The Centre for Policy Dialogue (CPD) on Tuesday strongly opposed the provision allowing whitening of undisclosed/black money in the next budget, arguing that it disincentivizes genuine taxpayers.
The think tank also raised questions about government officials’ dearness allowance, saying it will raise inflation.
CPD officials were speaking at a press conference where a report titled “State of the Bangladesh Economy in FY2024-25 Third Reading” was presented. There, CPD said it is time for the interim government to announce a specific date for general elections.
It is also believed that there would be no investment without political stability.
Regarding black money, CPD noted that there are two types of black money in the economy: one generated through illegal means and the other resulting from the existing system.
Prof Mustafizur Rahman, a distinguished fellow at CPD, reiterated their longstanding opposition to the measure, saying it discourages honest taxpayers and undermines the integrity of the tax system.
“It’s being heard that there may be an opportunity to invest existing black money in the housing sector in the next budget; it should be taxed at a large rate, the amount of which could be up to five times higher than the current one.”
However, Rahman also added that Bangladesh's main economic challenge currently lies in the lack of investment at expected levels, which in turn affects employment generation.
Election date
Asked about elections, CPD’s Executive Director Fahmida Khatun said: “It must be said that the government has already been in office for nine months. Now, it would be reasonable to give a specific date for the election, whether it'll be held in December, January, February, or March — whenever it may be.”
“The time has come to announce a specific date for the election. Without political stability, there would be no investment, and without investment, there will be no employment or growth. Employment opportunities in both formal and informal sectors will also be reduced,” she explained.
Dearness allowance
Fahmida Khatun delivered the keynote presentation, where she spoke on government officials’ dearness allowance, and said: “Is this being given to please them (government officials)? There is a question about its timing. This will be given in place of the 5% special incentive currently offered. This will increase government expenditure by about Tk7,000 crore. But if measures are not taken for others, the common man will be under the pressure of inflation.”
The report also stated that while this allowance will provide some respite to the public servants during times of high prices of necessities, apprehensions remain as to whether this move will stoke inflation further.
There are still concerns about how much attention the rest of the workforce— especially those working in low-paying private jobs and the informal sector— will receive.
“The timing and nature of this allowance also calls into doubt the government's priorities. It needs to be observed whether this move was initiated to appease and maintain support from the government employees, particularly those in the bureaucracy.”
Inflation easing, but high prices persist
Although the government has set a target to reduce the inflation rate to 6.5% within the next fiscal year, CPD said achieving this target will not be possible.
It also stated that changing policy rates alone cannot tame inflation; price stickiness and delayed responses limit the impact of interest rate hikes.
Fahmida Khatun said: “After analyzing the inflation rate from 2012 to 2025, we have seen that it will not be possible to bring down the inflation rate to 6.5% next year.”
CPD said trends in local prices have increased since 2019; there has been a slight drop in January 2020 and a sharp rise since mid-2024 due to Aman crop damage.
To solve this, the CPD proposed to maintain buffer stocks, release stocks during price hikes or supply shocks, and improve flood-resilient agriculture.
Revenue shortfall
The revenue collection will fall short by Tk105,000 crore compared to the target in the current financial year, the think tank also said.
Revenue collection growth in the first nine months of the current financial year was only 5% compared to more than 13% last year, Khatun also said.
As a result, a major shortfall is being created in the revenue collection target.
To meet the revenue collection target, 64% growth will be needed in the last three months. However, this is not possible, given the current reality, she said.
Capital market woes continue
According to estimates by the DSE Brokers Association of Bangladesh (DBA), the real value of the capital market, when adjusted for inflation, has declined by 37.6% over the past 16 years.
The report also stated that the performance of the capital market during the first nine months of the interim government fell short of expectations.
However, this might happen for two contradictory reasons: a) the impact of sectoral measures and b) the impact of market manipulation practices.
In terms of the market index (DSEX), it consistently followed a downward trend and never (except for once) reached or approached the 6,000-point mark.
The index for the same period under the previous regime also showed a declining trend, albeit it mostly remained above the 6,000-point level until it plunged to below 5,500 during the last two months.
