7.5pc GDP growth target unrealistic, says economist
The national budget for fiscal year 2022-23 predicted a gross domestic product (GDP) growth of 7.5 per cent, which is unrealistic and not objective, AB Mirza Azizul Islam, former adviser to the caretaker government, said yesterday.
Reports of various organisations such as the World Bank and International Monetary Fund say it will be less than 7 per cent.
"The budget deficit of 5.5 per cent of the GDP is rational. I would not have had any issues if it had been 6 per cent," he said.
The economist was addressing a "Post-budget Dialogue: FY2022-23" organised by Brac University Business and Economics Forum at the university's Mohakhali campus auditorium.
The revenue generation target has been set at Tk 433,000 crore, which is around 11 per cent higher than the revised budget of fiscal year 2021-22 and would require all-out effort, said the professor of Brac Business School.
The National Board of Revenue (NBR) has been tasked with collecting Tk 370,000 crore, which is 12 per cent higher than that of the budget for fiscal year 2021-22. The task here is not increasing taxes, both on income and VAT, on those already complying, but instead widening the tax net, he said.
There are over 70 lakh tax identification numbers but less than half submit returns and the NBR's performance identifying the non-compliant is not satisfactory, he added.
Even Nepal's revenue-to-GDP ratio is 22 per cent, better than Bangladesh's 10-12 per cent even though their per capita income is two thirds of that in Bangladesh.
"Though the budget mentioned this problem, I did not see any proposal on a remedy," Islam said.
A big part of the budget deficit financing has been planned through bank borrowing. Growth in private sector lending in fiscal year 2021-22 was well below the Bangladesh Bank target.
Of the 31.5 per cent of the GDP counted as investment, 24.9 per cent is set to come from the private sector while 6.6 per cent from the government.
If the government borrows too much from banks, it reduces the growth of private sector lending. Investment in Bangladesh is mainly based on banks as the stock market has till date been unable to play a significant role in financing industries.
It should be remembered that investment propels growth, he said.
A 2016 survey said some 64 per cent of the poor people were left out of social safety net programmes and with the pandemic increasing the number of financially insolvent people, proper disbursement of the aid needs to be ensured, he added.
The size of the annual development programme (ADP) for FY23 has been fixed at a record-high Tk 246,066 crore. The revised ADP budget for fiscal year 2021-22 was fixed at Tk 209,977 crore but in nine months to March, just Tk 98,934 crore could be spent.
Spending should be focused throughout the year instead of just the end of the year and the government could enable a form of "reward and punishment" for implementation officials in this regard, Islam said.
Achieving the Sustainable Development Goals will be impossible if income inequality is not addressed, he said.
Addressing the event, Mominul Islam, managing director and CEO of IPDC Finance, said this time subsidies and safety net programmes may not be enough to reduce the sufferings of ultra poor.
Though some term it a business-friendly budget, marginal people need to be protected instead of those in the upper social tiers who comprise the business sector.
"Taxing someone earning just Tk 25,000 a month is simply not right while retaining VAT on non-profit private universities will just make them even more business-oriented," he said.
Some 22 lakh youths are entering the job market each year while the market has a capacity to absorb 12 lakh, so greater focus is needed in this regard.
On the scope of allowing people to bring back money laundered abroad by paying 7 per cent tax without having to face any questions, he said there was little hope for it to work as seen in 17 countries which tried this method.
Focus should instead be on the drivers, such as lack of security in the country, trade-based money laundering and prevalence of low interest and illegal money, he added.