Anu Mahmud: The proposed budget has substantially increased allocation for education and social safety net. Education budget in particular has been raised to Tk 49,009 crore for the next fiscal year, which is a 32 per cent increase compared to the allocation in the outgoing FY.
The decision to earmark more budgetary allocation for the education sector is positive and the fund should be directed at raising the standard of education from elementary to tertiary level and also removing disparity between rural and urban institutions. The quality of education that the state currently provides is not up to the mark, to say the least.
The budget is a policy document. Its impact on the ground will only be seen in the implementation of the ADP. Failure to implement the programmes in full is a case in point.
The government proposed Tk 110,700 crore for ADP despite the fact that only half of the development programmes of the outgoing fiscal has been implemented in the first ten months. Therefore, the government needs to move quickly to strengthen mechanisms for the budget’s implementation.
Meanwhile, the proposed budget came as a shock as it eyes to widen the net of VAT to augment revenue collection. Although the Finance Minister backtracked from introducing the new VAT law, he did not exempt anyone from the purview of it.
People from across the board will feel an increased pinch of VAT in talking over phone, buying many essential items and even while publishing classified adds in newspapers. Service holders earning as low as Tk 16,000 a month will have to submit income tax return.
Imposition of taxes on all fronts will further aggravate the situation of lower and middle income people. We hope the government will reconsider this.
It is also a matter of concern that Muhith did not show any consideration for the real estate sector which has been going through a tough time for a prolonged period. The leaders of the sector had placed a 13-point demand to be incorporated in the proposed budget to reinvigorate the housing sector, but the minister totally ignored their demands. The government should spare some thought for the housing sector considering that about two crore people and 269 backward linkage industries are directly or indirectly connected with it.
Moreover, the VAT, tax revenue and import duty which have been increased to meet the expenditure, will hit hard the middleclass. The success of this rather ambitious budget, which is 30 per cent higher than this year’s revised budget, will mostly depend on proper implementation of projects, capacity building and taking up of effective reform programmes. But some days earlier before announcing the budget, the Finance Minister categorically pointed out that he wanted to be ambitious. But all ambition should be grounded well, anyway.
To be sure, a budget with a staggering TK 97,853 crore deficit-five per cent of the GDP-will warrant for mobilisation of more revenue from the domestic sources if foreign aid remains largely unavailable and there is no budgetary support. Then the government will have to borrow money from banks, which in turn will have its bearings on the private sector, impacting negatively the investment situation. Emphasis should also be given for maintaining quality domestic investment as well as proper implementation of projects in country’s physical infrastructures such as power, gas, transport, communication and ports, etc.
Achieving a 7.2 per cent GDP target riding on the achievements of economic expansion in the recent years will not be hard if country remains politically peaceful to attract investment. For the sake of our economy, the government must work hard to create FDI-friendly atmosphere. That is why a more liberal trade policy has to be adopted in this regard. On the other hand, bringing inflation down to the 5.8 per cent will be really difficult because salary hike of the public servants already impacted negatively prices of goods in the market.
Moreover, the expediting of the process of implementation of Tk 110,700 crores Annual Development Programme (ADP) will also continue to be a major challenge. The government needs to identify and remove the barriers in the implementation of ADP and increase use of foreign aid. But it is sad to note in foreign aid utilisation, the country’s performance is not always up to the mark. While observers have praised allocation of 14.39 per cent of the total budget for the education sector, they have however criticised poor attention that has been given to the health sector. People in general are less likely to welcome the increase cost in using mobile, buying imported books for secondary and higher secondary level, paper and paper products, etc. in the new budget.
In our view financing of the huge budget will be the biggest challenge to the government as it has to collect extra Tk 77 thousand crore next year to attain its overall revenue target at Tk 2.42 trillion. Though the Finance Minister is much optimistic, we don’t know how the economy will create so much revenue overnight. During the outgoing fiscal, the NBR revenue shortfall was reported at Tk 30 thousand crore and it spells doubt how yet bigger revenue targets may be achieved for next year.
The budget has made enhanced allocation to different development Ministries like Communications and Energy, Health and Education while earmarking huge fund also for mega projects. But it appears that the biggest chunk of the budgetary resources will go to funding administrative activities with priority to footing the pay bills of the bureaucracy.
The Annual Development Programme (ADP) at a cost of over Tk 1.10 trillion with an overall budgetary deficit of Tk 97.853 crore shows that almost the entire ADP is in a way dependent on deficit financing from banks, non-banks and external sources. Such borrowing can only be justified when the quality of budgetary expenditure can be ensured.
The budget shows Finance Minister AMA Muhith has tried to mobilize the highest amount of resources to break the 7 percent growth trajectory to accelerate the country’s economic development, mainly focused on attaining the middle status for the country by 2021.
But what puzzles the economists is that where the government’s political leadership is scandalous and its administrative capacity is very poor, the implementation of such huge budget may face many uncertainties.
When poor governance and unbridled corruption at all levels are at its peak; the bigger budget may only result in yet bigger corruption and budgetary chaos.
This is more so when the party men and dishonest government officials are robbing every financial institution including the budgetary resources under the cover of government projects. We see that the budget is swallowing in size every year but its benefit to common people in not much visible. Big budget only means goods pay and benefits to government employees.
Contrary to it, the drastic fall in annual job creation in the country to three lakhs now on an average from 2013 as against 1.2 million annually from 2002 shows that such big budget does not mean big development, except tall talks by the government leaders.
The new budget will push prices of agricultural equipment and bakery products up for example to suggest that common people will be hurt. In our view budgetary proposals that call for new tax on good and services used by ordinary people should be reviewed to protect the interest of people at lower level of the society.
Special attention has been given to infrastructure development. Fast-track projects, which include the Padma Bridge, metro rail, Rampal power plant, Rooppur nuclear power plant, Matarbari power plant, Payra sea port, Padma Bridge rail link, Dohazari-Cox’s Bazar-Gundum rail line, Sonadia deep sea port and LNG terminal are being given top priority.
An amount of Tk. 187.27 billion has been kept aside for the first eight of these mega projects, while the latter two will be implemented on government-to-government (G2G) basis.
The emphasis on infrastructure development is praiseworthy since developed infrastructure is a prerequisite to increased investment and employment generation.
The proposed budget places greater emphasis on human resources development. So the education and technology sector has the highest allocation of Tk. 529.14, which is 15.53 per cent of the new budget.
Minister Muhith informed the nation that the government had taken up various programmes to develop the education sector considering the expenditure in the sector as long term investment.
The minister deserves appreciation for addressing the point correctly.
The fact that the proposed budget has not brought in any change to seven tax rates, which include tax-exempted income-threshold for individual tax payers, and the government has backtracked on its plan to implement the new VAT law is proof that the government does not want to burden people with extra spending.
Furthermore, various provisions have been kept in the new budget to widen the government’s social safety net programmes and have them reach the ultra poor and marginal sections of society.
All these aspects of the proposed budget make it appear very much pro-people. However, there are some challenges as well. The slow rate of implementation of the annual development plan (ADP) remains a major concern.
Despite pledges from the government, less than 50 per cent of the ADP has been implemented in the first 10 months in the current fiscal, which is the lowest in the last six years.
Besides, the targeted revenue collection worth Tk. 2.42 trillion is bound to be more challenging this time around because in the initial budget for the current fiscal the target of revenue collection was set at Tk. 1.76 trillion which later was cut down to 1.5 trillion and yet the target seems to remain unattained at the end of the fiscal.
Bridging the huge deficit of Tk. 978.53 billion will also be a daunting task for the government.
Above everything else, the implementation of the budget will depend mostly on good governance and efficiency of government officials. And we are happy the finance minister also has made it clear that the government is aware of this fact.
(The writer is an Economic analyst, Reacherser & Columnist, e-mail [email protected])
