The challenge of attracting private investment remains the same as the government in the proposed budget did not give any clear outline how it will mobilise additional private funds required to kick-start new industrial activities and job creation so badly needed in the country, Centre for Policy Dialogue (CPD) said in its budget reaction today.
The GDP growth target for next fiscal year is set at 7.2 percent, which according to CPD is moderate compared to the provisional figure of 7.05 percent for the outgoing year. But to achieve this additional growth, private investment has to be 23.3 percent of GDP, up by 1.5 percentage points from the present level or equivalent to Tk 80,000 crore, CPD said.
“But, there is nothing in the budget that explains what is the source of this additional money,” said Dr Debapriya Bhyattacharya, distinguished fellow of CPD in his presentation on the findings.
Debapriya said the budget speech says that during 2010-2015, 47 lakh people entered the labour market, of them, 98 percent found jobs in the local market. But the finance minister did not mention that the pace of additional job creation in 2014 and 2015 came down to only 3 lakh a year from average 13 lakh a year in 2010-13.
“Jobs are there in the informal sector, but not in corporate and industrial sectors, which is not possible without a rise in private investment,” he said.
He said banks’ lending rates have come down, yet private investments are not picking up. Banks and capital markets, the two major sources of borrowing money, have been weakened in recent years.
Prof Mustafizur Rahman, executive director of CPD, also spoke on the occasion held at Lakeshore Hotel in the city. Like previous years, the private think-tank came up with its analysis on the national budget just after a day of its announcement.
This year, CPD said the budget has been placed at a time when the economy witnesses sluggish private investment, low job creation in manufacturing sector, increase of borrowing from domestic sources to finance deficit, unachieved tax revenue and lack of good governance in the financial sector.
CPD said the size of the budget is no way a big one in terms of GDP. It is stagnant at around 14 percent of GDP. But the think-tank questioned on the quality of the implementation, which has not improved for years.
The think-tank said deficit financing and debt servicing would be a challenge for the government. Though tax to GDP ratio in Bangladesh is one of the lowest in the world, revenue collection target – Tk 65,351 crore more than the revised budget – seems to be a big challenge. Packaged VAT, which has been revised significantly in the budget, will create burden on small traders.
The CPD also questioned on the anticipated gross foreign financing worth $5.7 billion, an almost impossible target in view of only $2.1 billion during July-February of the outgoing year.
Tax deduction at source for all exporters at 1.5 percent from previous 0.6 percent is too high and it should be reconsidered, said CPD.
CPD reiterates its opposition allowing whitening of undisclosed money, saying that it is unethical for honest taxpayers and might encourage people to evade tax. The think-tank also questioned on giving the facility only to the housing sector. Why not, it is given to the industrial sector, he said.