Budget surreal, says CPD
Distinguished fellow Debapriya Bhattacharya of Centre for Policy Dialogue speaks to the media about the proposed budget at the Brac Centre Inn in the capital yesterday. Photo: Star
The proposed budget is a "surreal" venture with a wide gap between income and expenditure, the Centre for Policy Dialogue said yesterday.
The think-tank also said the provision to allow black money for real estate investments would push up land prices further and pose a risk to businesses who already find the prices too high to set up their factories.
The CPD, however, said duty cuts for capital goods and raw materials and tax benefits for small and medium enterprises would help the local industries grow.
“The size of the budget is big and it sounds good for the time being. That's why we say there is water in the budget,” CPD Distinguished Fellow Debapriya Bhattacharya told a media briefing at BRAC Centre Inn in Dhaka.
"And from that perspective, it (budget) is surreal," Debapriya said.
Finance Minister AMA Muhith announced a Tk 222,491 crore budget on Thursday for the next fiscal year, with a Tk 55,032 crore deficit.
Of the deficit, Tk 21,068 crore may come from foreign sources and the rest from the domestic ones, mostly by borrowing from the banking sector.
The revenue earning target has been set at Tk 167,459 crore, while the annual development programmes are set to get Tk 65,870 crore.
The CPD termed the revenue target ambitious on the basis of the outgoing fiscal year's target, not the actual collection.
Revenue earnings in the first 10 months of the current fiscal year show that the amount falls short of the target set for the period. The think-tank said it is doubtful about achieving a 22 percent revenue growth target next year.
The revenue department was able to register such a high growth only during the last caretaker government and on some occasion during the present government's tenure when commodity prices were very high on the international market.
“Is it possible this year?” Debapriya questioned.
He said the financial structure of the budget is very weak because of its poor connection with reality, and the projection of earnings made in the budget is inconsistent with the reality, historical trends and possibilities.
The government received $2 billion foreign aid in the outgoing fiscal year and has set the target at $3.8 billion for the next year, which the CPD thinks would be impossible to get.
“Expenditure projection is also inconsistent with the implementation capacity of the budget,” Debapriya said.
Everyone, including the executors, knows that there will be no spending from the allocated fund for the public private partnership and Padma bridge projects, he said.
So, there would be no need for an additional Tk 10,000 crore allocated for these projects, and if the government misses the revenue target, it will not be a big problem, he added.
The CPD also focused on the overall budget implementation as political uncertainty centring the next general election is growing.
“Polls-related uncertainty, political violence and shutdowns will take a toll on the economy,” Debapriya said.
As the current government is not getting a full year to implement the budget, what actions it will take to complete the work in advance remain unclear, he added.
The CPD said the current political uncertainties will likely to continue till a compromise is reached on how the next parliamentary elections will take place and this will seriously undermine the possibility of taking advantage of various proposals to speed up investments.
The think-tank also termed the GDP growth target "radical", citing the present scenario of faltering investment and domestic demand, low industrial productivity, a weak international economy and declining domestic savings.
“Overall, we think a revision of the budget will be a necessity in light of the political and economic reality, global economic scenario and institutional capacity to implement the budget,” Debapriya said.
The CPD said the proposed budget aims to boost investment and give benefits to local industries by adjusting duties.
“It should be helpful in stimulating private investment.”
CPD Executive Director Mustafizur Rahman hailed the duty and tax measures.
Replying to a query on the withdrawal of concession on newsprint import, Fahmida Khatun, research director of the think-tank, said, maybe the decision has been taken to please a vested group.
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