Await twin tests

The new budget unveiled yesterday will face challenges of mobilising finance to meet higher expenditure and tackling inflation, warn top economists.
Akbar Ali Khan, a caretaker government adviser on finance, said he feared the budgetary target of revenue earning for fiscal 2013-14 might not be met.
"If the targets are not achieved, the budget deficit will go up, which will ultimately fuel inflation and affect the interest rates."
The budget does not spell out any measure to give momentum to the sluggish economy, Akbar said, rather it is intended to make happy various interest groups through various measures.
The finance minister in his budgetary speech said inflation, now at 7.9 percent, would not go up in the next fiscal year but gave an explanation on the basis of assumptions, he said.
The reality is when shutdowns are enforced, they disrupt transport sector and as a result the prices of essentials go up, he added, hinting at the possibility of more hartals by the opposition before the next polls.
Zaid Bakht, research director of Bangladesh Institute of Development Studies, echoed Akbar's views about the challenges.
He, however, said he did not think the budget was ambitious as "it has just maintained the historic growth in size."
Debapriya Bhattacharya, distinguished fellow of Centre for Policy Dialogue, said the proposed growth of revenue earning is higher than that of the expenditure, which is very necessary.
However, the tendency to borrow more from the banking sector to finance the budget deficit has continued, which is worrisome.
The revenue earning target, which is 19.89 percent higher than that of the outgoing fiscal, may go up to 22 to 24 percent as the National Board of Revenue may fail to collect revenue as estimated for 2012-13, Debapriya said.
Ahsan H Mansur, executive director of Policy Research Institute of Bangladesh, said the revenue target is in line with the planned expenditure.
"The strategy, however, carries risks," he said, adding that if the minister goes ahead with his spending plan but revenue does not flow in accordingly, questions will arise whether the budget is unrealistic.
"It will also affect our fiscal management."
Mansur also said the budget had been made considering the next parliamentary elections to some extent.
He said the scope for money whitening was an old issue and unfortunately that remained. "But neither the economy nor the government has benefited from it."
Mohammad Farashuddin, former governor of Bangladesh Bank, preferred sales of savings instruments among the people to finance the budget deficit over borrowing from the central bank or the banking system.
To some, pre-election political issues are seen as the main obstacles to implementation of the budget.
Mirza Azizul Islam, a former finance adviser, said fixing political troubles would be the key to implementing the budget.
"People are uncertain about the political situation in the next one year."
If political stability is not ensured, Bangladesh will fail to attain the expected gross domestic product (GDP) and to control inflation. Besides, the country also will not be able to create employment and encourage investment, Mirza Azizul said.