Controlling inflation will be the guiding principle of upcoming budget: Debapriya Bhattacharya

Debapriya Bhattacharya, a distinguished fellow of the private research organisation Center for Policy Dialogue (CPD), has stated that controlling inflation should be considered the primary goal of the budget for the fiscal year 2026-27 in order to maintain macroeconomic stability.

At this time, Debapriya Bhattacharya described the upcoming budget for the next fiscal year as a ''balancing act'' or a difficult test to maintain equilibrium against the backdrop of the current economic circumstances.

Debapriya Bhattacharya said that due to unresolved structural reforms, adverse global conditions, IMF conditions, and public expectations, the Finance Minister has to formulate the budget amidst these quadruple pressures. Under such circumstances, controlling inflation should be the primary target of the budget to maintain macroeconomic stability.

Today, on Thursday, Debapriya Bhattacharya made this statement at a roundtable discussion titled ''Budget in Crisis and Public Expectations'' organised by Prothom Alo. The meeting was held at Sonargaon Hotel in Karwan Bazar, Dhaka. The chief guest of the event was Finance and Planning Minister Amir Khasru Mahmud Chowdhury.

Debapriya Bhattacharya believes that an ''anchor'' in the framework of macroeconomics is necessary to return from a fragile economy to a path of prosperity.

He says maintaining inflation as the main goal for economic stability is still the most important. Secondly, in terms of government financial management, the budget deficit will be one of the anchors. In the present situation, the budget deficit should not exceed 4 per cent of the GDP.

Regarding the revenue collection target, Debapriya Bhattacharya said that covering the large annual revenue deficit is currently the big challenge.

There is no alternative to expanding the tax net into new areas and increasing efficiency in tax management to achieve the minister's target to raise the tax-GDP ratio to 8 per cent.

Debapriya Bhattacharya cautioned that in efforts to reduce the budget deficit, allocations for education and health should not be reduced, stating that there is a tendency within the Annual Development Programme (ADP) to keep projects alive with many ''sweetheart deals'' or limited allocations.

Debapriya Bhattacharya suggested that unnecessary tax exemptions should be reduced to keep the budget deficit under control.

He noted that currently, about 6 per cent of GDP is given away in tax exemptions. This includes sectors like agriculture as well as major corporate sectors.

Citing specific sectors, he mentioned that currently, tax exemptions exceeding Tk 250 billion are given in corporate income tax. In the garment and textile sectors, the amount of this exemption is nearly Tk 46.46 billion.

Again, in the power and energy sectors, exemptions amount to about Tk 76. 11 billion.

Debapriya Bhattacharya said that the National Board of Revenue (NBR) should thoroughly review these areas of tax exemption and that there is an opportunity to reconsider the vast tax exemptions granted in the power sector in particular.

To address economic disparities, Debapriya Bhattacharya called for the introduction of wealth tax and inheritance tax rather than relying solely on income tax.

He said that it has never been possible to eradicate disparity with income tax alone in the world. Wealth tax is necessary for this. Concerns over a middle-class backlash due to fear of losing popularity should not persist. Additionally, there should be an ''inheritance tax'' on property acquired through inheritance as it is an ''unearned income''. Creating a political narrative in support of this is essential.

Expressing concern over the pressure of repaying foreign debt, Debapriya Bhattacharya said Bangladesh has now entered a ''moderate debt distress'' situation. Managing foreign and domestic debt is a massive challenge now. Particularly for foreign debt payment, more than double the amount spent on education and health sectors is currently being allocated. Effective coordination between Bangladesh Bank and the Ministry of Finance is needed to control this situation.

As an alternative source of revenue growth, Debapriya Bhattacharya advises the government to release shares of its multinational and profitable industrial establishments in the stock market.

He mentioned that this discussion has been ongoing since the tenure of former Finance Minister Saifur Rahman. Even the most recent interim government could not make a bold decision on this.

The current Finance Minister was the founding president of the Chattogram Stock Exchange. If he cannot do this, then who will? Mainly due to resistance from bureaucrats, this has not been possible because they receive various benefits by sitting in the board meetings of these organisations.