Dr Debapriya Bhattacharya speaks to The Daily Star on budgetary measures for Bangladesh’s development, published on Friday, 5 June 2015.
Hard to achieve
Say top economists
Md Fazlur Rahman
The government is likely to face mounting challenges in implementing its new budget as economists, while welcoming some new initiatives, were unconvinced about the country’s capacity to execute the finance minister’s ambitious plans.
“The budget targets are quite impressive, and if realised, they will do justice to the development demands of Bangladesh,” said Debapriya Bhattacharya, distinguished fellow of the Centre for Policy Dialogue (CPD).
He welcomed the cut in corporate tax, and hailed the introduction of the first-of-its-kind children budget and the continuation of the gender budget.
The noted economist soon turned his attention to the challenges the budget for the 2015-16 fiscal year faces.
He said he was concerned about some overarching targets in the new budget.
For instance, Debapriya said, the total revenue growth in the last three years never exceeded 10 percent. “But the new budget aspires to achieve 27.5 percent revenue generation growth. It is actually 36 percent more than the final figure of 2014-15.”
Similarly, the expenditure growth averaged below 10 percent in the last three years, but the proposed budget has stipulated the growth to be 23 percent, said Debapriya.
“Again, the new growth target is 42.5 percent higher from the closing figures of the outgoing fiscal year.
“In the budget, we have not found any list of measures to drive this kind of beyond-the-trend growth,” he told The Daily Star, adding that similar trends might also be observed in the case of deficit financing.
Mirza Azizul Islam, former finance adviser to a caretaker government, said first it has to be seen whether the government would be able to mobilise adequate financing.
“Secondly, we have to see whether the government has the administrative and institutional capacity to implement the budget even if the fund is mobilised. If it can’t do so, the budget is ambitious.”
The NBR revenue target is nearly 30 percent higher than that of the revised budget of the outgoing year, he said. Bangladesh has never in its history achieved such year-on-year higher growth.”
Islam also said there is apprehension among investors and businesspeople that the NBR might push for reaching its revenue generation target. “If that happens, it will hamper private investment.”
The former CG adviser also said if the government borrows more from the banking sector, it would obstruct credit flow to the private sector, thus disrupting private sector investment.
He also said the government’s target on sales on savings instruments to manage deficit financing might overshoot in the next fiscal year as it happened in the outgoing year, putting pressure on the government in repaying interest on borrowing and curbing the budget’s ability to spend more on productive sectors.
Mirza Azizul Islam, however, supported the finance minister’s priority for transport, energy and power, human resources development, health, education and social safety net programmes.
Former Governor Salehuddin Ahmed of Bangladesh Bank said implementation of the budget is the major challenge.
Zaidi Sattar, chairman of Policy Research Institute of Bangladesh, said he has not found anything in the budget that is consumer-friendly, though ideally a budget should be friendly to consumers.
He said the GDP target of 7 percent is ambitious but sometimes there is a need to be ambitious, especially when the country has for long been trapped in the 6-plus percent economic growth.
“But achieving 7 percent GDP growth will be transformative and it will not be easy to attain,” he said.
Sattar also does not think that the budget which is 17.2 percent of the GDP is that large. “Nepal’s budget size is 21 percent of its GDP, while it is about 17 percent in many of our neighbouring countries.”
He said the finance minister has unveiled a big budget riding on the macroeconomic stability which the country has been enjoying for a while. “There is also incentive for high target.”
Extrapolating from the country’s past experience, Khan Ahmed Sayeed Murshid, director general of Bangladesh Institute of Development Studies (BIDS), said the budget may not be implemented fully.
He said the country can’t raise its GDP growth without the much needed investment. “The private sector is not making investments. Although there are talks about innovative financing, we don’t see any innovation.”
“Public-Private Partnership has played key roles in many countries including China. But we have yet to be serious about it … If we can’t be serious about innovative financing, public financing alone can’t meet the country’s huge needs,” he added.