Home / CPD in the Media / CPD events mention / Press reports on CPD’s National Budget FY2017-18: Post-Approval Observations

Press reports on CPD’s National Budget FY2017-18: Post-Approval Observations

CPD organised a media briefing titled National Budget FY2017-18: Post-Approval Observations on 10 July 2017 at BRAC Centre Inn Auditorium, Dhaka. The briefing was organised under CPD’s flagship programme Independent Review of Bangladesh’s Development (IRBD).

Find more news on this event


Published in The Daily Star on Tuesday, 11 July 2017

No political will to clean up banking sector: CPD

Think-tank gives its observations on fiscal 2017-18 budget

Star Business Report

debapriya_bhattacharya_4
Debapriya Bhattacharya, distinguished fellow of the Centre for Policy Dialogue, speaks at a media briefing on the national budget for 2017-18, organised by the think-tank at Brac Centre Inn in Dhaka yesterday. Fahmida Khatun, executive director; Mustafizur Rahman, distinguished fellow, and Khondaker Golam Moazzem, research director, were also present. Photo: Star

Loan scam grips one bank after another and the overall financial sector mainly because of a lack of political will to address the problem, said the Centre for Policy Dialogue yesterday.

Now the first generation banks have started to get affected by loan scandals after state-owned banks and the new ones.

And the reason behind the repeated incidents is the absence of good governance and a lack of oversight on banks, said CPD Distinguished Fellow Debapriya Bhattacharya at a media briefing held at the Brac Centre Inn.

The private think-tank organised the meet to share its observations on the budget for fiscal 2017-18.

“Such incidents would not take place if there was a political will.”

The CPD once again called for a temporary financial sector commission to suggest and implement reforms.

“The finance minister also mentioned the banking commission in his budget speech and on several occasions before. But we have seen that it losses steam somewhere,” Bhattacharya said.

People will be benefitted and satisfied if a reform commission is formed based on a transparent process ahead of the general election, he added.

Citing the past trends for budget implementation, revenue collection and budget deficit, the CPD said Tk 360,266 crore out of the total outlay of Tk 400,266 crore can be spent, meaning 90 percent of the budget can be implemented.  In the worst case scenario, Tk 340,266 crore of the budget would be implemented, said the CPD.

The think-tank forecasted a revenue shortfall between Tk 43,000 crore and Tk 55,000 crore. The budgetary target for revenue collection is Tk 287,990 crore.

“The possible revenue shortfall could be significant, but its extent will depend on the ability to deliver public expenditure plan. Nevertheless, the government will need to put utmost emphasis on mobilising resources from both NBR and non-NBR sources.”

The inability to implement the new VAT and SD Act for another two years will have serious consequences for fiscal framework, particularly for revenue mobilisation.

The think-tank suggested continuation of digitisation of the VAT process and bringing in more businesses through the implementation of the VAT online project under the existing VAT Act 1991.

The move would prepare a high number of firms to comply with the new law once it comes into effect. “The new VAT law has made a crash landing. So, schemes for automation of the VAT system through VAT online project should be continued to salvage it,” Bhattacharya said.

The implementation of the law has been deferred at the last moment as there was a lack of political, social and technical preparation, he said, adding that the CPD supports the new VAT law.

The new law seeks a single and uniform VAT rate of 15 percent for most goods and services available in the country. The CPD said the lowering of the single VAT rate to 12 percent would reduce the worries of people.CPD Research Fellow Towfiqul Islam Khan suggested the revenue authority set a timeline to introduce electronically generated 9-digit Business Identification Number. The 9-digit e-BINs are issued under the new law.

CPD Executive Director Fahmida Khatun said the organisation supports a revenue system that ensures accountability and transparency in tax collection and expand the tax base.

To implement the budget for fiscal 2017-18, the CPD recommended that the government should prepare a work plan based on new circumstances while considering the objectives of maintaining macroeconomic stability, supporting private investment and generating more employment.

It suggested involving the parliamentary standing committees to prepare the work plan. A cabinet sub-committee may scrutinise and endorse the work plan and oversee implementation, Bhattacharya said.

The CPD recommended widening the income tax base, citing its findings that only 27.3 percent of all potential income taxpayers declared income tax in 2010.

It also called for more stringent measures to reduce illicit financial outflows and actions against proven cases.

“Motivation of honest taxpayers erodes if the government does not take action against people making money illegally and sending them abroad,” Bhattacharya said.

On one hand, increasing amounts of funds are transferred abroad and on the other, the tax burden is being increased on legally earning taxpayers. “It is not morally acceptable.”  Increased attention should be given to curb unlawful outflow of capital as it intensifies ahead of national election, he said.

Replying to questions on the sluggish growth of exports, falling remittance and achievement of Sustainable Development Goals, CPD Distinguished Fellow Mustafizur Rahman stressed taking reform measures. He suggested increasing productivity and competitiveness, and diversification of exports to attain higher export growth. “Bangladesh has to ensure productivity-driven growth,” he added.

CPD Research Director Khondaker Golam Moazzem said declining remittance inflows may affect consumption spending in the domestic market.


 

Published in Dhaka Tribune on Tuesday, 11 July 2017

CPD calls on govt to form reform commission to stop looting of banks

‘Tk2,000 crore set aside for banks can be swept aside like a speck of dust. This will have no impact in reducing the bank’s deficit. So we need structural reforms’

The Centre for Policy Dialogue has called for steps to form a transparent reformation commission to put an end to banking scams.

The local think tank also stressed on the need for political goodwill to this end.

CPD made the observations at a national budget discussion titled National Budget FY2017-18: Post-Approval Observations, held in Brac Centre Inn in the capital on Monday.

Dr Debapriya Bhattacharya, Distinguished Fellow of CPD said: “Lack of political goodwill is responsible for the theft or looting in the banking sector. So a transparent reform commission is necessary to end this practice.

“Besides, absence of good governance in the banking sector, lack of Central Bank oversight and poor supervision by the finance department are factors that have led to the present situation. Even if there was no political interference, the situation would continue to persist due to lack of institutional capacity,” he also said.

Dr Debapriya Bhattacharya presented the key-note paper at the press conference organized by CPD. The CPD also shared its post budget recommendations for the current fiscal year.

Debapriya said that the situation was not the result of only corrupt individuals but deep institutional issues. Political economy is the most important determinant in the development of the county. Lack of political goodwill is the main reason behind the situation in the banking sector. So discipline has to be brought to the sector to stop looting.

“If political goodwill was there then those who are monitoring it can exercise power and the Security Access Commission can take action. These situations can then be avoided,” he added.

He also added that it is a good practice to take certain exemplary action. If action is against these irregularities and those responsible for them, before the national election, then the people would be happy with the ruling party. To this end, the government should form a banking commission and our recommendations should be implemented.

Debapriya said, some Tk10,145 crore has been allocated as incentive to be invested in different sectors, including stock markets, for the fiscal year 2017-18. There should be supervision on how this money is being used.

“Tk2,000 crore set aside for banks can be swept aside like a speck of dust. This will have no impact in reducing the bank’s deficit. So we need structural reforms.”

There is some scope to rein in the budget in the non-development expenditure. There is a block allocation of Tk3,327 crore and the government should mull whether there is an opportunity to avoid spending this money, he said. Besides, Tk1,066 crore given to the Planning Ministry should also be spent with caution.

CPD Executive Director Professor Mustafizur Rahman, Director Anisul Fatima Yousuf, Acting Director Fatima Khatun, Khondoker Golam Moazzem and Researcher Towfiqul Islam Khan were present there.


 

Published in Daily Observer on Tuesday, 11 July 2017

Six CPD recommendations for implementing budget

Staff Correspondent

The Centre for policy Dialogue (CPD) has put forward six recommendations to implement the national budget for fiscal year 2017-18.

The recommendations are banking sector reforms, maintaining quality in implementing the Annual Development Programme (ADP), formation of a commission for fixing prices of agricultural commodities, Active parliamentary standing committees. End to high cost borrowings and improving the overall budgetary earning-expenditure, which include maintaining the existing trend of revenue collection.

The CPD placed the recommendations at a press briefing on “National Budget FY2017-18: Post-Approval Observations” at Brac Centre Inn in the capital on Monday.

Dr Fahmida Khatun, Executive director of the CPD, Distinguished Fellow Dr Debapriya Bhattacharya, Dr Mustafizur Rahman, additional research director, Khondaker Golam Moazzem, research fellow Tawfiqul Islam Khan and other senior officials were present in the press briefing.

Debapriya Bhattacharya said that revenue collection in the current fiscal year 2017-18 could suffer a shortfall due to non-enforcement of the Value Added Tax and Supplementary Duty Act, 2012 and suggested the government to focus on direct tax and non-NBR revenue sources to offset this deficit.

“The shortfall in revenue collection could be between Tk 43,000 crore and Tk 55,000 crore in FY18,” said CPD’s distinguished fellow Dr Debapriya Bhattacharya.

He said reduction in one percent duty at import level will not have any impact on revenue earnings. Supplementary duty could boost earnings but revenue earnings will fall because of changes in imposition of VAT in service sector, he added.

Bhattacharya said the Value Added Tax and Supplementary Duty Act, 2012 could not be enforced for three reasons. Firstly, the National Board of Revenue (NBR) had lacking in technical preparation and for this reason it was not possible to calculate real impact of VAT. Secondly, coordination was not created among the people and institutions involved in implementation of the VAT law. Thirdly, what social impact the VAT law will create on the income-expenditure of the consumers was not realized.

He suggested preparing a post-budget work-plan based on three specific targets-maintaining the existing macroeconomic stability because macro economy will face pressure if any imbalance between income and expenditure, increasing private sector investments and focusing on public expenditures that create jobs.

CPD also come up with six proposals for improving the overall budgetary earning-expenditure, which include maintaining the existing trend of revenue collection, becoming more conscious in managing non-development expenditures, reconsidering the priorities of development expenditures, refraining from high cost borrowings, handling the negative pressures in respect of foreign loans and taking forward the reform programmes.
Responding to a question, Bhattacharya stressed the need for constitution of a reform commission urgently to ensure good governance in the banking sector. He also suggested the judicious use of the budget allocation for the capital markets.

Comments

Check Also

Time to be vigilant, not to be complacent

There is hardly any room for us to be complacent, rather we need to be vigilant with every component of the fiscal framework. However, careful steps need to be taken while implementing the budget as the changed financial structure will have to depend more on domestic resources.