Economic Reporter
The proposed budget massive deficit financing from the banking sector is expected to crowd out private sector credit, which has already been sinking due to the pandemic, said Business Initiative Leading Development (BUILD).
In a budget reaction, the BUILD said the proposed budget deficit is 6.0 percent of GDP amounting to Tk 1.89 trillion of which bank borrowing target is Tk 1 lakh 9 thousand 980 crore from the domestic sector and Tk 76 thousand 4 crore from abroad.
“The massive deficit financing from the banking sector is expected to crowd out private sector credit, which has already been sinking due to the pandemic. So, the government needs to spell out a clear vision of how private sector credit and investment can be promoted and facilitated in the wake of both the COVID-crisis and the large budget deficit to be financed through the banking channel by the government,” it said.
It also said considering global economic loss and impact on business in the country the growth target would be almost difficult to achieve and the government should immediately prepare a COVID-19 recovery plan and a well planned exit policy otherwise sustenance of economic growth and attaining the LDC graduation target would be difficult.
The BUILD further said the target of revenue collection is 3.30 trillion, 1.35 percent higher than the earlier year and 9.8 percent higher than the revised target, a bit ambitious considering the present situation. It said the four main focused areas of the government, such as; health, education, agriculture and employment is very rightly chosen, all the announced policies and allocated budget for these areas needs to be spent and managed very ethically and practically in order to maintain its required growth path and succeed targets.
Some policies– increasing the tax-free income limit, reduction of advance tax on import of raw materials, increasing the threshold of turnover tax and reduction of turnover tax rate, increased allocation for the social security and welfare sectors, increased supplementary duty on cigarettes and mobile call rates, measures for reducing duties on PPEs and other related medical equipment– are appreciable steps, it said.
The government should extend special support to the interested manufacturers willing to export of PPEs, surgical masks and other related products and support for raw materials import, the BUILD urged.A fully planned health sector management policy is needed and funding should be proposed aligning these needs, it said.
The country’s apparel exporters are facing sustenance challenges and continuation of 1 percent incentives may not be enough for them, the BUILD said.
Tax at source should remain as it is in the last year to 0.25 percent and there is a need for detail discussion with the concerned entrepreneurs to set a full proof strategy, it suggested.
