An expansionist budget
Syed Ishtiaque Reza, Editor-in-Chief of GTV & sarabangla.net : The national budget of Tk 4 lakh and 64 thousand crore for FY 2018-19 can be reviewed for its political finesse. Of the amount, 63.7% is projected to come as tax revenue (NBR), 7.2% as non-tax revenue, 15.3% as domestic loans and 1.8% as foreign loans.
Presenting his last budget, Finance Minister A M A Muhit actually pressed all the buttons he had to press, and addressed all the constituencies he had to address because the national parliamentary election is scheduled for December next. The result is an expansionist budget that sees Bangladesh is missing all its abilities to implement a mammoth size.
It is clear that we are in the midst of a financial crisis, due to one after another scam, that has taken a toll on the overall economy. Yet the finance minister reduced corporate income tax by 2.5% for the listed financial institutions without any assurance from the private bank owners that they would bring down the lending rate at single digit. This reduction will result in a revenue loss of Tk 1000 crore which will be taken away by bank owners. Only a few days ago these bank owners took away Tk 10,000 crore as the central bank reduced CRR by one per cent. The loss making state-owned banks are also given Tk 2000 without any corrective measures to make them efficient and corruption free.
Muhit also didn’t say much about the capital market. Until and unless the affairs of these two sectors are streamlined, the economy would not be able to move ahead at a healthy pace.
The budget proposed certain tax measures with a view to giving protection to a number of domestic industries. There were however some harsh tax proposals for certain items, including tobacco, polythene bags and energy drinks.
The government could spend only 45 per cent of the revised budget in the first nine months of FY 2017-18. Yet Muhit is hopeful about ‘dynamism’ in the budget execution in the remaining months of the outgoing fiscal.
The total revenue receipts in FY 2017-18 were projected to be 13% of the GDP in the original budget and 11.6% in the revised budget. The actual receipts in nine months were equivalent to 7.2% of GDP. Similarly, the ratio of expenditures to GDP during nine months was only 7.5% vis-à-vis 18% and 16.6% respectively projected in the original and revised budgets for the outgoing fiscal. The budget deficit was also as low as 0.2% as against the estimated 5.0% of GDP.
The government has placed great emphasis on mega projects with a budget allocation of Tk 32,555 crore to speed up implementation, especially before the elections. But inefficiency, corruption and negligence of project officials have caused resulted in both cost and duration overrun.
Good side of the budget is that twelve lakh more people will be brought under the social safety net programme, introducing electronic transfer of funds to avoid irregularities. It is laudable that the government is prioritizing projects targeting the poor and most vulnerable sections of society. The energy sector has also been allocated a bigger chunk of the budget to meet the ever increasing demand. Raising the subsidy for agriculture and move to introduce a pension for all are the good moves.
There has been actually little change in the budget and little indication that the problems of poor implementation of projects, the crisis in the banking sector, and the burden of rising costs for lower income groups, will be solved anytime soon.