Beyond earnings

Finance Minister AMA Muhith yesterday placed a budget of Tk 222,491 crore, up by 17.51 percent compared to the outgoing fiscal year, with an aim to give a boost to stagnant investment and pull off higher economic growth.
The outlay of the 2013-14, the last budget for the present government, is largely based on an unrealistic revenue target.
In the outgoing fiscal year the budget size grew by 19 percent compared to the previous budget.
The new budget is, however, almost twice the size of the first budget presented by the Awami League-led government in 2009, when expenditure was set at Tk 113,819 crore.
The next budget is 18.71 percent of the GDP, which was 16.57 percent four years ago.
Given the next general election knocking at the door and the trend in the rise of expenditure, the size of the next year's budget does not look much ambitious. But the revenue earning target can give the government a tough test.
The revenue generation target rose by 19.89 percent to Tk 167,459 crore. Of the amount, the National Board of Revenue (NBR) will have to collect around 22 percent. The non-NBR tax and revenue growth has been fixed at 14.43 percent higher than the outgoing year.
In the last five years to 2011-12, the tax department collected more taxes than the initial target. It, however, is set to face a deficit in tax collection this fiscal year due to political unrest and slowdown of imports.
A number of NBR officials said the government might not be able to achieve the revenue generation target given the poor collection record in the outgoing year.
The failure to reach the target will widen the budget deficit. As a result, the government might be forced to borrow heavily from banks, which will ultimately crowd out the private sector for credit and fuel inflation.
In case of NBR revenue earning, the main emphasis has been given on income tax setting it at 36.81 percent higher than in the revised budget of the outgoing FY.
The value added tax came next, with its growth set at 23.45 percent. Growth in the import duties has been fixed at just 0.69 percent.
In case of non-NBR tax, prices of non-judicial stamps will go up by 15 percent.
EXPENDITURE
Development expenditure target grew 26 percent to Tk 72,275 crore, out of which Annual Development Programme will get Tk 65,870 crore.
Non-development expenditure has been fixed at Tk 134,449 crore, up by 22 percent from the previous year.
Interest payment will eat up 12.05 percent or Tk 27,743 crore of the total budget, which is 19 percent higher than the revised budget.
The block allocation has gone up by a staggering 359 percent compared to the revised budget to Tk 3,466 crore, to meet election expenditure and provide special increments to government employees.
DEFICIT
The present government in the last four years put the budget deficit at around 5 percent of the GDP. This time, it has been fixed at Tk 55,032 crore or 4.6 percent of the GDP.
Banks will be a major source to finance budget deficit.
The government has targeted to borrow Tk 25,993 crore from banks in the next fiscal year. But, it might fail to stick to its plan, as the borrowing could escalate further in the event of any major shortfall in revenue earning.
In the outgoing fiscal year, the bank borrowing target to finance the deficit was Tk 23,000 crore in the original budget, which was later revised up by 24 percent to Tk 28,500 crore.