Press reports on media briefing on analysis of the National Budget for FY2016, held at Brac Centre Inn on 5 June 2015.
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Published in The Financial Express
CPD questions clarity of budget’s fiscal framework
Also finds budget financing major challenge
The Centre for Policy Dialogue (CPD) identified mobilising the targeted huge revenue principally from domestic resources as a major challenge for the next budget and also doubted fairness of a few fiscal propositions.
“We are not at all concerned about the size of the budget rather we are concerned about the financing of the budget which is highly dependent on internal resources,” said CPD distinguished fellow Debapriya Bhattacharya at a post-budget media briefing Friday.
In its budget analysis styled ‘Independent Review of Bangladesh Development (IRBD)’ the private think tank also questioned the quality of fiscal framework as it thinks the budget does not provide any monitorable transparent plan for its implementation.
“The quality of fiscal planning has been deteriorating over the last four years, which is likely to continue in FY16,” says the CPD analysis.
Finance Minister AMA Muhith Thursday placed in parliament a Tk 2.95 trillion budget for the fiscal year 2014-15 with a thrust on increasing revenues to meet at least two-thirds of the budgetary allocations.
The government set a target of 7.0 per cent GDP (gross domestic product) growth for the next fiscal and set the spending targets for different sectors accordingly from the lofty outlay.
According to CPD, the high revenue target and the absence of clear guidelines in achieving that improving efficiency of spending may lead to messing up in achieving the budgetary target. “All major parameters of fiscal framework will need to register higher growth rate to attain the targets,” it said.
The government set revenue target for the National Board of Revenue (NBR) at Tk 1.76 trillion, about 30 per cent higher than that of this fiscal, which CPD feared might not be achieved.
“The revenue projected to grow is faster than public expenditure,” says the analysis.
It noted dependence on domestic financing increased while utilisation of foreign loans and grants remained weak. To overcome the problem, the CPD suggested the government increase its foreign aid utilisation to reduce reliance on high-cost domestic borrowings to fund the budget deficit.
The CPD identified tapping more foreign assistance, sluggish exports and accelerating private investment as some more challenges for the government in the new fiscal year.
The think tank believes that sufficient initiatives have not been taken in the budget to boost private investment in the country which has remained sluggish over the past two years.
To reap the benefit of fiscal measures, the CPD stressed the need for reform of government institutions.
And to have the status of a middle-income country (MIC), Debapriya said, the country also needs political stability, consensus on national issues as well as more investment.
“But without reform nothing will be achieved,” said the CPD distinguished fellow.
Asked about achieving the status of a lower middle-income country (LMIC), Debapriya said it’s a matter of time. But it will take some more years to graduate from the league of least-developed countries (LDCs), as the country still lags behind with economic vulnerability and human assets index despite faring well in some socioeconomic indicators.
“But even then it is not impossible to achieve the status of a developed country if we stride hard to achieve the macroeconomic performance as prescribed by the mid-term fiscal frameworks,” said executive director of the CPD, Dr Mustafizur Rahman.
Held at the Brac Inn Centre at Mahakhali, the programme was also addressed, among others, by CPD Additional Research Director Dr Khandaker Golam Moazzem and research fellow Towfiqul Islam Khan. The programme was aired live on Channel-i.
Asked about the assessment of last fiscal’s performance, the CPD’s distinguished fellow said it is not up to the mark, but the real picture will be clear after 3-4 months when the actual figures will be available.
He also mentioned that the overall macroeconomic indicators also failed to be commensurate with mid-term fiscal policies.
Regarding black money, the CPD proposed to formulate a legal framework to help bring undisclosed or black money into the mainstream economy.
In the absence of an effective mechanism to address the relevant issues, the volume of black money has only grown bigger and bigger, a large part of which has even been transferred abroad.
The National Board of Revenue (NBR) could do little to stop it. The anti-money laundering act has also not been effective either to stop transfer of illegal funds or bring the money back into the country.
Asked about Indian Prime Minister Narendra Modi’s visit to Bangladesh and settlement of various trade issues, CPD’s executive director Dr Mustafizur Rahman said it’s a great opportunity for Bangladesh to link connectivity with India and China, world’s two giant economies that import goods worth billions of dollar every year.
To have linked with their economies he also stressed the need for increasing the country’s efficiency in all relevant areas.
Regarding the second line of credit (LoC) from India, CPD distinguished fellow Mr Debapriya, however, expressed his scepticism. This should be free from conditionalities, he said.
Regarding the first LoC, he said there was only progress in the cases of import of railway wagons and buses from India but no progress made in other areas like infrastructure development.
“If US$2 billion more comes from India under LoC, these should be free from import-based conditionalities,” he said. “I am more concerned about import-based loan rather than high-cost domestic borrowing.”
Published in Dhaka Tribune
Source of budget financing worries CPD
The proposed budget has limitations with regard to credibility for fiscal planning in many areas including source of financing, revenue income and expenditure, think tank Centre for Policy Dialogue observes.
“Budgeting in Bangladesh continues to lack benchmarks on progress, expansion and plans concerning various measures and initiatives from the earlier budget,” CPD distinguished fellow Debapriya Bhattacharya said in a post-budget reaction yesterday.
The CPD says the budget size of Tk2.95tn is not ambitious but the budgetary plan to finance it is worrisome.
The government set the target to finance the budget from domestic borrowings worth Tk565.23bn and external sources Tk301.34bn. “The budgetary plan is not in line with the actual achievement, which is concerning,” Debapriya said.
According to CPD’s projections, all major parameters of fiscal framework will need to register higher growth rates to attain the targets compared to those planned in the budget FY16 … “because the budget targets take revised budget figures for FY15 as its base which in reality will lesser.”
It observes that fiscal gap of revenue income continued to widen as it stood at 17.4% in FY15 from 15.4% in FY14. The new budget targets an additional Tk45,072 crore revenue with a 27.6% growth over revised of the outgoing fiscal year. “This is not realistic target in the light of our past experiences,” Debapriya said.
“To finance the budget, the government has increasingly become dependent on bank borrowing, which will affect credit flow to the private sector,” he added.
“The size of expenditure does not matter, but how the funds will be sourced matters.”
He said the budget mentioned almost $5bn worth of foreign assistance for financing the deficit, which means Bangladesh needs to use $2bn foreign aid more than it usually uses.
“But history says that Bangladesh always failed to use less than $3bn foreign aid. So the aim of financing 82.5% of incremental deficit using foreign sources cannot be sustainable in the long term.”
Debapriya strongly criticised setting aside Tk5,000 crore for recapitalising state-owned banks saying it is totally waste of public money and that this allocation is not a viable idea without going for necessary reforms in the banking sector.
The budget failed to give a picture on some measures, which was taken in FY15, including green and eco tax, district budget, and progress of digitised land survey were missing from the FY2016 budget while the Chittagong Hill Tracts (CHT) Affairs ministry was lagging in terms of budgetary expenditure, the CPD observes.
“Keeping silent regarding black money appears to be a continuation of earlier facilities to whiten black money,” Debapriya said.
On the other hand, the CPD has lauded budgetary allocations for infrastructure development, raising of tax at source for apparel sector and cutting corporate tax.
But it criticised the budget for ignoring health and education sectors.
It suggests to incorporate a matrix for future budgets, articulating the progress of key initiatives in the preceding budget, and a plan and timeline for key milestones to be achieved during the upcoming budget period.
Total allocation for agriculture and allied sectors continued to decrease. To ensure fair prices for agricultural commodities, the CPD has proposed setting up of a Permanent Agricultural Price Commission on an urgent basis to ensure incentive price for the producers while maintaining market stability.
With regard to taxation, the think tank lauded a number of good moves including raising the ceiling for personal income tax and taxing allowance of government officials but did not find it fair to set the minimum tax of Tk4,000 across all geographical locations.
Published in New Age
Revenue target ambitious: CPD
The proposed budget is nothing but continuation of higher up expenditure based on domestic borrowings and record of low utilisation of foreign loans which might not help achieving targets of private investment and seven per cent growth.
Centre for Policy Dialogue, a local think-tank, made the assessment at a press conference in the capital on Friday, a day after finance minister AMA Muhith proposed the national budget for 2015-16 fiscal year.
CPD distinguished fellow Debapriya Bhattacharya said exiting financing model of budget in absence of reform proposals had become less viable for the country like Bangladesh whose annual growth has been stuck at 6 per cent for the last one decade.
He said the proposed budget’s slogan ‘Bangladesh Marches Towards Prosperity Paving the Way for Higher Growth’ might be poetic but lacked clear indications for implementation.
The weakness of such financing model is pushing up higher payment for interest against the decreasing allocations for health, agriculture and education. Besides, many allocations like recapitalisation of the state-owned banks were just wastes of public funds, he said.
The CPD officials doubted Muhith’s optimism to turn the country into a developed one by 2041 saying it needed US$ 1200 per capita income to be so.
Besides, 10 years time alone would be needed for rising above the least developed country, they said, adding that the country already lagged behind those targets because of the unsuccessful sixth five-year plan.
There are initiatives in the budget proposal for higher up sluggish private investment.
But those would not bring much benefit to encourage the tentative investors to go for fresh investment because of lack of infrastructures, said CPD additional director Khondoker Golam Moazzem Hossain.
Slower than expected implementing rate of infrastructure related projects was evident, he pointed out.
Revenue income target is ambitious which will end up in high shortfall like the outgoing fiscal year, said the CPD officials, adding that bank borrowing would go up to meet the shortfall.
The revenue board suffered Tk 30,000 crore revenue shortfall due to lack of proper reforms.
The CPD officials doubted utilization of projected foreign loans which is almost double to a record of US$ 3 billion.
Unlike previous finance ministers, Muhith did not clarify imposition of new tax or duties with projected revenue incomes that makes transparency of budget further questionable.
The CPD officials urged that there should be a chart in the budget giving implementation status of the previous announcements.
They criticised proposed amendment to the income tax ordinance aiming at relaxing the facility of investing undisclosed money in the unproductive sectors like real estate. They suggested for enacting a new act to bring the undisclosed money and hidden assets in the real economy.
The CPD welcomed Muhith’s announcement for establishing a financial sector reform commission to work on the poor status of the country’s banking sector hamstrung by loan scams.
They demanded for establishment of commissions on the national statistics, agriculture, local government expenditure and public expenditure. They noted that time was suitable because of better political outlook in the country.
The CPD officials identified the Child Budget as the brightest of proposals and exclusion of district budget the darkest one.
Published in New Age
CPD for service charges on transit
Centre for Policy Dialogue on Friday said that Bangladesh should impose service charges on the transshipment and transit facilities proposed for its neighbour India.
The local think-tank made the observation at a post budget press conference on the eve of Indian prime minister Narandra Modi’s two-day state visit to Bangladesh beginning from today.
The loan of around $2 billion, likely to be announced by Modi during his visit, should not be suppliers’ credit in nature, the thin-tank said, adding that 80 per cent of the existing $1 billion loan by the same country was tagged with procurement of Indian goods.
India has long been pressing for transit and transshipment facilities through Bangladesh to establish easier communication from main land to its north east estates plugged with decades old movement by the separatist groups.
It is reported that the issue would get prominence in Modi’s visit after both the countries have made progresses over the years.
CPD executive director Mustafizur Rahman said that there were some overenthusiastic policy makers who were against the introduction of service charges citing examples of other countries, while CPD reviewed many laws in this connection and found that service charges were applicable.
Even India never refused to pay the charges for using the country’s infrastructures, he said.
He noted that a committee was appointed by the government to fix charges after the then Indian prime minister Manmohan Singh’s visit in 2011.
He demanded that the proposals of the committee should be considered during talks on the issue.
CPD distinguished fellow Debapriya Bhattacharya said that the country would not benefit by giving transit and transshipment facilities to India on scattered/piecemeal basis.
For maximising benefit the country should adopt a transit and investment framework with India, he said.
Published in New Age
CPD opposes wholesale SD on telcos’ services
The Centre for Policy Dialogue in its budget analysis on Friday opposed the government’s proposal for imposing 5 per cent supplementary duty on the services provided by the mobile phone operators through SIM and RUIM card as the wholesale rise might increase talk time rate.
Finance minister AMA Muhith in the proposed budget for the fiscal year 2015-2016 on Thursday imposed 5 per cent supplementary duty in addition to the existing 15 per cent value-added tax on the services.
‘Excessive pressure to increase revenue collection for achieving the budget target might be a reason for the government’s intension of imposing the supplementary duty,’ CPD distinguished fellow Debapriya Bhattacharya said while presenting the budget analysis of the local think-tank at the BRAC Centre Inn in the capital.
He, however, said the government should create slabs in imposing such SD on mobile phone calls so that the people who make calls for essential purpose only avoid such duty.
Speaking about the absence of evaluation of the budget for the outgoing fiscal year, Debapriya said, ‘We did not see any evaluation of the budget of the outgoing fiscal year in the budget placed at parliament.’
Muhith in the last budget imposed 1 per cent green-tax on ad-valorem basis on all types of products manufactured in Bangladesh by industries which pollute the environment and eco-tax on the polluters who pollute Buriganga, Shitalakshya, Balu and Turag rivers, but the proposed budget did not contain any disclosures in this regard, he said.
‘We would like to propose that the finance minister in the next budget make an evaluation of commitments and implementations,’ he said.
He also said that the government should clarify what tax measures would bring how much revenue and how much revenue collection would fall due to a certain tax incentive.
The government might have scrapped the district budget provision without mentioning the reason although the finance minister in the previous two budgets made heavy campaign in this regard, Debapriya said.
‘The finance minister said the local administrative department would decide the budget allocation for district. In that case what will be the justification for allocation of fund for districts,’ he said.
It is essential to form a local government commission for setting district-wise budget allocation based on their demand, Dabapriya said.
Besides, the government should prepare a state-of-the-art database that will contain all its liabilities, he added.
Published in The Daily Star
Think-tank CPD says Bangladesh’s budget financing biggest challenge
Financing the proposed budget for 2015-16 will be the biggest challenge, Centre for Policy Dialogue (CPD) yesterday said, raising doubts about achieving the revenue collection targets to implement the Tk 2.95 lakh crore outlay.
“We are not concerned about the size of the budget. Our concern is rather about the financing of the budget and the financing mix to implement it,” said CPD Distinguished Fellow Debapriya Bhattacharya at a press briefing at Brac Centre in the capital.
The civil society think-tank shared its analyses a day after Finance Minister AMA Muhith unveiled the national budget for 2015-16 fiscal setting a target of collecting Tk 2.08 lakh crore in total revenue, which is 27.6 percent higher than the revised collection goal for the outgoing fiscal year.
Debapriya made the presentation on behalf of the CPD.
The National Board of Revenue (NBR) will have to generate 84 percent of the total targeted revenue in the form of VAT, income tax, customs and supplementary duty.
The CPD said there is no doubt that investment has to be increased to accelerate the pace of the economy and revenue collection as percentage of GDP has also to be raised. There is also no disagreement about the need for higher expenditure for the economy, it added.
The revenue target set for the next year would not be achieved, Debapriya said.
Citing past trends of revenue collection, he said collection target will fall short of Tk 30,000 crore in the outgoing fiscal. Annual Development Programmes (ADP) targets will also remain unachieved by the end of the current fiscal.
“Similarly, a large portion of revenue collection goal will remain unachieved in the next fiscal year,” said Debapriya, adding that revenue collection should be increased by 35 percent to attain the next year’s target.
He also said the projections Muhit made are based on the revised budget, rather than on real achievements, which will be clear when the outgoing fiscal’s actual data in different sectors such as revenue collection will be available.
Talking about the lack of transparency in specifying various sources of revenue collection, he said, “In the past, we saw that every finance minister shared break-up of revenue collection or loss against the budgetary measures. Why do we not get that break-up now?”
He said the government will have to depend on borrowing mainly from banks and non-banking sources to finance the coming fiscal year’s budget due to deficit in revenue collection target. This will increase the interest payment burden unless the government pays attention to utilise foreign aid.
In the proposed budget, the net bank borrowing has been projected at 44.5 percent of the total deficit, up from 41.6 percent in the revised budget of the outgoing year. The flow of foreign aid was also projected to grow but the target of foreign aid flow is “almost impossible” to achieve because of slow pace of implementation, he reflected.
On tax measures, the think-tank hailed the slash in corporate tax rate and a hike in the source tax for exporters. However, it stated that the Tk 4,000 uniform minimum tax for all taxpayers is ‘unfair’.
On sector-based allocations, the CPD said allocation for the transport and communication, and power and energy sectors was expected but lamented the drop in allocation for the agriculture and health sectors. Allocation for education also remains below 2 percent of GDP.
Debapriya said increased use of foreign aid might pave the way for making use of more resources in education and health sectors, which remain neglected for lack of fund.
The think-tank believes that sufficient initiatives have not been taken in the budget to boost private investment in the country, which has remained sluggish over the past two years.
The CPD welcomed the children budget but inquired about the schemes that were shared by the finance minister in his previous budget proposals, including district budget, Audit Act for budget implementation and creation of a database for genuine fishermen.
“We are disheartened. We thought district budget is a promising initiative to strengthen local government bodies,” he said.
CPD Executive Director Mustafizur Rahman and its additional research director Khondaker Golam Moazzem also spoke at the programme.
Published in Daily Sun
CPD doubts meeting revenue target
Local think tank Centre for Policy Dialogue (CPD) has expressed doubt whether the government would be able to meet the revenue collection target set in the proposed budget for 2015-16 fiscal.
“As per the track record, we can say a big portion of the targeted amount of the revenue would remain uncollected,” CPD said in its post-budget press conference held at the BRAC center Inn at Mohakhali in city on Friday.
Addressing the press conference, CPD Distinguished Fellow Dr Debapriya Bhattacharya said the estimation of the income and expenditure of the budget has not been done based on realistic accounts, rather it has been done based on revised budget, “That’s why we feel that fulfilling the target of revenue earning would not be possible.”
“Public investment has to be increased, there is no doubt about the necessity of expenditure but if it was possible to clear that how much money will be earned from which sources, then it would be possible for us to keep trust on the realism of the budget,” Bhattacharyya added.
He mentioned that most significant part of this budget is ‘Child budget’ considering welfare of the country’s next generation, while the worst side of this budget is the deducting process of the District budget.
“Size of this year’s budget is Tk 295,100 crore, GDP is confined within the circle of 6 percent, private sector investment is not increasing, growth expectation is 7 percent, revenue income has to be increased by 30.62 percent, all these mean that in the next fiscal year, more Tk 45,072 crore has to be supplied and CPD expresses doubt about collecting the additional amount of revenue”, CPD officials observed.
CPD Executive Director Dr. Mostafizur Rahman and other high level officials of the think tank were also present in the press conference.
Published in News Today
CPD doubtful about achieving revenue collection target
The Centre for Policy Dialogue (CPD) in its post-budget reaction on Friday expressed its doubt over achievement of the revenue collection target in the upcoming fiscal like the outgoing fiscal, reports UNB. “We don’t have doubt over budget expenditures, rather our main concern is over revenue collection and financing sources to meet deficit…a big portion of the revenue collection target, set in the proposed budget, will remain unachieved in the upcoming fiscal,” said CPD’s distinguished fellow Debapriya Bhattachariya at a press conference in the city’s Brac Centre Inn. The think-tank arranged the press conference to voice its reaction over the proposed 2.95 lakh crore budget for 2015-’16 fiscal, placed by Finance Minister AMA Muhith in Parliament on Thursday. Its executive director Mostafizur Rahman delivered the welcome speech. Noting that the CPD’s projection of Tk 30,000 crore shortfall from the revenue target of the outgoing fiscal has become finally true, Debapriya said they will also be able to project what amount of revenue target will not be achieved in the next fiscal, when they get data after a year. The FY16 budget targets an additional Tk 45,072 crore revenue with a 27.6 percent growth over revised budget of 2015 fiscal, but the growth will have to rise at 36 percent, he said. “The revenue collection is now 10-11 percent of GDP in Bangladesh, whereas it was 17-18 percent in Tanzania and other countries. We want revenue collection to be increased taking reform initiatives,” he added. Bangladesh needs to concentrate on using foreign soft loans to increase budgetary allocation to health and education sectors. “If foreign assistance to our projects are used, cost against payment loan interest will come down,” the noted economist said. The brightest side of the proposed budget is introduction of a separate Child Budget, which will enhance transparency in the budget, while the gloomiest side of the budget is dropping district budget without showing local grounds, Debapriya said. He claimed sufficient initiatives have not been taken in the proposed budget to boost private investment. He said according to the CPD projection, Bangladesh will turn into a lower-middle income country in 2016 or at best 2017. “We do not need to wait till 2021 for this.” He, however, said though Bangladesh will come from the list of lower income countries by 2018 – rather the country will be kept under observation for the next six years whether it’ll slip down to lower income status again. “So, our Bangladesh may remain a lower income country for more 10 years in true sense.” Debapriya said Bangladesh will have to go to a coordinated transit structure to get maximum benefit from connectivity, rather than dealing with river transit and road transit separately. CPD executive director Mostafizur Rahman said regional connectivity may be a win-win situation for Bangladesh and other neighbouring countries, but a big investment is required in the transportation infrastructure of Bangladesh for launching the connectivity.