[🇧🇩] Monitoring Bangladesh's Economy

[Saif]

Bangladesh loses over 2,500 hectares of cultivable land every year: DAE

The DAE has undertaken a new plan to produce safe food

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Bangladesh loses over 2,500 hectares of cultivable land every year: DAE
The DAE has undertaken a new plan to produce safe food

Around 2,500 to 3,000 hectares of cultivable land are converted and used for non-agricultural purposes every year in Bangladesh, raising serious concerns about future food security, according to experts and stakeholders.

The population is increasing day by day while the amount of land under cultivation is decreasing, Md Sawkat Osman, director for the crops wing at the Department of Agricultural Extension, said at a seminar today.

"Many people are constructing houses, brick kilns and other structures on cultivable land. This could have a significant impact on the nation's ability to meet its growing food demand."

The seminar was jointly organised by the Consumers Association of Bangladesh and Friends in Village Development Bangladesh at the Bangladesh Food Safety Authority office.

Osman said the DAE has undertaken a new plan to produce safe food.

In the first phase, 2 crore farmers will be given smart cards, which will be used to organise agricultural production by region. The initial phase targets the production of eight specific crops, with a focus on increasing agricultural output through the use of organic fertilisers, he added.

Muhummad Nazim Uddin, senior scientific officer of the Horticulture Research Center at the Bangladesh Agricultural Research Institute, said: "The organic nature or fertility of our soil has drastically decreased.

"There is no guarantee that the food being consumed is completely safe. Although these issues have been discussed for a long time and some initiatives have been taken, there has not been any significant development so far," he added.

Uddin added that adopting sustainable and environmentally friendly agricultural technologies at the production level in Bangladesh is crucial to ensuring food security and combating the challenges of climate change.

He also said the formulation and implementation of policies to ensure a balance between demand and supply for the consumers in the country were essential.

Fakir Muhammad Munawar Hossain, director for the operations and laboratories department of the Directorate of National Consumers' Right Protection, said proper enforcement of laws must be ensured alongside social awareness to ensure safe food for consumers.

Raising social awareness requires creating a social movement, which in turn necessitates political commitment, he added.

Zakaria, chairman of the BFSA, said it was essential for people involved in food production to have proper knowledge and training. Online training programmes alongside training centres need to be established for restaurant staff and owners, he added.

He also cited the need to increase manpower at the BFSA, pointing out that there is only one official designated for the whole Mymensingh region, which has a population of 60 lakh.

As of 2023, there were 88.29 lakh hectares of cultivable land in the country, according to data from the Ministry of Agriculture.​

 

[Saif]

Economy slowing, negative revenue growth shows the sign

For Bangladesh, it is no longer the question of whether the economy is destined for a hard landing or a glide to a flat state; rather the question now is how deep the descent will be.

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Economy slowing, negative revenue growth shows the sign

For Bangladesh, it is no longer the question of whether the economy is destined for a hard landing or a glide to a flat state; rather the question now is how deep the descent will be.

To fathom the crisis, let's take a look at the country's tax collection.

Roughly speaking, the collection turned negative in the first half of the current fiscal year (FY) 2024-25, which is a first since at least the pandemic era -- when markets shuttered, manufacturing units came to a grinding halt, supply chains collapsed, and life and livelihood endured unprecedented shockwaves.

But those days were long over.

Yet, in the July-December period of FY25, taxmen collected Tk 156,442 crore -- 0.98 percent down year-on-year, according to National Board of Revenue (NBR) data.

This negative growth in revenue collection itself is not the disease, according to economists and businesspeople. Rather, it is a symptom of a slowing economy and growing cracks on the macro frontier.

In FY25, major macro indicators like the growth of the gross domestic product (GDP) tumbled, high inflation continued its rampage without showing signs of stopping anytime soon, the exchange rate remained volatile, and development spending hit a four-year low.

All these fairly indicate a single message: the economy is slowing down, it is hurting and will continue to do so due to a lot of factors, including revenue mobilisation, according to economists.

They said NBR's struggle to mobilise revenue and meet targets is nothing new, but these newly emerged economic cracks have added to the collection inefficiency.

In the last 13 years, the revenue board has been consistent in failing to meet its collection targets.

Despite a 6.66 percent collection growth in December, the revenue administration's collection still fell short of its target by Tk 58,000 crore or 25 percent in the first half of FY25, with its end goal set at Tk 480,000 crore for the year.

Taxmen and policy analysts point the finger at the political and economic shakeup stemming from the ouster of the Awami League government following a mass uprising on August 5 last year.

"The lower revenue growth is closely linked to the current economic slowdown, which also expedites the NBR's inefficiencies," said MA Razzaque, research director of the Policy Research Institute (PRI) of Bangladesh, a local think tank.

Prolonged inefficiencies, reduced imports, higher exemptions and inflationary pressure also contributed to the overall shortfall, the economist added.

The World Bank slashed its forecast for Bangladesh's economic growth by 1.7 percentage points to 4 percent for FY25 due to "significant uncertainties following recent political turmoil" and "data unavailability".

But Razzaque said the country's actual GDP growth this year could be lower than the World Bank projection.

The country's US dollar stocks have been depleting fast since 2022, prompting the authorities to tighten the belt and restrict imports.

As per the BPM-6 method by the International Monetary Fund (IMF), Bangladesh forex reserves now hover around $20 billion, according to the latest Bangladesh Bank data.

Furthermore, the country's total imports decreased from $90 billion in 2021 to $70 billion in 2023.

"So, the NBR is not going to get enough tariffs from imports," Razzaque added.

Besides, inflationary pressure is also hurting revenue growth as people have been slashing their consumption for a couple of years.

Echoing similar views, Anwar-ul Alam Chowdhury (Parvez), president of the Bangladesh Chamber of Industries (BCI), said lower imports contributed to lower revenue collection.

"The reduction of the overall import volume has contributed to the lower revenue growth and lack of business expansion," he said.

Besides, sluggish implementation of the development budget, officially known as the annual development programme (ADP), is another reason for the lacklustre revenue collection.

The NBR is not getting value-added tax (VAT) and supplementary duties (SDs) from construction works, according to the business leader.

"The projects automatically generate revenue for the NBR," he said.

The implementation of the Annual Development Programme (ADP) in the first six months of fiscal year 2024-25 was down 19 percent year-on-year.

Development spending in the July-December period amounted to Tk 50,002 crore, according to the Implementation Monitoring and Evaluation Division (IMED) under the planning ministry.

"There is an interrelation between the reduction of development spending and lower manufacturing growth," said Parvez.

For example, he said, if there is an ongoing project, there would be demand for construction items and services.

When government spending slows, it badly hits production, including cement, rod and brick manufacturing, causing lower revenue collection, explained Parvez, also a former president of the Bangladesh Garment Manufacturers and Exporters Association.

He also criticised NBR for failing to expand the tax net.

"We don't see any major progress in expanding the tax net. Rather, the NBR is burdening existing taxpayers," he said.

Seeking anonymity, an NBR official acknowledged that the negative collection growth occurred due to the economic slowdown.

"We are facing hurdles in collecting revenue amid the government's lower public spending, higher inflation and slow private sector credit growth," the official said.

Prof Selim Raihan, executive director of the South Asian Network on Economic Modeling (Sanem), suggested exploring more diversified sectors for revenue generation, properly implementing the wealth tax, and expanding the tax net.

"The NBR should not take any ad-hoc decisions for tax hikes without consultation stakeholders," he said, referring to the revenue board's recent withdrawal of hiked VAT and SD on nine goods and services.

"It should be well researched and meticulously planned," he said.​

 

[Saif]

Tk 580b revenue shortfall in first half of FY25

Experts blamed disruptions in business and trade due to the student-people movement in July and August and subsequent unrest in the political sphere.

en.prothomalo.com

Tk 580b revenue shortfall in first half of FY25
Special Correspondent
Dhaka
Published: 23 Jan 2025, 20: 44

Photo shows the National Board of Revenue (NBR) building. File photo

Revenue collection has fallen short by around Tk 580 billion compared to the target in the first six months (July-December) of the current fiscal year 2024-25, while the figure is less by Tk 100 billion in comparison to the collection in the previous fiscal’s corresponding period.

According to the National Board of Revenue (NBR), a total of Tk 1,560 billion was collected in revenue during the July-December period, down by 6 per cent or Tk 100 billion from Tk 1,656 billion collected in the previous fiscal’s first half.

The NBR officials attributed the shortfall to disruptions in business and trade due to the student-people movement in July and August and subsequent unrest in the political sphere.

The current trend of revenue collection indicates that the NBR is likely to fail in achieving the annual target in the current fiscal year. In the first half, the revenue board managed to collect only one-third, or 32.5 per cent, of the Tk 4,800 billion revenue target.

The deficit in duty and VAT collection against the target during the July-December period amounted to Tk 577.24 billion. The revenue collection target for the July-December period was Tk 2,140 billion, while actual collection stood at Tk 1,562.76 billion.

None of the three major revenue sources – import duties, VAT, and income tax – met their six-month targets, with the income tax collection experiencing the largest shortfall. For income tax, there was a collection target of Tk 766.7 billion, while the actual collection stood at only Tk 521.62 billion.

In the import sector, Tk 498 billion was collected against the target of Tk 619.52 billion during the same period. VAT collection reached Tk 551.77 billion, falling short of the Tk 663.17 billion target.

Mohammad Abdul Majid, former NBR chairman and a member of the advisory committee on revenue sector reform, cited political unrest as the reason behind the poor revenue collection.

While talking to Prothom Alo, he said political unrest during the opening two months of the current fiscal year disrupted business and trade. This, in turn, affected import duty and VAT collection, while income tax collection also remained low.​

 

[Krishna with Flute]

IMF asks to raise tax-GDP ratio by 0.6 percentage points

The International Monetary Fund (IMF) has asked to increase the tax to GDP ratio by 0.6 percentage points by the end of this fiscal year to make up for last fiscal year’s revenue collection shortfall.

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IMF asks to raise tax-GDP ratio by 0.6 percentage points

View attachment 11343

The International Monetary Fund (IMF) has asked to increase the tax to GDP ratio by 0.6 percentage points by the end of this fiscal year to make up for last fiscal year's revenue collection shortfall.

Last fiscal year, the ratio stood at 7.3 percent.

As per conditions of an existing loan of the Washington-based lender, the ratio was supposed to be increased by 0.5 percentage points every year.

"But the IMF asked to raise the ratio…for the current fiscal year to mitigate last year's shortfall… It will definitely create an extra burden on us," said a top official of the National Board of Revenue (NBR) yesterday.

The issue was raised during a scheduled closed-door meeting between an IMF delegation and NBR officials at the tax authority's Agargaon headquarters in Dhaka.

This is the third IMF delegation arriving with the primary task of assessing the country's progress in meeting the criteria for the release of a fourth tranche of the $4.7 billion loan.

The multilateral lender approved the $4.7 billion loan in January 2023. Bangladesh has already received $2.3 billion in three tranches.

The IMF mission's discussions with the interim government of Bangladesh began on Tuesday, incorporating potential conditions for a fresh $3 billion loan. The discussions are to continue until December 17.

The delegation asked why the NBR failed to meet the IMF's revenue collection target for the previous fiscal year and sought to know about the measures taken to increase revenue collections, according to the official.

The tax authority logged overall receipts of Tk 382,562 crore in fiscal year 2023-24, falling short of its revised target by Tk 27,438 crore.

"We explained our real situation to them and informed of what we have done in recent times, including measures to increase tax return submissions," said the official.

The multilateral lender laid emphasis on revenue mobilisation, especially for the fact that Bangladesh witnessed a one percent year-on-year drop in revenue collection in the first four months of this fiscal year.

The tax authority collected Tk 101,281 crore in the July-October period, falling short of the target by Tk 30,831 crore.

The target for the entirety of fiscal year 2024-25 has been set at Tk 480,000 crore.

The NBR official further said the mission had enquired about the tax expenditures and various reform measures, including automation of the taxation system and e-return filing.

"We have been asked to reduce tax exemptions in a rational way," the official added.

The IMF team also agreed to extend their assistance for automation.

Besides, the mission also discussed the status of medium and long-term revenue collection strategies, measures to strengthen tax administration governance and plans to separate the tax administration from the tax policymaking department.​

IMF has started advising BD. Great Development. In some time, they will dictate everything like what WB and IMF do in Pakistan.

 

[Krishna with Flute]

Revised budget may be Tk 50,000cr smaller

Bangladesh’s national budget for fiscal year 2024-25 is likely to be reduced by more than Tk 50,000 crore, with the entire cut expected to be made in funds meant for the annual development programme (ADP).

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Revised budget may be Tk 50,000cr smaller

View attachment 11465

Bangladesh's national budget for fiscal year 2024-25 is likely to be reduced by more than Tk 50,000 crore, with the entire cut expected to be made in funds meant for the annual development programme (ADP).

However, this budgetary revision will depend on several factors, including conditions that the International Monetary Fund (IMF) may set for a fresh loan, the availability of budgetary support and the government's ability to generate revenue through tax collections.

A Fiscal Coordination Council held a meeting chaired by the finance adviser on Monday and discussed the reduction, according to officials from the Ministry of Finance.

In June, the government had passed a national budget of Tk 797,000 crore for fiscal year 2024-25, which included an allocation of Tk 265,000 crore for the ADP.

After the expected revision, the overall size of the budget may be reduced to Tk 747,000 crore, with the ADP allocation likely falling to Tk 216,000 crore, a senior official of the ministry said.

These figures are only preliminary estimates, and the final size of the revised budget will be determined during a meeting set for March or April next year, he said.

A significant portion of the cuts is expected to come from the ADP as the implementation of development projects has slowed due to political instability and the change in government.

Besides, the interim government has also decided to adopt a more cautious approach to spending.

In the first four months of fiscal year 2024-25, ADP implementation fell by 31 percent year-on-year.

Officials of the Implementation Monitoring and Evaluation Division (IMED) point out that many ADP projects were currently on hold due to contractors fleeing following the ousting of the previous government, and few had returned.

Additionally, the government is reevaluating projects that may not be deemed essential or were initiated based on political decisions, further contributing to the delays in project implementation.

As a result, the government has decided to reduce the ADP allocation by a big margin.

However, changes could come about in the revenue as the allocation for interest payments and subsidies is expected to rise.

But this has not been decided yet because a big portion of the revenue budget is spent on interest payments, a financial ministry official said, adding that increasing interest payments were exceeding previous projections.

In the budget for the current fiscal year, Tk 113,500 crore was allocated for interest payments and Tk 42,388 crore had already been spent in the first quarter.

This is a 92 percent increase compared to the same period last year.

That is why the allocation for interest payments may increase further in the revised budget.

Besides, subsidy spending has also been rising in recent years, with the government initially allocating Tk 88,015 crore for it.

By the end of the first three months of the current fiscal year, Tk 4,514 crore had been spent on subsidies, which is nearly half of what was spent during the same period last year.

The finance ministry official said the payments for subsidies have not been cleared due to the political unrest. Besides, there are arears on bills of the fertiliser, energy and power sectors, he said.

Meanwhile, the IMF may impose a condition for the government to settle a substantial portion of these arrears to be eligible for a fresh loan, the finance ministry official said.

This could increase the allocation for subsidies in the revised budget.

As of June, arrears for bills of the power, energy, and fertiliser sectors had accumulated to about Tk 60,000 crore, and these arrears continue to grow.

The interim government, after taking charge, sought budgetary support from multilateral and development partners. The government is expecting to get commitments for $6 billion in loan support by next June.

However, a confirmation on the amount of money will be available by next March or April. And the size of the revenue budget is depending on it.

Selim Raihan, executive director of the South Asian Network on Economic Modeling (SANEM), suggested that the government's decision to revise the budget could be linked to efforts to control inflation by reducing expenditure.

He noted that government revenues were under pressure, and there were challenges involving the development projects initiated by the previous government.

To stabilise the economy, Raihan recommended that the government prioritise key projects while addressing irregularities and mismanagement from past administrations.

However, he emphasised that there is no room to reduce the operating budget as interest payments on loans continue to rise.

Raihan, also a professor of economics at the University of Dhaka, said the fiscal year would unfold with these constraints in place, but stressed the importance of developing a mid-term plan for the future.

The potential loan from the development partners would provide some relief to the government, but it is crucial to align this funding with the country's development priorities, he said.​

50000 Cr Taka reduction budget and unfortunately, all this from Development budget. RIP BD economy.

 

[Bilal9]

Policy consistency critical for attracting foreign investment

Commerce Adviser Sk Bashir Uddin questioned why foreign investors would be interested in investing in Bangladesh if even local entrepreneurs do not find the country’s business environment conducive.

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Policy consistency critical for attracting foreign investment
Commerce Adviser Sk Bashir Uddin says

View attachment 13336
Sk Bashir Uddin

Commerce Adviser Sk Bashir Uddin questioned why foreign investors would be interested in investing in Bangladesh if even local entrepreneurs do not find the country's business environment conducive.

He stated that attracting local or foreign investment requires relevant policy support, adding that policy consistency is critical.

However, he opined that there is no alternative to increasing the private sector's capacity to meet the challenges of trade and investment in the future.

The commerce adviser made these comments during a meeting with Dhaka Chamber of Commerce & Industry (DCCI) President Taskeen Ahmed at the former's office at the secretariat yesterday.

Uddin noted that the student-led mass uprising in July, its subsequent impacts on the overall law and order situation, and floods across the country had caused supply chain interruptions and disrupted local business activities last year.

However, he added that the overall situation is already improving and that the government is working relentlessly to enhance the environment further.

He also expressed hope that prices of essential commodities would stabilise during the holy month of Ramadan, set to begin at the end of February.

He said the recent rise in rice prices had come to the government's attention and assured that efforts are being made to keep prices tolerable.

He emphasised that containing inflation and ensuring the continuation of overall economic development requires expanding tax collection and widening the tax net.

Mentioning that the private sector will face numerous challenges after Bangladesh graduates from the list of least developed countries (LDCs), the commerce adviser stressed that reforms in trade- and investment-related policies, along with collective efforts from all stakeholders, would be indispensable for the economy's betterment.

DCCI President Ahmed stated that radical reforms and modernisation of existing frameworks related to trade and investment -- including import-export policy, revenue structure, financial management, logistics policy, national budget, and monetary policy -- are essential to addressing the challenges of LDC graduation.

He noted that Bangladesh could not adequately prepare for the challenges of the post-LDC era due to the Covid-19 pandemic, the Russia-Ukraine war, unrest in the Middle East, and political instability in the country in 2024.

Ahmed suggested that the government consider deferring the process to allow sufficient time for preparation since the country will lose significant preferential trade benefits on the international market upon graduation.

He also criticised recent initiatives by the National Board of Revenue (NBR) to increase VAT, supplementary duty, excise duty, and taxes on over a hundred products, saying these measures have already caused concern among the general public and businesses.

Ahmed cautioned that if these measures are implemented in the current economic context, the impacts would include increasing inflation, raising the cost of doing business, and potentially hindering both local and foreign investment.

Although the government announced it would reconsider the proposed tariff hikes for several sectors, the DCCI president remarked that the timing of such moves, especially with Ramadan on the horizon, is unacceptable.

He also called for strengthening market monitoring activities to address existing irregularities in supply chain management and to control inflation effectively.​

I like this guy Sheikh Bashir Uddin.

He is a successful business person with a bevy of superb investments (and products) to make Bangladesh proud.

More props to him on his suggestions and plans to improve. Though I am afraid surmounting years of neglect and mismanagement in the financial policies area will be a monumental task no doubt.

 

[Bilal9]

50000 Cr Taka reduction budget and unfortunately, all this from Development budget. RIP BD economy.

You have no clue. Most of the excessive spending was to prop up the chori and looting by Awami idiots.

However the infra did improve, and is on par with your country (some would say better in terms of road infra).

 

[Krishna with Flute]

You have no clue. Most of the excessive spending was to prop up the chori and looting by Awami idiots.

However the infra did improve, and is on par with your country (some would say better in terms of road infra).

Ohhh is it? Our Delhi Bombay highway costs us over Rs.one lakh crore. Our bullet train cost us INR one lakh sixty thousand crore. What is your total infra budget by the way.

Secondly, it is not about corruption but about priority. Your country decided to deduct these deficit out of planned. Expenditure rather than from military budget or unplanned expenditure.

 

[Saif]

Waning foreign investment a wake-up call for policymakers

The inflow of foreign direct investment (FDI) into Bangladesh is facing critical challenges as a plethora of factors have caused it to stagnate to a mere 0.5 percent of the country’s gross domestic product in recent years.

www.thedailystar.net

Waning foreign investment a wake-up call for policymakers

The inflow of foreign direct investment (FDI) into Bangladesh is facing critical challenges as a plethora of factors have caused it to stagnate to a mere 0.5 percent of the country's gross domestic product in recent years.

In the July-September quarter of FY25, the South Asian country received 71 percent less foreign investment year-on-year, down from $360.5 million in the July-September period of FY24, according to Bangladesh Bank data.

Even more concerning is the fact that a recent report by the Bangladesh Investment Development Authority (BIDA), styled 'The FDI Heatmap', emphasised the significant lack of structured investment promotion campaigns for domestic industries.

According to the report, only 45 percent of all foreign investments in Bangladesh qualify as actual FDI. The majority consists of intercompany loans or reinvestments.

This is an alarming development, especially as economists have cited the need to increase the amount of foreign investment in order to create jobs, spur business activities and put the economy back on track for years now.

This raises the question of why FDI has continued on a downward trend despite numerous authorities advocating measures to enhance inflows.

Experts identified several barriers, including political instability, economic uncertainty, bureaucratic inefficiencies, and inconsistent policies.

They also pointed to high inflation, currency volatility, and inter-agency misalignment, which collectively undermine investor confidence and hinder economic growth.

Bangladesh's political landscape took a tense turn in mid-2024 when monthslong protests against the then Awami League government culminated in a mass uprising that saw its ouster.

This shift disrupted the economy and created doubts about stability and governance -- key factors in attracting FDI.

The political unrest was further compounded by a deteriorating law-and-order situation, leaving investors in a "wait-and-see" mode.

Additionally, economic problems, including rising prices, an unstable local currency, and a lack of US dollars, continue to make it harder for foreigners to invest. Policy inconsistency is another major concern.

"Bangladesh is grappling with fundamental economic issues that significantly deter investment decisions," observed M Masrur Reaz, chairman of Policy Exchange Bangladesh.

According to him, restoring macroeconomic stability is essential for meaningful improvement in FDI inflow.

Over the last 15 years, corruption extended beyond bribery, hitting new heights, including manipulation during policy formulation, Reaz observed, adding that this rise in corruption significantly discouraged FDI.

Economic experts also point to deep-rooted problems such as structural inefficiencies, external shocks and policy gaps, which come about as there is a lack of coordination between regulatory bodies such as Bangladesh Bank, the National Board of Revenue, and ministries.

"Policy inconsistencies and bureaucratic hurdles significantly amplify investment risks," noted Rupali Chowdhury, a former FICCI president. She urged the government to ensure alignment among institutional policies to regain investor trust.

Professor Selim Raihan, executive director of the South Asian Network on Economic Modeling, characterised the current investment climate as hostile to FDI due to policy uncertainty.

He noted that frequent ad-hoc changes to policies, particularly those related to import duties and taxes, deter both existing and potential investors.

"There are lucrative policies on paper, but a lack of implementation undermines their effectiveness," Raihan added. He emphasised that macroeconomic stability and consistent policies are essential for any significant improvement in FDI inflow.

Raihan also highlighted that FDI inflows are often seen as an indicator of economic health.

Al Mamun Mridha, joint secretary general of the Bangladesh China Chamber of Commerce and Industry, said the prevailing unstable political situation is the primary reason for the decline in FDI.

He added that rising interest rates and the shortage of gas supplies to industries was another deterrent. "Investors monitor everything before making an investment. So, in this moment of crisis, no one will feel interested in investing here."

He also pointed out that the cost of doing business in Bangladesh is higher than in many other countries, despite relatively low labor costs, discouraging FDI.

Zaved Akhtar, president of the Foreign Investors' Chamber of Commerce and Industry, said earlier that political stability is paramount for any form of investment, adding that a lack thereof had created a palpable sense of hesitation among foreign investors.

Without stability, foreign investors hesitate due to risks like currency depreciation, sudden regulatory shifts, and an unstable business environment.

Ultimately, if political and economic uncertainties are not addressed quickly, Bangladesh may lose its competitive advantage in attracting global investment. This could harm the country's long-term economic goals and growth.

However, the recent decline in FDI should not be swept under the cloud of political uncertainty. It should serve as a wake-up call for policymakers.​

 

[Saif]

Next budget to focus more on revenue

Revenue generation will continue to get priority in the next budget as the interim government wants to pull up the country’s falling tax-GDP ratio.

www.newagebd.net

Next budget to focus more on revenue
Shakhawat Hossain 25 January, 2025, 23:24

Economists want curb on corruption in NBR

Revenue generation will continue to get priority in the next budget as the interim government wants to pull up the country’s falling tax-GDP ratio.

Finance ministry officials said that they had focused on half a dozen areas to increase the revenue generation in the coming financial year of 2025–26 beginning from July 2025.

Rationalisation of income tax waivers will get top focus along with imposing 15 per cent Value Added Tax on most of the consumer goods, they said referring to the proposed revenue mobilisation target at Tk 5.5 lakh crore in FY2025–26.

Economists said that the finance adviser should also come up with specific proposals to curb revenue leakages and corruption by the tax officials which, according to them, significantly contributes to the falling tax-GDP ratio.

The National Board of Revenue in a report released in December 2024 has calculated that Tk 1,15,056 crore was exempted in direct taxes during FY2021–22, almost 2.9 per cent of the GDP in that financial year.

Of that exempted amount, Tk 71,394 crore or more than 60 per cent is linked to the exemption of corporate income tax.

The overall amount of revenue losses due to exemptions reached over Tk 1,50,000 crore in the past FY2023–24, said the finance ministry officials.

The interim government like the ousted Awami League regime is committed to the International Monetary Fund to reduce the tax exemption under the on-going $4.7 billion loan programme.

Tax exemption has been identified as a major reason for the country’s tax-GDP ratio falling over the last ten years with it dropping below 8 per cent in FY2023–24 from 9 per cent in 2013–14.

The low revenue has been a persistent headache for the successive governments, said Mustafa K Mujeri, executive director of the Institute for Inclusive Finance and Development.

Resource crunch has constrained the government’s ability to allocate adequate fund for social protection amid high inflation prevailing persisting over the past three years, he said, adding that public expenditures on health and education were decreasing.

Revenue shortages also forced the government to rely on borrowing sending public debt to an unsustainable level, according to the ‘Medium-term macroeconomic policy statement from 2024–25 to 2026–27’ report by the finance division.

Economists said that revenue mobilisation measures were taken in the past also but failed to bring much results due to corruption by the tax officials and revenue leakages.

Unless the interim government could effectively curb corruption, there is no guarantee that the proposed tax measures would pay, said former World Bank Dhaka office chief economist Zahid Hussain.

He suggested automation of revenue collection as a step to check corruption helping generate more revenues.

The recently prepared ‘White Paper on the state of the Bangladesh economy’ calls the revenue board’s automation measures half-hearted and says that the half-baked steps are a major barrier to effective revenue generation, deepening inefficiencies and fostering a climate of non-compliance.

One of the most glaring examples in this regard is the lack of integration between the NBR and other relevant government agencies that severely limits the effectiveness of the taxation system, continues the White Paper prepared by the interim government to review the state of the economy for the period of 2009–2024, the tenure of the now ousted Awami League government.

The paper also identifies corruption and weak governance undermining tax revenue, stalling reform and service delivery.

Low tax revenue in the country is driven by weak governance, widespread corruption and a lack of trust in how tax revenue is used. Corruption, particularly in tax administration, has led to widespread tax evasion and poor compliance, adds the White Paper.​

 

[Saif]

Inflation can be reduced to 6-7pc in next fiscal, says economist Zahid

Zahid Hussain, a prominent figure and former lead economist at the World Bank’s Dhaka office, has expressed optimism that the general point-to-point inflation rate could be reduced to between 6 to 7 per cent in the next fiscal year (FY26) if the country does...

www.newagebd.net

Inflation can be reduced to 6-7pc in next fiscal, says economist Zahid
Bangladesh Sangbad Sangstha . Dhaka 25 January, 2025, 23:25

Zahid Hussain

Zahid Hussain, a prominent figure and former lead economist at the World Bank’s Dhaka office, has expressed optimism that the general point-to-point inflation rate could be reduced to between 6 to 7 per cent in the next fiscal year (FY26) if the country does not face natural or political calamities.

‘My projection is that it will be possible to bring down inflation within 6 to 7 per cent if there is no major disruption. Prices of several commodities are still increasing. The prices of essential items like rice, lentils, and fish, which significantly impact the common people, need to be reduced,’ he stated.

The esteemed economist shared these insights during an interview with BSS at his residence in the capital. It is noteworthy that the general point-to-point inflation rate in Bangladesh slightly eased in December, reaching 10.89 per cent, down from 11.38 per cent in November 2024.

Data from the Bangladesh Bureau of Statistics (BBS) indicated that this decline was driven by a fall in both food and non-food inflation. In 2024, point-to-point food inflation decreased to 12.92 per cent in December, from 13.80 per cent in November, according to BBS data.

Similarly, non-food inflation also saw a slight decline, reaching 9.26 per cent in December, down from 9.39 per cent in November 2024.

When asked about the possibility of general point-to-point inflation falling below double digits in the coming days, Zahid stated that while one can hope, it is not something to be counted on.

Regarding GDP growth for the current fiscal year (FY25), he commented, ‘If 4 per cent growth is attained by the end, compared to 1.81 per cent in the first quarter, then I would consider it a good achievement given the current circumstances.’

He further elaborated, ‘My projection is that if we can move towards stability in the next fiscal year (FY26), then we could reach a new normal by mid-2026, coinciding with the completion of the election process.’

Zahid emphasized that if this new normal materializes, stakeholders and investors would not wait until June 2026. ‘Should they perceive that everything is heading in the right direction, they would begin preparations to capitalise on moving early,’ he added.

He added that if everything proceeds as planned, the country might witness a significant turnaround in investment by the end of this year. ‘A GDP growth rate of 4.5 to 5 per cent in the next fiscal year (FY26) will then be attainable. Subsequently, we can work towards surpassing a 5 per cent GDP growth rate and gradually emerge from the middle-income trap.’

When asked about the state of the banking sector, he remarked that, unlike the previous regime, the central bank’s policies are now being implemented effectively. ‘We now see much more proactivity and consistency from the central bank,’ he noted.

Although the central bank has printed money to provide some liquidity support, he mentioned that they did not follow their predecessors’ approach to financing the budget. The interest rate caps, both visible and invisible, no longer exist, and the exchange rate has remained stable despite some instability last December.

The eminent economist highlighted that the central bank is making efforts to make the exchange rate more market-based. Banks are now required to send the exact buying and selling rates of foreign currencies twice a day. ‘In this regard, efforts from the central bank are evident,’ he said.

He added that from late 2021 to early 2024, there was a significant drop in foreign currency reserves, declining by at least $1 billion on average each month. However, that trend has now ceased.

‘There has been some stability in foreign currency reserves, and the central bank is currently not selling dollars. However, with a gross reserve of $20 billion, this amount is not substantial enough to withstand large-scale political or natural disasters, such as hikes in import costs or declines in export earnings,’ he explained.

He added, ‘We do not have sufficient buffers and need to further enhance the reserve.’

Noting the encouraging inflow of inward remittances, he highlighted that this improvement is not due to a sudden rise in expatriate wages or a decrease in their cost of living but is primarily a result of a decline in illicit financial outflows.

Zahid mentioned that it is now difficult to launder money abroad as it was in the past, with many who previously laundered money now in hiding. ‘You can’t guarantee where this trend will go in the future or whether it will revert,’ he said.

In the past, remittance inflows of $1.30 billion to $1.40 billion per month were considered ‘bad performance,’ while $1.70 billion or above was seen as ‘good performance.’ However, the benchmark has shifted, with $2 billion per month now considered the new normal.

‘If we can maintain a remittance inflow of $2.20 billion or more on average per month, coupled with the growing number of outbound expatriates, we can term this trend of ‘turnaround’ as sustainable,’ he concluded.​

 

[Bilal9]

Ohhh is it? Our Delhi Bombay highway costs us over Rs.one lakh crore. Our bullet train cost us INR one lakh sixty thousand crore. What is your total infra budget by the way.

Secondly, it is not about corruption but about priority. Your country decided to deduct these deficit out of planned. Expenditure rather than from military budget or unplanned expenditure.

Just one 6.15 KM bridge through a major river cost Tk. 30,000 crore.

How Padma Bridge cost surged to Tk30,000cr

The devaluation of Taka has played a major role in raising the cost of the Padma Bridge project, as more than half of the project’s expenditure has been paid in foreign currency

www.tbsnews.net

The 52 KM six-lane controlled-access connector expressway from Dhaka to Bhanga near the bridge is called the Dhaka–Bhanga Expressway (aka N8). It is about 52 KM long and cost 11,000 crore to construct. So about 211 crore per KM.

The Delhi Mumbai expressway is 1250 KM long - of course the cost will be high (around 80 crore per KM). But still not as high as that of Bangladesh - about one third as costly.

Per KM, roads in Bangladesh cost way higher than India. Of course graft is a small part of it, but generally the standards are higher in Bangladesh (in this case Chinese road construction standards). Indian vloggers repeatedly post this on their VLOGs when they visit.

You don't build highways or railway tracks every day - better to build them right and not repair them every year.