Published in The Daily Observer, on Thursday, 4 June 2015.
Muhith unveils biggest-ever budget today
Aim to pull economy out of slump
The finance minister, Abul Maal Abdul Muhith, is set to unveil today (Thursday) the budget for the 2015-2016 fiscal year in the Jatiya Sangsad (Parliament) with an aim to overcome sluggishness in economy and remove obstacles to investments.
Muhith, in his seventh budget speech in a row, is expected to propose the biggest-ever outlay of more than Tk3,00,000 crore including the Annual Development Programme (ADP) of Tk 97,000 crore with a package of measures to boost economy.
The target for total revenue income, including that of the National Board of Revenue (NBR), non-NBR and other sources is expected to be Tk2,03000crore. The revenue target for the NBR is set to be Tk 1,76,000 crore. The new budget is thus set to see a deficit of 5 per cent.
Finance officials said that the Gross Domestic Product (GDP) growth target is likely to be set at 7.1 per cent and inflation at 6.2 per cent. In the outgoing fiscal of 2014-2015, the GDP growth target was at 7.3 per cent and inflation at 7 per cent.
According to the Finance officials, the new budget will give priority to poverty reduction, education, increase in allowance for freedom fighters and the power sector focusing on further revenue income and foreign aids. The next budget will also propose measures to women empowerment and stop influx of rural people to urban areas by providing employment to them.
Anticipated political stability, a drop in international oil and food prices, and the ‘comfortable’ state of economy seem to have emboldened him to go for such a huge budget, analysts say.
They, however, say that traditional but futuristic measures that could dominate the budget proposal might backfire if non-economic factors such as political uncertainty and insecurity continued.
Economists think that targets of revenue income and ADP implementation could be challenging.
Officials said that the target for the National Board of Revenue in the next financial year is Tk 2,03,000 crore, up by about 13 per cent from the revised target of the outgoing fiscal year for the NBR portion.
The 44th national budget of the country will spell out specific steps towards implementation of about a dozen of large projects including the Rooppur Nuclear Power Plant, Padma Bridge, Metro Rail and Elevated Expressway along with high economic expansion and low inflation, said officials involved in the budget-making process.
Dr AB Mirza Azizul Islam, former finance adviser to a caretaker government, said, “It could be extremely difficult for the NBR to achieve the high growth target given the sluggish trend in the economy and lack of confidence among local and foreign investors.”
He said that making up the budget deficit of 5 per cent with estimated foreign funds of about 3 per cent and bank borrowing and earnings from national savings certificate of 2 per cent could be difficult.
As for furthering investment climate and private-sector investments to boost the economy, Azizul said that although the budgetary measures were positive, they could fail to attract investors as investment decisions required a political stability.
“Problems with poor investments are beyond economic factors as investors still fear that political unrest could come back soon,” he observed.
He said that fiscal incentives offered in different countries to attract investments had not worked as expected.
The Executive Director of the Centre for Policy Dialogue (CPD), Mustafizur Rahman, said that three factors could be major challenges for implementing the next budget. These are revenue mobilisation, ADP implementation and the mobilisation of funds to finance deficit.
Bangladesh Bank data, on the other hand, show that private-sector credit growth year-on-year during July-March of the current fiscal year was 12 per cent against the central bank’s target of 16 per cent.
A Finance Ministry official said the government is actively considering giving incentives to the business and industrial sectors that have been affected by recent blockade and hartal programmes enforced by the BNP-led 20-party alliance.
“Oil prices came down in the global market, which is a plus point for the government who has to count a huge amount of subsidy for different sectors. So the businesspeople, especially the exporters, may be awarded a bailout package,” he said.
According to sources, the new budget for FY16 would have announcement for implementation of the new pay scale for government officials and employees for which the Finance Minister would have to feel the pinch for collecting the fund for meeting the additional demand of salaries and allowances of the public servants.
The proposed budget for the next financial year is likely to slash the subsidy expenditure of the government and expand the coverage of social safety net programme moderately by taking advantage of the cheap fuel oil prices on the international market and planned hike in tax rates on apparel exports.
Another official at the Finance Ministry hinted that the corporate tax for the publicly traded companies (listed with the capital market) is likely to come down at 25 percent from the existing 27.5 percent while that of the banks, insurance companies and financial institutions (except merchant banks) at around 40 percent from the existing level of 42.5 percent. However, the tax on the publicly and non-publicly traded cigarette manufacturing companies is unlikely to witness any change.
The individual tax free ceiling is likely to be increased to Tk 2,50,000 from the existing Tk 2,20,000 with the minimum tax to be raised to Tk 4,000. Besides, the individual tax free ceiling for the women and elderly citizens above 65 years is likely to be made Tk 3,00,000 from the existing Tk 2,75,000 while that of the physically challenged people to Tk 3,75,000 from the existing ceiling of Tk 3,50,000.
The new budget would also propose a tax-free income of Tk 4,25,000 for the gazetted wounded freedom fighters up from the existing Tk 4,00,000.
It is also likely to withdraw the provision of 10 percent fine for whitening undisclosed money since the facility is yet to draw any good response. The government has also decided to allocate only Tk2,000 crore for public -private partnership (PPP) initiatives in the next fiscal year.
Besides, the Finance Minister is likely to increase the tax at source for the RMG sector while there would be increased duty on Biri and tobacco. The SIM tax on the mobile phone operators is likely to be increased, too.