Budget loses sights of economic weaknesses, real-life challenges

Planning Minister MA Mannan speaks at the 'CPD Budget Dialogue 2023' at a city hotel on Sunday.

With the proposed budget nearing its passage in parliament, analysts remark that it overlooks current economic realities and challenges and lacks fiscal measures to cut 'hyperinflation' while a minister mostly disagrees.

The critics also say that the budget at this critical juncture bears many questionable allocations, social-safety net does not get proper importance, and non-profit organisations are hooked onto corporate-tax net.

They expressed their views at an out-of-parliament budget debate organised by the Centre for Policy Dialogue (CPD) with speakers drawn cutting across political lines, economists and civil-society bodies. Dr Debapriya Bhattacharya, a Distinguished Fellow of the think-tank, presided over the 'CPD Budget Dialogue 2023' at a city hotel.

Speaking as chief guest Planning Minister M A Mannan said higher inflation is not linked with the proposed budget rather it had been rising during the last couple of months gradually and have presence everywhere.

Some people say there is some disorder in market management and the truth is "we are trying to tackle it," he said in response to views about wayward domestic market.

"Our target is lower-income group of people, 30 per cent, to give them protection," he said, adding that the government has been raising allowances through social-safety net, providing food grains at lower prices.

Mr Mannan said power sector had faced some disruptions in the recent times-that is true-but at the same time government deserves credit for providing electricity to all.

On governance issues, he said there was no single instance that the present government did anything that can be an example of bad rule. "We are ruling this country as per laws of the land."

Regarding appointing tax-return preparers to collect taxes he said brokers are everywhere in every democratic country. "Let's appoint them, give a try; if they fail, we can cancel it."

The planning minister claimed that the Tk 2,000 minimum tax is not for everybody, not for all TIN- holders, only for those who want to submit return, buy apartments or cars, or land etc.

He acknowledged that the advance income tax (AIT) is not logical and need to come out from the provision.

Swinging criticisms came from the opposition side. Terming the present government "unelected", former Commerce Minister Amir Khosru Mahmud Chowdhury said they do not have any accountability to the people.

"Who is placing the budget? Is it a government who has accountability to people? Are they elected? When they are not elected, they do not need to be accountable. That is the fundamental question," he told the meet.

When there is no accountability, there are some reflections on economic model of a country. "Such situations can result in patron-tied economy, patron-tied politics," he said, adding that such an economy believes in patronising, because they have patrons.

Mr Chowdhury calls it a rent-seeking economy where commission, rents etc, rule the roost and to cater them institutions become extractive because those are mediums of corruption and also they are benefited.

"They get a share of the pie from those kinds of transactions and corruption," he said, speaking as a special guest on the out-of-parliament budget debate as his party current has no representation in the legislature following the resignation of a few MPs elected in the last polls.

He questioned the necessity of creating a "broker class" to realise tax. "We know who has baton in hands and who is going to be selected for this. This is also a part of patron-tied politics."

Mr Chowdhury claimed that during the rule of Bangladesh Nationalist Party, the macroeconomic indicators were in positive territories and the rate of economic growth was 7.5 per cent.

He lamented that the central bank has broken the macroeconomic framework and the economy is now in dire straits. The economy is running to patronise less than 1.0-percent people.

Former Minister Barrister Anisul Islam Mahmud MP of the Jatiya Party said the government has now taken some reform measures on advice of the International Monetary Fund (IMF) that the local economists had been suggesting during the last ten years.

Today, the price of dollar has reached Tk 107 from Tk 86 few months back, energy prices doubled, and industrialists are forced to pay extra for "inefficiency" of the government.

"The budget should have proposed investment in human-resource development, which is very much absent," he told his audience.

Mr Mahmud noted that the government in the next year would borrow heavily from the banking system that will lessen the scope for private-sector investment.

Dr Ahsan H Mansur, Executive Director, Policy Research Institute of Bangladesh (PRI), thinks the budget is not too big and not ambitious either, but even then, it is impossible to be implemented.

"Because, the fiscal space and the fiscal constraints the government is facing are absolutely tying the hands," he said, adding that anybody who would like to fund the budget will have problems.

Even with very limited allocations for the health sector and education, financing this budget will be extremely difficult, he notes.

Shamsul Huq Zahid, Editor, The Financial Express, told the budget-review meet that the proposed budget does not meet demand of the time.

"Going by the measures taken in the budget and the statement made by the finance minister during its presentation makes one believe that the budget has not been equipped adequately to face the challenges that the economy is now experiencing," he said.

Mr Zahid said though the budget does not say much about the high inflationary pressure and consequent sufferings of low-and middle-income groups of people, it has increased the number of safety-net beneficiaries and monthly allocations, too.

"But the rate of increase is unlikely to bring much relief to the recipients since the amount is too small to leave any impact and inflation will erode much of its value."

He said: "The targets that have been set for GDP growth, revenue collection, and investment growth, by any measure, are ambitious and devoid of correct assessment of the ground realties."

Mr Zahid pointed out that the stock market now is in pitiable state and the budget does not say anything about the way-out. "Whenever the floor price will be lifted, the market might collapse. That is the situation."

Fahmida Khatun, Executive Director, CPD, in her keynote presentation said the proposed budget for FY24 failed to fully acknowledge the ongoing macroeconomic realities and challenges and, therefore, offered inadequate remedial measures.

"The current reality is hyperinflation but the proposed budget has completely failed to address the ongoing macroeconomic challenges and crises," she said.

She finds a significant gap between proposed budget and targets, and says the budget has been placed at the time when the macroeconomic stability of Bangladesh has weakened significantly.

"Negative developments on both domestic and external fronts contributed to this weakened situation."

The CPD executive director also mentions lower growth in revenue mobilisation and consequent shrinking of fiscal space, over-dependence on bank borrowing to finance budget deficits, high prices of essentials, depreciating external-sector balance and foreign-exchange reserves as very visible signs of macroeconomic stress.

Debapriya Bhattacharya said considering the election year, the proposed budget seems unrealistic. Bangladesh is one of the rare countries where national budget comes up with a lot of excitements.

"The reason is the people in the country believe that effective public policy makes a difference," he said.

Professor Shamsul Alam, energy adviser of the Consumers Association of Bangladesh (CAB), said the power and energy sectors are in a vulnerable position. "The budget has failed to address the problems of power and energy sector completely."

Mr Alam said if power cannot be ensured, production isn't ensured and so job and growth-everything is affected.

Barrister Sameer Sattar, president of Dhaka Chamber of Commerce and Industry (DCCI), said there is no way but expanding tax net for increasing revenue mobilisation.

People are ready to pay taxes but NBR must take steps including automation to reduce harassments.

Rasheda K Chowdhury, adviser of a former caretaker government, wonders that educational institutions and NGOs have been included under the Companies Act.

"An educational institute in the city can pay taxes but how can a rural educational institute pay corporate tax?" she questioned.

Mohammad Abdul Majeed, former chairman of the National Board of Revenue (NBR), said connecting the income-tax law with the passing of budget is not logical.

Prof Mustafizur Rahman, a distinguished fellow at the CPD, thinks children have been ignored in the proposed budget while they suffered education loss during the Covid-19 pandemic.

Taslima Akhter, president, Bangladesh Garment Sramik Sanghati, said the garment owners have been receiving many incentives, benefits but the workers are not getting the fruit of it.

She said inflation is currently over 10 per cent but there is no visible discussion on increasing wages in the national budget for labourers.

"The commoner are ultimate sufferer from inflation and the government has not taken initiatives to reduce the sufferings," said the trade-union activist in the country's main export industry.

BNP leader Tabith Awal finds transparency and accountability missing in the budget proposal and implementation.

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