Published in The Financial Express on Thursday, 4 June 2015.
Mega budget to see a mix of fiscal measures
Economic growth to be set at 7.0pc, inflation 6.2pc
Jasim Uddin Haroon
Finance Minister AMA Muhith will unveil in parliament today (Thursday) the national budget for the fiscal year (FY) 2015-16 with an enhanced outlay of around Tk 2.95 trillion.
The budget, according to available indications, despite its record size is unlikely to spring any major surprises.
However, the corporate world, in all likelihood, will see a cut in their income tax rates. The tax-exempted income ceiling of individuals and women taxpayers may be raised keeping in view the current price situation.
The duty rates of some of the consumers’ items are likely to be revised both upward and downward. Source tax of the export-oriented may also see a raise this time.
As estimated, this budget is going to set a record in terms of the gross domestic product (GDP) as its outlay size will be nearly 17 per cent of the country’s total GDP.
For financing the substantially bigger budget than the outgoing year’s one, the National Board of Revenue (NBR) is being handed a daunting task of mobilizing Tk 1.76 trillion.
According to many economists, this tall target may emerge as key challenge for the government in the FY2016.
They also said execution of a rather ambitious Tk 970 billion annual development programme (ADP) would be another challenge for the government in the coming financial year-given the past track record as far as implementation of development projects is concerned.
The budget envisages a 5.0 per cent overall deficit and the gap between estimated expenditure and income is to be funded mostly from domestic sources- both banking and non-banking.
Muhith would start unveiling the budget at 3:00pm through power-point presentation, according to an official announcement from PID.
It will be the second budget under the Awami League-led government’s second consecutive tenure.
It will be the 16th annual budget being presented by Awami League in its four terms of governance–and the 9th one for Mr Muhith as finance minister.
But it is going to be a record seventh budget presentation in a row by Mr Muhith.
The budget for the FY16 will be Bangladesh’s 44th national budget since the nation’s independence in 1971.
Tajuddin Ahmed, country’s first finance minister, presented the first one in 1972.
The budget 2015-16, incidentally, heralds the launch of the seventh five- year plan of national development.
In keeping with the seventh five-year plan, the budget has also projected that the economy would expand 7.0 per cent in the FY2016-the first year under the plan.
The poverty rate is expected to fall 2.0 percentage points to 22 per cent as a result of the targeted expansion of the economy during the upcoming fiscal.
Meanwhile, the finance division had wanted to keep inflation target at 6.5 per cent in 2015-16 in tune with the seventh five-year plan, but it is now being projected at 6.2 per cent amid a sharp fall in commodity prices both on the domestic and international markets.
Stimulating private-sector investment will be another big challenge for the government according to many economists.
However, Policy Research Institute (PRI) executive director Dr Ahsan H Mansur finds the revenue plan a bit upscale.
“The NBR target is definitely ambitious,” he told the FE.
Dr Khandker Golam Moazzem, additional director at the Centre for Policy Dialogue (CPD), another private think tank, said the next budget will face key challenges in executing major infrastructure projects like roads and providing gas to fuel the economic growth up to the desired level.
Country’s power sector has improved somewhat, but the other key areas of infrastructures remained far below the mark in terms of execution.
The budget is expected to put emphasis on macro-economic stability through continued creation of investment opportunities, expanding and upgrading physical infrastructure, improving quality of social services, and strengthening institutional and regulatory environments.
Human-resource development, particularly as regards women and child, according to the finance minister, will get priority in the budget.
The government might provide some financial schemes for the development of livestock.
On the taxation front, the next budget is likely to trim down further the supplementary duties to give the consumers some relief. The corporate tax might be cut by 2.5 per cent to 40 per cent.
Mr Muhith, in presenting his budget, will also lay before the House the finance bill 2015 seeking to give effect to the budgetary measures.
Bangladesh Institute of Development Studies (BIDS) director (research) Dr Zaid Bakht said raising private investment will be very important for the next fiscal, as it will help expand the economy.
“The economic growth will not be achieved without a big jump in private-sector investment.”
He noted that the government has been implementing many big projects over the last few years, and after their successful implementation, private investment might be attracted.
Mr Bakht, who is also chairman of the state-owned Agrani Bank, told the FE that the opening of letter of credit has been on the rise in recent times and that means investment will boom.
A post-budget media briefing will take place at the Osmani Auditorium at 4:00pm tomorrow (Friday), where the finance minister, the finance secretary, the NBR chairman, the economic relations division senior secretary and other high officials will be present.
As in previous years, all the budget documents will be made available online so that anyone can read and download these and send their feedback.