The proposed national budget finance minister AMA Muhith presented to parliament on Thursday for the 2018-19 fiscal year (FY) is the biggest one in the country's history. The Tk 4.64 trillion budget, which is 25 per cent larger than that of the revised budget for the last FY, will once again test the ability of the government in budget implementation. The government seems to be aware of this. While describing the proposed budget as a 'pro-people' one, road transport and bridges minister Obaidul Quader, who is also general secretary of the ruling Awami League, admitted that its implementation would be a big challenge for the government.
Budget financing will be very difficult in the next fiscal year. Realisation of aid disbursement target will be too tough for funding the budget. Financing from the non-banking sources, which is targeted at 1.0 per cent of the Gross Domestic Product (GDP) in the proposed budget, will also be difficult for the government.
Analysts say certain things need to be prioritised for proper implementation of the budget. These include policy reforms, simplification of taxation system, business-friendly policies, policy continuation, and ease of doing business.
Special attention should be paid to the rising inflation rate in the new fiscal year and take measures to contain it. Inadequate infrastructure and shortage of power and energy are the main impediments to the growth of the economy.
It is necessary that there should be proper utilisation of allocated resources and their timely completion be ensured. The benefits of these measures will only be effective if they are implemented in a timely and effective manner.
The proposed budget does not make any specific proposal about reforming the state-owned enterprises (SoEs). No measures have been proposed for curbing deficits of SoEs or the non-performing loans of the state-owned commercial banks (SoCBs).
On the contrary, the budget proposes to continue the financing of SoEs' deficits and capital shortfalls in SoCBs through budget transfers. This is an 'unjustified burden' on the taxpayers. It encourages inefficient practices.
The government has proposed that the employers would submit statements on the submission of returns by their employees. Otherwise, tax returns of the employers will be subjected to audit. This provision for auditing might turn into a source of harassment for many transparent taxpayers.
The proposed budget has, however, some positive elements. The budget proposal for reducing corporate tax on the banks and other financial institutions by 2.5 per cent is a good sign. Other sectors should get the same benefits.
Proposal for withdrawing provision of taxing dividend income multiple times is also a welcome gesture. Such exemption is expected to benefit many existing companies and encourage local investment further.
Attaining the increased revenue target for the new fiscal will continue to be a major challenge, despite a rise in the number of tax payers. The National Board of Revenue (NBR) has targeted Tk 2.96 trillion in tax revenue for fiscal year 2019, which is 31.64 per cent higher than the revised one of Tk 2.25 trillion of the outgoing fiscal. In order to meet the target, the authorities should find out new avenues of tax collection instead of increasing tax burden on the compliant enterprises. It is necessary that the government should set the inclusion target of new taxpayers' number for each of the tax officials and reward them for enrolling fresh taxpayers.
Economists say the projected 7.2 per cent GDP growth target for the next fiscal is ambitions. The country needs to raise the investment-GDP ratio to 29 per cent, if it wants to attain the projected GDP growth.
The ADP (Annual Development Programme) implementation will, according to analysts, also be a challenging task for the government as it does not have adequate administrative support to implement such a large-sized ADP. The size of the ADP is almost 30 per cent higher than that of the outgoing fiscal.
Some economists lauded several initiatives of the proposed budget, including initiating inclusive pension system for all, focusing on job creation for the young generation, increasing subsidy and allocation in agriculture sector and steps to control tobacco usages.
But there is no proper direction in the proposed budget about what measures would be taken to quicken the rate of reducing poverty or discrimination.
Given the tax revenue growth which was witnessed during the outgoing fiscal, the government will face a few challenges to meet the target to be set for the upcoming one. The budget deficit is in the upcoming fiscal is projected to reach Tk 1.25 trillion or 4.9 per cent of the GDP.
Although there are huge allocations for the mega projects, the budget has no direction for avoiding time and cost overrun of the projects or for ensuring their quality. It has been seen that the budget implementation rate has been decreasing year by year. Nothing has been said in the budget about how to increase the rate.
The proposed budget should have given an increased focus on the sectors like education and health. The country is currently going through a demographic dividend era. The key thing for reaping the benefit of this dividend would be to increase the quality of education. A substantial increase in education and health sectors is necessary for attaining the Sustainable Development Goals (SDGs).
Emphasis should have been given on attracting the private sector investment. Increasing capacity of the National Board of Revenue (NBR), implementation of the VAT law, and identifying areas for expanding the tax net is critical for attaining the government's increased revenue target.
There is, in fact, no alternative to raising the level of private investment if the country wants to confirm the status of a developing country by 2021. The government needs to take necessary measures to ensure efficient and effective spending of the ADP funds. This will help improve the quality of people's lives and create better employment opportunities for them.
The proposed budget has no reflection on the 'employment-led growth', a model which was officially adopted in the national planning. The shrinking number of new jobs is, in fact, a major a concern despite rising trend in GDP growth.
The proposed budget should have specific provisions for employment generation, skill development and up-skilling of women in the workforce.
© 2017 - All Rights with The Financial Express