Staff Reporter :Terming the proposed budget for the fiscal 2015-16 as ‘big one but usual routine exercise’ the World Bank (WB) has said the government might face tough challenge to deficit financing if the expected revenue collection and foreign credits and grants fall short of. “A shortfall in revenue collection and external financing may force the government to depend heavily on bank borrowing to finance deficit budget, which could fuel inflationary pressures and crowd out credit to the private sector,” the global lender made the budget assessment through a press briefing at its Dhaka office on Monday.In its assessment on economic growth, the WB said that achieving the 7.0 per cent GDP growth in the next fiscal would not be impossible, but might be a ‘challenging task’. Although the size of the budget is big one, it shuns ‘big bang’ reforms, mentioned the WB analysis. “For achieving such a growth that the country is to maintain political stability on a consistent basis and enhance the rate of investment significantly,” said Zahid Hussain, the lead economist of the WB’s Dhaka Office.He mentioned that political stability requires on consistent basis to increase investment rate from the current 29 per cent to 33.5 per cent of GDP. If Bangladesh can accelerate investment to such level, it could help achieve the 7.0 per cent GDP growth target. The WB’s acting country director Salman Zaidi made the introductory remarks. Finance Minister AMA Muhith on June 4 placed a Tk 295,100 crore Zahid Hussain said the proposed budget for the next fiscal year is ‘as usual’ if we consider its size, source of financing and reform programmes. “The government might face challenge to finance the deficit budget while it might also face difficulties in meeting budgetary goals due to lack of reforms on fiscal economic policies,” he said.Listing six challenges in moving forward, the WB lead economist said revenue mobilisation will be the key challenge for which there is a need to enhance the skills of the tax administration and make sure that the honest taxpayers are not overtaxed.The other challenges are improving the quality of the development projects portfolio, ensuring the availability of enough resources for maintaining the existing and new infrastructure, containing the growth of interest costs by choosing financing options that minimise the interest on domestic debt, improving the efficiency and equity of subsidies, delivering on structural reforms in business regulation, infrastructure management, and quality and coverage of service delivery.To address the challenges, Zahid Hussain said the government needs to target the subsidies through correcting the pricing mechanism from the existing ad-hoc mechanism.About the revenue mobilisation for the next budget, he said the revenue mobilisation target with a growth of 29.5 per cent is ambitious by any measure since the country came closest to such high target in FY08 with a revenue growth of 26.4 per cent.He, however, said the necessary revenue reform is in the right direction which includes increase in income tax exemption limit, increase in net wealth exemption limit, wealth surcharge reduction from 30 per cent to 25 per cent, reduction in corporate tax rates, increase in tobacco income tax rate and a uniform VAT rate of 15 per cent from FY17.About the way out of weak investment climate, the WB official noted that the government is going on towards establishment of the economic zones across the country and this implementation pace should have to be speed up further.
