Surreal budget having water in it: CPD

Terming the proposed budget a ‘surreal’ episode, the Centre for Policy Dialogue (CPD) on Friday said though a big budget sounds good, there is water in it and the election-centric violence might put it at risk.“We say it’s a surreal budget…there’s water in the budget. Hartal, anarchy and election-centric violence might put the budget implementation at risk,” Dr Debapriya Bhattacharya, an economist and distinguished fellow of the CPD, said while briefing the media on the proposed budget at the city’s Brac Centre Inn.
The government, Debapriya said, has not set the priority areas for the six months as it will not get the full tenure to implement budget. “It’s not clear through which it will make ‘front-load.”
Considering the reality and global economic indicators, the government might need to bring changes, amendments and inclusion in the budget in mid-term, he said.
CPD Executive Director Prof Mustafizur Rahman, Dr Fahmida Khatun, Dr Khondaker Golam Moazzem, Anisatul Fatema Yousuf and Towfiqul Islam Khan were also present.
Debapriya said the current political uncertainties will likely continue until a compromise is reached over holding of the parliamentary elections. “This’ll seriously undermine the possibility of taking advantage of the various proposals in the budget to stimulate investment in the economy.”
He mentioned that Bangladesh has not been able to attain more than 7 percent GDP growth in the past. “Attaining the targeted 7.2 percent growth will certainly hinge on raising investment-GDP ratio and lowering capital-output ratio.”
In the next FY, the GDP growth target has been set at 7.2 percent instead of 7.6 which clearly marked a balance between last year’s experiences where it had been down to 6.03 percent, Bhattacharya said. “In the proposed budget, we’ve brought it down which was supposed to be 7.6 to balance our midterm estimation.”
Debapriya said a major challenge will be mobilising the required US$ 3.2 billion foreign aid for underwriting the deficit financing and the second one will be ensuring that the development administration has the capacity to use this significantly higher amount of resources.
“The increasing share of bank borrowing in deficit financing could crowd out private sector borrowing and is likely to further raise interest burden in the economy, particularly at a time of high non-performing loans afflicting the banking system,” he said.
He said this will call for a significant breakthrough in terms of resource generation, resource allocation, and effectiveness of resource use and efficiency of development administration. “Will there be an appetite for all these in an election year?”
Debapriya said the target for revenue mobilisation by the NBR has been set at high levels. We’ve much doubt over the NBR target. Emphasis needs to be put on raising efficacy of tax administration, broadening the tax base and gearing up income tax mobilisation efforts.”
He also thinks it will be very difficult for NBR (National Board of Revenue) to achieve the revenue collection target.
“Though the steps proposed for collecting revenue are agreeable as these are aimed at expanding investment but financial structure is weak and it lacks relation with reality,” Debapriya said.
According to the civil society think tank, the new budget will be operationalised at a time when three governments are expected to successively take the opportunity of implementing the budgetary proposals.
Black Money: The CPD thinks the scope of whitening black money is morally unacceptable and its economic benefit remains questionable though it benefits only some particular persons.
It’s morally unacceptable and economically unjustified,” Debapriya said adding that the scope of investing black money in buying plots and flats will not bring benefit to economy but will cause harm to society.
Debapriya wondered why the government has given such an opportunity in the housing sector instead of productive ones.
The proposed budget allowed black money investment in the housing sector at a flat rate of 10 percent tax.
Responding to a query, he said there is another area that has emerged in between black and white which is obscure and grey. “The people of grey area will also be there in benefiting from the provision.”
Debapriya said the people who have money in hands, specially the remittance earners, will be benefited from the scope pushing up the prices of lands significantly.
Presenting data on black money whitening, he said the government had earned only Tk 38 crore in taxes during the period of 2009-2013 against the declaration of Tk 1,305 crore.
The highest Tk 9682 crore was declared during the army-backed caretaker government while the total amount of whitened black money stood at Tk 14,467 crore from 1975-2013, he said quoting media reports.
Despite criticisms by various quarters, the government proposed a provision allowing undisclosed money in buying plots and flats.
Capital Market: The CPD thinks a number of tax proposals will benefit different groups of stakeholders in the capital market like withdrawal of 3 percent tax over extra premium on listed company’s share’s face value and withdrawal of source tax.
It observed that there was no mention about Tk 900 crore refinancing scheme. “The government might think that it’s already implemented,” Debapriya said.
The CPD also said these facilities will have limited impact on stabilising the capital market.
It said the SEC should prepare a code of conduct for institutional investors to encourage them towards long term investment.
Missing Programmes: There were some programmes that should have been completed by 2013, including digitalisation of land registration, establishment of economic zones, establishment of competition commission, construction of Dhaka Elevated Expressway, railway sector projects, approval of anti-corruption (amendment) bill and formulation of financial reporting act and establishment of financial reporting council. (Source: UNB)

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