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Kamal unpacks maiden budget today

Higher growth ambition pitted against domestic challenges


Jasim Uddin Haroon | Published: June 13, 2019 09:29:14 | Updated: June 14, 2019 12:12:07


Finance Minister AHM Mustafa Kamal. File Photo

The government releases the budget for fiscal year 2019-20 today (Thursday) setting higher growth target, despite a number of domestic challenges.

People familiar with the budget preparation said there will be nothing new in the annual document as it is hardly bringing about any major reform.

Finance minister AHM Mustafa Kamal is set to place the fiscal blueprint before Jatiya Sangsad with a record outlay of over Tk 5.23 trillion, up by Tk 590 billion from the original budget size of the outgoing fiscal.

The budget, which will be the country's 48th since independence, aims to give over Tk 28 trillion boost to the economy. It is the 11th budget in a row by the ruling Awami League government.

The auditor-turned finance minister is scheduled to start his budget speech at 3:00pm, which will be brief, finance officials told the FE.

Of the Tk 5.23 trillion, the authorities will chase Tk 3.78 trillion coming from the National Revenue Board (NBR), non-NBR and non-tax revenue.

Some Tk 3.26 trillion will come from the NBR and the rest from the non-NBR and non-tax sources.

A senior official at the finance division told the FE the budget is usual in nature except for the introduction of new VAT Act-2012.

"Just there will be changes in some incentives," said the division official.

The budget usually expands at around 18 per cent on an average a year and the official said there will be no exception this year too.

The target for GDP growth would be set at 8.2 per cent for the next financial year.

The yearly average inflation target has been set at 5.5 per cent, though prices of fuel and other commodities are on the rise in the international market.

The official said the finance minister would give priority to education and human resources development, mega infrastructure, power and other nationally important projects.

But economists said Mr Kamal is going to present the budget at a time when the economy faces both external and internal pressures.

They said poor revenue mobilisation, slow private investment, higher non-performing loans in the banking sector are a few challenges on the domestic front.

They said the government focuses more on setting lofty revenue goals, only to suffer the shortfall at the year end.

Terming the banking sector a big challenge, they said without addressing this, private investment will not pick up in general and people's confidence in the banking system will erode significantly.

Dr Zahid Hussain, lead economist at the World Bank in Dhaka, said the banking sector has liquidity crunch on the back of higher non-performing loans.

"To my mind, this is impacting the growth of private investment."

Dr Hussain said that the credit flow to the private sector might shrink further as the government was planning higher borrowing from the banking system in the next fiscal year to finance its big budget.

"Sales of national savings certificates may fall due to the introduction of new system and the government must boost borrowing from the banking system," he said.

The buyers of national saving certificates do now require to produce e-TINs, bank accounts and other relevant documents.

"Private credit growth in April was 52- month low. I see it come down next year as a result of big borrowing by the government," Dr Hussain predicted.

He, however, wanted to see some structural reforms since this is the first budget of the re-elected government with a new election manifesto and a new finance minister.

Dr Mirza Azizul Islam, who presented two budgets in 2007-08 as an adviser to the caretaker government, told the FE that budget is becoming bigger each year but its implementation rate falling.

"It's very unfortunate that the execution of budget has been falling in recent years," he said, adding the government cannot generate adequate revenue while fails to implement the ADP, said Dr Islam, who now teaches economics at Brac University in Dhaka.

"If we fail to implement the budget then its main objectives like reduction of poverty and income inequality in the society will remain unmet," he argued.

The national average poverty rate has dropped to 21.8 per cent, but in some northern districts he sees it hovering at 40-50 per cent.

"During my budgets, the allocation for social safety net was higher than the recent budget spending on the same head," he said.

During 2008-09, the allocation for social safety net was 2.8 per cent of the GDP, which now 2.4 per cent, Dr Islam stated .

Dr Ahsan H Mansur, executive director at the Policy Research Institute of Bangladesh, told the FE the multiple rates of VAT are against the main spirit of the VAT law.

"I don't find any logic behind such multiple rates," said Dr Mansur, who was involved in preparing the law.

Already, the National Economic Council (NEC) has approved a Tk 2.03 trillion Annual Development Programme (ADP) for FY'20.

The next budget may allocate Tk 11.5 billion to bring around 3,000 more educational institutions under the Monthly Pay Order (MPO) scheme, which has remained suspended for nine years.

The budget may propose developing a "Start-up Fund" for the first time in the country for young entrepreneurs who could take low-cost loans to launch and run their entrepreneurial ventures.

This time, the highest expenditure is likely to go to education, which is equivalent to 3.15 per cent of GDP. It is 17.4 per cent of the total budget, sources said.

Like the previous years, the budget this year too will be presented on PowerPoint and all the fiscal documents will be made available on the website of the finance division -- www.mof.gov.bd.

Before the budget speech, a documentary film on the liberation war will be screened.

Mr Kamal will speak at a post-budget press conference at Bangabandhu International Conference Centre at Agargaon tomorrow (Friday) at 3:00 pm.

jasimharoon@yahoo.com

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