The South Asian Network on Economic Modeling (SANEM) has stressed the urgent need for reforms in the banking and revenue sector to steer the economy back on track.
It made the observation on the proposed national budget for the 2024-25 financial year at a press conference in the capital Dhaka.
Bangladesh has been facing high inflation for 15 consecutive months, signalling a deep-seated issue.
Despite various initiatives, the economy remains off-balance, with its foundations weakened by the lack of timely reforms.
SANEM emphasised the importance of developing and promptly implementing a roadmap for these reforms to ensure the economy鈥檚 resilience against global shocks.
Highlighted several critical economic issues, SANEM executive director Selim Raihan said that the conventional monetary policy had not been effective in reducing inflation.
Efforts to adopt market-based interest rates have also fallen short, with the policy change coming too late to have a significant impact, he said.
鈥楢ny further changes in interest rates could destabilise the financial sector,鈥� he said.
Selim criticised the emphasis given by the government on indirect taxes over direct tax collection.
He condemned the scope for legalising undisclosed money with paying 15 per cent tax.
He expressed concern over the increasing debt burden and the need for proper evaluation of mega projects undertaken with loans.
Regarding the exchange rate, Selim suggested allowing the crawling peg to work more smoothly to avoid shocks to the economy.
He also warned of the risk of Bangladesh facing a situation similar to Sri Lanka鈥檚, with a significant deterioration in the macroeconomy over the past year.
The budget review was presented by the SANEM鈥檚 research director Sayema Haq Bidisha.
Bidisha said that Bangladesh had recently experienced a record high non-performing loans, amounting to Tk聽182,000 crore.
鈥楬owever, no clear direction in budget to tackle the high NPL. Clear and detailed policy directions to tackle NPL is required,鈥� she said.
Bidisha highlighted key economic challenges including high inflation, declining foreign exchange reserves and taka depreciation.