An ambitious budget
The finance minister has presented the 45th annual budget of Tk3.4 trillion that is 29 per cent bigger than the last fiscal. These are our preliminary reactions based on the minister's speech and deeper insight will follow. The budget is targeted at creating more jobs, woo investment and speed up implementation of mega projects. The upcoming budget is targeting a GDP growth rate of 7.2 per cent and keep budget deficit at 5 percent of GDP.
A primary thrust is to speed up implementation of mega projects that will generate jobs. Implementation remains a major headache for the government given the dismal performance of current projects that have not only been delayed in commissioning but also missed completion deadlines and witnessed major cost escalations. Though it is envisaged that the economy will grow at beyond 7 per cent, economists have expressed concern that without major policy reforms attaining such high growth may hit a snag.
Meeting salaries and benefits of government employees will be a big challenge given the revised pay-scale that will cost the exchequer in excess of Tk45,100 crore, i.e. 54 percent higher than last fiscal. The good news is that subsidies have fallen thanks to a fall in international oil prices. Although the finance minister presents an upbeat picture on investments, experts worry that unless cost of doing business reduce, the picture will not get very rosy in this area. On the positive side, income tax ceiling remains the same.
The major concern remains revenue generation and meeting expenditures. The proposed VAT law has been shelved and with a 30 percent rise in budget from previous fiscal without having attained greater implementation capacity and better quality of spending, there is worry that the mega projects on whom so much emphasis is being laid will hinder development.