ADB, partners to give $2b by June
Bangladesh is poised to get about $2 billion in budget support this fiscal year in a co-funding initiative led by the Asian Development Bank, in a development that would ease the continued pressure on the foreign currency reserves.
The fund would come in two phases: $1.05 billion in April and about $1 billion more in June, The Daily Star has learnt from finance ministry officials involved with the proceedings.
Of the sum, the Manila-based multilateral lender would be providing as much as $750 million.
The government would have to implement at least 14 reforms in return for the funds, which would come from the Asian Infrastructure Investment Bank, Japan International Cooperation Agency and Korea among others.
The other donors are not coming up with separate conditions; they are going along with the reform programme drafted by the ADB.
Should the government ensure budget support under the ADB-led co-financing programme, it would help it to meet one of the mandatory conditions for the $4.7 billion loan programme from the International Monetary Fund: the floor on foreign currency reserves.
As of March 22, reserves stood at $31.3 billion, enough to secure about three-and-a-half months' import.
The government has already implemented some of the conditions under the ADB-designed co-financing programme and is working earnestly on implementing the remaining reform actions, said a finance ministry official on the condition of anonymity.
One of the conditions is getting the amendment to the Income Tax Ordinance 1984 approved by the parliament.
The amendment would make income tax return submission mandatory for those who have spent Tk 4 lakh when travelling abroad in the previous income year; Hajj spending is excluded from this.
In so doing, the government would be able to expand the taxpayer base for income tax through expenditure tracking.
The government must also consolidate and revise the law on income taxes and secure cabinet approval for the new Income Tax Code with the view to making its administration robust to new and emerging issues such as base erosion and profit shifting by global internet-based entities, transfer pricing and so on.
The Manila-based multilateral has also called for the withdrawal of selected income tax exemptions by amending the income tax ordinance in the parliament or issuing an SRO with the view to reducing unproductive income tax exemptions.
The National Board of Revenue will have to issue an order for information exchange between the large taxpayer units of VAT and income tax as well as introduce risk-based VAT audits. A risk-based audit manual must be adopted too.
It must also expand the electronic deduction of income tax at source system.
ADB has also stipulated mandating online payment of VAT for amounts exceeding Tk 20 lakh and piloting online personal income tax return filing by taxpayers with income exceeding Tk 70 lakh.
This would improve tax collection efficiency, tax assessment and avoidance of fraudulent transactions.
The government will merge the budgets for the annual development programme and non-development programme from the next fiscal year.
Under the co-financing programme, the government will close down loss-making sugar mills under the Bangladesh Sugar and Food Industries Corporation.
The government must also secure cabinet approval for the Bangladesh Public Procurement Authority bill for the establishment of an autonomous public procurement body.
The electronic contract management system of e-GP must be rolled out with the view to establishing direct linkages between procurement value, budget and actual expenditure, facilitating real-time capturing of procurement budget utilisation, procurement commitment and expenditure data, and monitoring and tracking of payments.
This would help avoid cost escalations and enable efficient monitoring of contract performance.
The government must use key public investment management tools for all development project proposals submitted for approval from the next fiscal year.
Thanks to the steps taken by December 2024, the country's revenue to GDP would increase to at least 10.4 percent from the existing 9.7 percent and tax to GDP ratio to 8.8 percent from 8.1 percent at present, according to ADB's estimation.
The Bangladesh Bank must also introduce innovative financing options for CMSMEs.
The government must also submit to the cabinet the Collateral Protection Bill to promote the use of movable assets as collateral.