing the overall macroeconomic context and government revenue situations, PRI-CDRM recommended prioritising fiscal reforms, tax net expansion, reduction of indiscriminate tax exemptions, increasing the compliance rate with corporate and personal income tax system, reform of VAT and state-owned enterprises, and improving quality of spending.
Reforms are needed to increase revenue in the coming days. At present, the NBR does not have the capacity to collect revenue as per the target. In this situation, it will not be possible to achieve the revenue target given by the IMF.
Ahsan H Mansoor believes that if the revenue income cannot be increased, it will not be possible to make major changes in the next budget. If there is no change in revenue income, GDP growth cannot be achieved.
He added that the ADP project is being implemented with 100 per cent borrowing. The reality in this case is that 25 per cent has to be financed from own income. ADP implementation is lagging behind due to reliance on borrowing.
