Budget for FY'24: Not up to task of meeting challenges

The budget placed by Finance Minister AHM Mustafa Kamal in Parliament for the next financial year (FY) amidst applause and table-thumping by the ruling party and like-minded lawmakers last Thursday contains lofty goals, but it lacks clear strategies to achieve those in an unprecedentedly difficult time. Officials at the finance ministry usually burn the midnight oil while accomplishing the complex task of preparing a national budget. Given the situation prevailing now both at home and on external fronts and a general election looming on the horizon, the task was particularly daunting. Is this a time-befitting budget? 'Yes' and 'no'. 'Yes' in the sense that some sops have been proposed for domestic industries and the poor and disadvantageous section of people. In addition, a plan has been unveiled to introduce a universal pension scheme in the upcoming financial year. But the 'nos' are too many and the prominent one being the lack of a strong and effective strategy to provide relief to consumers in these days of runaway inflation.

By any measure, a Tk 7.62 trillion budget under the given circumstances is an expansionary one in the context of inflationary pressure that the economy has been enduring for a considerable amount of time and the persistent dollar crunch. The budget targets to lower the inflation rate to 6.0 per cent in the upcoming fiscal from the prevailing rate of 8.6 per cent. But the measures incorporated into the budget for next fiscal have all the potential of doing the opposite. Bank borrowing, a handy tool that the government uses very often to deal with budget deficits, is likely to torpedo that idea. The government has borrowed right and left, particularly from the central bank, in the outgoing fiscal year. The net borrowing from the banking system more than doubled to Tk 780 billion in the July-May period compared to the corresponding period of FY'22. What is more damaging is that the authorities borrowed more high-powered money from the central bank than from scheduled banks to avoid a crowding-out effect on the private sector. As the liquidity situation with banks is uncomfortable, the government may be forced to pursue the same style of borrowing with the consequence of fuelling inflation further.

The greenback crunch has been taking a heavy toll on the economy, and poor and low-income people in particular. The situation has become even tighter lately. The central bank raised the exchange rate by Tk1.50 on Thursday, coinciding with the placement of the national budget. Thus, the depreciated Taka along with the country's credit rating downgraded by Moody's is likely to make the price situation worse.

It is not that the finance minister is oblivious of the challenges that the government faces. While touching upon 'Smart Policies and Strategies to Build Smart Bangladesh' in his budget speech he listed the challenges, which included controlling inflation, improving the current account balance situation, and stabilising the foreign exchange rate. He mentioned some remedies, such as tariff rationalisation, domestic resource mobilisation to meet the fiscal deficit and withdrawal of subsidy/cash assistance. He felt that those needed to be considered right 'now'. Remedies to that end, however, are not visible. Subsidies and interest payments together constitute 40 per cent of the operating budget and anything notable is not seen on the tax front except for raising the individual tax threshold, a welcome move for low-income taxpayers in these days of financial distress.

But the proposed mandatory payment of Tk 2,000 by every service-seeking holder of tax identification number (TIN) has given rise to serious confusion. If a TIN holder has to pay a minimum amount of tax, what is the use of keeping the tax threshold? The provision for mandatory tax payments by TIN holders is likely to fuel anger among the vast majority of low-income people. Instead of engaging many taxmen in mobilising a paltry amount of tax revenue from the people most of whom do not have taxable income, the revenue board needs to plug tax evasion by the biggies.

Besides, the proposal to raise the limit of wealth value from Tk 30 million to Tk 40 million for levying a surcharge at 10 per cent runs counter to the move to impose Tk 2,000 tax on TIN holders and efforts, if there is any, to narrow the growing income inequality in the country.

The government deserves appreciation for its decision to raise the number of elderly, widows and destitute women beneficiaries, though by a nominal margin, and their monthly allowance, that too marginally. The increase in financial benefits, however, would mean nothing, if seen in the context of soaring inflation.

The finance minister's plan, as detailed in his budget speech, to roll out the Universal Pension Scheme, though heartening is unlikely to be materialised during the upcoming fiscal year since a lot of work needs to be completed before putting the scheme into effect.

This time Mr Kamal deviated entirely from the traditional way of budget presentation in Parliament, but the content of the budget--- key budget figures, however, was known to most people beforehand courtesy of the media--- is not in any way significant. The challenges the economy now facing demand a demonstration of greater craftsmanship by the finance minister and his team. However, there is still time to mend lapses --- likely to hurt most --- and help offer some comfort to the low and middle-income people reeling from inflationary pressure.