M Munir Hossain
Abdur Rahim is a small farmer living in a remote Rangpur village. Even a few years ago, he was not acquainted with the word ‘budget’. However, as there has been a rapid expansion in power supply, communication system, and satellite television in his locality over the past several years, he has by now gathered some basic knowledge about national budget.
He knows the announcement of budget every year leaves some impacts on the life of the people. Abdur Rahim has observed how various pro-farmers schemes e.g. financial and agricultural inputs subsidy, easy agricultural loans etc declared in the national budgets for last several years have eased his activities and helped increase his productions.
This year, after counting big loss due to low price of paddy, Rahim expects that the budget for the next fiscal will come up with cash incentives and other proposals to compensate the losses of farmers like him. Against this backdrop, Finance Minister AHM Mustafa Kamal on Thursday placed in parliament Tk 5,23,190-crore 48th national budget for the 2019-20 fiscal year. Although the proposed budget cannot match completely with the expectations of farmer Abdur Rahim, the increased amount of allocation and subsidy in agriculture will definitely help his cause at least to some extent.
Besides, the finance minister has been the bearer of very good news for the disadvantaged and ultra-poor section of the population. Through extending various social safety net programmes and raising allocations, the budget looks very much sensitive to the vulnerable section of society. The plan of bringing another 13 lakh poor under various social safety net programmes is a welcome initiative on part of the government.
This is the maiden budget placed by Mustafa Kamal as finance minister. It is also the first budget of the incumbent government. In keeping with tradition, the proposed budget has outsized all the previous national budgets in the country’s history and is around 18 percent larger than the outgoing fiscal year’s initial budget and 26 percent bigger than the revised one.
Riding on the country’s success of pushing the annual growth of gross domestic product (GDP) beyond 8 percent in the ongoing fiscal year, the new finance minister can definitely and rightly feel upbeat about his big dream demonstrated in every aspect—from expenditure to revenue generation—of the big budget that he has placed before the nation: from expenditure to revenue generation.
However, in the prevailing economic conditions in the country accompanied by a somewhat serene political atmosphere the dream does not appear that unrealistic. Most of the targets, including 8.2 per cent GDP growth, 5.5 per cent inflation rate, set by the government in the new budget look very much achievable.
Education and human resources development, mega infrastructure, power and other nationally important projects have been given priority in the proposed budget. Fast-track projects, which include the Padma Bridge, metro rail, Rooppur nuclear power plant, Matarbari power plant, Payra sea port, Padma Bridge rail link, Dohazari-Cox's Bazar-Ghundum rail line, are being given top priority. An amount of Tk 36,000 crore has been kept aside for the seven mega projects.
The emphasis on infrastructure development is praiseworthy since developed infrastructure is a prerequisite to increased investment and employment generation. However, utilisation of the allocations will require much efficiency from the authorities concerned as we have seen the government cut budgetary allocations in some of these projects.
The proposed budget places greater emphasis on human resources development. So the education and technology sector has the highest allocation of more than Tk 79,486 crore for education, science and technology sector, which is about 15 percent of the new budget. Minister Kamal informed the nation that the government had taken up various programmes to develop the education sector considering the expenditure in the sector as long term investment. The minister deserves appreciation for addressing the point correctly.
Of the Tk 5,23,190 crore, the authorities will chase Tk 3,77,810 crore coming from the National Revenue Board (NBR), non-NBR and non-tax revenue. Some Tk 3,25,600 crore will come from the NBR and the rest from the non-NBR and non-tax sources. The fact that the proposed budget has not brought in any change to seven tax rates, which include tax-exempted income-threshold for individual tax payers, and the government has backtracked on its plan to implement the new VAT law is proof that the government does not want to burden people with extra spending.
But, the huge revenue target will be quite a big challenge for the National Board of Revenue (NBR), in the absence of any new reform measures other than enforcing the VAT law 2012, especially considering the current year’s situation. In the July-March period of the current fiscal, the NBR could collect total revenue worth Tk 153,000 crore, with still needing Tk 1,27,000 crore in the rest three months to reach the possible revised goal of Tk 2,80,000 crore from the initial target of Tk 2,96,000 crore.
The government has planned to bring more businesses under tax net. According to Kamal, there are 40 million people in Bangladesh who are included in the middle income group, however, the number of taxpayers is only 2.1-2.2 million. The finance minister aims to take the number to 10 million at the earliest possible time. It would be interesting to see how they become successful in this area in the upcoming year.
After a two-year delay in the implementation of the new VAT law, the finance minister has announced that the VAT law 2012 will be fully implemented from the very onset of the upcoming fiscal. It would be interesting to observe how this decision affects the market. But implementation of the new VAT law is expected to provide the country’s small and medium enterprises to flourish as tax exemption facilities for such businesses have been expanded to a large extent.
The concessional rate of 0.1 percent will continue for newly established manufacturing entities in the first three years to facilitate industrialisation. The decision to impose supplementary duty on several goods in order to safeguard the local industries is praiseworthy.
The finance minister has introduced 2 percent incentive on inward remittances, aims to mitigate the burden of increased expenses in sending foreign remittances and encourage bringing in foreign remittances through legal channels. The move is expected to bring positive outcome in inward remittance inflow.
The finance minister has kept aside Tk 2, 02,721 crore of the total budgetary outlay for development expenditure. He has seen higher ADP spending as key to growth. But it is not clear how this huge ADP will be implemented without taking any measures to enhance efficiency when less than 50 percent of a much smaller ADP worth Tk 1,67,000 crore has been implemented in the first 9 months of the current year. Moreover, boosting private investment that has remained stagnant for some time now, and streamlining the banking sector literally paralysed by ever increasing non-performing loans will remain key challenges for the government in the upcoming year.
