Budget conservative

Dr Debapriya Bhattacharya, distinguished fellow of Centre for Policy Dialogue (CPD), speaks at the CPD's media briefing on the national budget 2009-10 at the Brac Centre Inn in the city yesterday. CPD Executive Director Prof Mustafizur Rahman is also seen in the picture.Photo: STARStaff Correspondent

Private think tank Centre for Policy Dialogue (CPD) has rejected the view that the proposed budget is an ambitious one and said many of its projections, including economic growth, have been estimated lower than capacity.

"Rather it is a conservative budget in terms of growth projections and people's expectations," Dr Debapriya Bhattacharya, fellow of the CPD, told reporters yesterday at BRAC Centre Inn.

Growth projections on GDP (gross domestic product), investment and tax income have been shown below capacity levels, observed the CPD.

"Even the private sector investment growth has been projected at 23.7 percent for the coming year from 24.2 percent this year," Debapriya said. Income tax growth is set at 22.3 percent from 23 percent for the outgoing year. The same trend has been projected for VAT (value added tax) also.

The GDP growth has been projected at 5.5 percent for the next year despite having a favourable time compared to a volatile 2008-09, he said.

"A near 6-6.5 growth can be expected given the resilience shown by manufacturing and an early recovery predicted from the global recession," said Debapriya, adding that in that case the government's big challenge will be to enhance public-private investment in industry and services sectors.

External sector outlook, such as for export and import, has also been shown conservatively, the CPD said, observing why then the government has projected lower economic and investment growth is not clear.

Incremental Capital Output Ratio has also been projected at 4.3 from the outgoing year's 3.9.

Debapriya said the projection is not only weak but goes against the liberal finance policy framework.

He, however, said the coming year would not be easier as the country might be affected by the global economic crisis.

He also urged the government to maintain coordination between monetary and fiscal policies.

The CPD criticised the provision for whitening black money at a flat rate of 10 percent which, it said, would give wrong signal to honest taxpayers.

"The design of the provision for whitening undisclosed money is wrong. It does not make any difference between legal and illegal earners," Debapriya said.

An honest taxpayer has to pay 20 percent tax on his/her yearly income of Tk 3.75 lakh, but a black money holder will have to pay just at a 10 percent rate to legalise whatever the amount is. Earlier in fiscal year 2005-06, the BNP-Jamaat alliance government allowed whitening black money at a flat rate of 7.5 percent.

The budget for the coming fiscal year has proposed legalisation of black or untaxed money without knowing the source of income. Black money holders will be allowed to invest in as many as 62 sectors, including capital market and housing sector.

"The area of investment allowed is so wide that it can create fiscal indiscipline also," said Debapriya, also former Bangladesh ambassador to Geneva and WTO.

The CPD also criticised the government for allocating a lower amount for the agriculture sector. It found Tk 1,465 crore lower than that of the outgoing fiscal year.

"Significant rise in interest payment is a concern," Debapriya said.

On implementation of annual development programme (ADP), the CPD has agreed with the finance minister's proposal of reforms but suggested preparing a project-wise action plan.

About budget deficit, Debapriya predicted that it would be lower than the projection because he believes the government will not be able to spend the full budget.

On the much-talked-about public-private partnership, he said it is not a new idea and some projects are already being implemented in the power sector. This time it has been brought under the budget, he said.

The CPD hailed the government for reducing duty on import of basic raw materials and for the stimulus package. Under social safety net, the target to create jobs for seven lakh poor people is a good move, it said.

But it said 5 percent duty on newspaper import would put strain on the print media.

The CPD also hailed the finance minister for undertaking a plan for introducing district and unified budget. Debapriya also thanked the minister for mentioning good governance and reform issues for implementing the budget.

The CPD in its assessment said the proposed budget has reflected the ruling party's election manifestos.

It identified five challenges for the coming fiscal year--energising investment, consolidating agriculture, protecting external sector, strengthening public finance and reviving public administration.

CPD Executive Director Mustafizur Rahman was present at the briefing.