Despite the inability to meet the revenue growth targets in the earlier fiscal years, ambitious targets are set once again in this years’ budget. The growth that accounted to only 16% in the revised budget for FY18 is targeted to grow by 30.8% in FY19. CPD however, projects that the growth will need to be 40% to collect the additional target of Tk. 79,826 crore. For this extra revenue, budget will rely on individual income tax and VAT at domestic level. The proposed measures would pressurise the middle income group and would create inequality as a ‘perquisite ceiling’ is given to the higher income group. Also there was no reflection of revenue mobilisation related reforms.
These observations came up at the CPD Budget Dialogue 2018. The dialogue held at Lakeshore Hotel on 24 June 2018, was organised as a part of the CPD’s flagship programme Independent Review of Bangladesh’s Development (IRBD). Dr Fahmida Khatun, Executive Director, CPD, made the keynote presentation on behalf of the IRBD team.
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The discussion also drew attention to the lingering banking sector crisis and urgent need to tackle the situation. Factors that affect bank lending rates and how the rates should come down to single digit, requires immediate attention in order to boost investment. The need for trade diversification from heavy dependency on RMG to other sectors, was also mentioned. Furthermore, the participants appreciated the increased allocation in the social safety net but regretted that the budgetary target ignored the proposals set out in the National Social Security Strategy (NSSS).
Speaking as the Chair of the dialogue, Professor Rehman Sobhan, CPD’s Chairman, mentioned the centre’s stepping into 25 years of organising the budget dialogue. He also expressed his frustration that the concerns related to budget proposals have remained similar over the years. Giving example of Vietnam, he observed how Bangladesh is lagging behind in economic progress and in attracting more foreign direct investments (FDI). According to him, Bangladesh is currently relying on short-term deposits of commercial banks to finance long-term investments, which is very risky.
The distinguished discussant at the dialogue, Barrister Nihad Kabir, President, Metropolitan Chamber of Commerce and Industry (MCCI), observed that uncertainty and crisis in the financial sector is hampering the private sector growth. There is also regulatory failure, she added.
The Guest of Honour, Mr Amir Khosru Mahmud Chowdhury, former Minister of Commerce, called for abolition of banking division under Finance Ministry and allow the central bank to independently handle the current banking sector crisis. Mentioning about the inequality and accumulation of unlimited amount of wealth in the hands of few and their investment in the foreign property market, he urged to impose tax on those properties.
The Special Guest, Mr M A Mannan, MP, Hon’ble State Minister for Finance and Planning, stated that revenue collection targets are intentionally set high in the budget to reach the desired amount. The government is yet to take final decision on reducing corporate tax, he informed the dialogue.
While answering to questions from the attendees, Mr A H M Mustafa Kamal, MP, Hon’ble Minister for Planning, the Chief Guest at the event, acknowledged the current anomalies in the banking sector. He reassured that measures will be taken against the wrong-doers and to bring discipline in the banking sector. He however, believes that the corporate tax rebate on banks will enhance the investment environment. In reply to Professor Sobhan’s concerns over FDIs, the Chief Guest said Bangladesh still lacks the infrastructural requirements, like power and fuel, to attract FDIs and also to become more export oriented. However, the government is taking necessary measures to address those issues.
Mr Rarnar Gudmundsson, Resident Representative, International Monetary Fund (IMF) in Dhaka; Mr Md Rezaul Hasan, Member, VAT policy; Mr Manzur Ahmed, Trade Advisor, BEI, BCI, BPGMEA and many others also spoke at the event.