by Sadiq Zafrullah
Finance Minister AMAMuhit placed Tk. 250506 crore budget for fiscal 2014 – 2015 as his 6th and 43rdof Bangladesh on June 05, 2014. He plans to earn Tk. 182954crore revenue to achieve GDP growth of 7.3%. Several economists and business people have opined that this budget is foreign investment friendly and business oriented. However, implementation of this huge budget will be the main challenge.
Previous years budgets show that it became failed to fulfill its target of financing and implementation. Overwhelming target of income is one of the reasons behind it. Also volatile political situation affected severely. Although the present political atmosphere seems to be calm and quite, ambivalence nature of it should be taken into account for future.
In the budget for FY 2014-15, revenue target has been set to Tk. 182954crore of which Tk. 149720crore from NBR tax, non-?NBR sources estimated Tk. 5572crore and tk. 27662crore will be collected as Non Tax revenue. And the budget deficit is set at Tk. 67552 crore, which is 4.5% of total budget of Bangladesh. The budget expenditure is estimated at Tk. 170191 crore including non-development sectors. Estimated ADP is set at Tk. 80315 crore.
Proposed budget of FY 2014-15 shows that, there is deficit of 67 thousand 552 crore Tk. To makeup this deficit government has proposed to get foreign loan of 18 thousand 69 crore Tk. But past several incidences show that it is quite unrealistic. In FY 2012-13, the Annual Development Program (ADP) has implemented by amount of 49 thousand crore Tk. In FY 2013-14, the revised budget targeted of 60 thousand crore Tk. But in previous ten months, the ADP has implemented by amount of 36 thousand crore Tk. only. At the end of the year, it could be about 54 thousand crore at most. Thus, we can say that the target of ADP in FY 2014-15 is much more unrealistic.
To hold up and achieve the target of the budget requires huge amount of investment both in the field of private and government sector. Immense corruption and lack of good governance throughout every sector of business from past several years left the investors insecure. Investment in government sector is being dissipated and inefficient administrations of those are not bringing fruits for the private investors and entrepreneurs. Under the circumstances, the proposed budget is not only high ambitious but also quite impossible to implement.
Since the revenue collection of past several years show downward direction, the target to increase revenue this year by 25% is quite imaginary. Distrust and lack of confidence have reduced private sector investments in last three years. Also foreign aid and loan reduced because of inefficient administration. However, if governmental investment and policies couldn’t attract the entrepreneurs, new investment in the private sector wouldn’t take place in the future.
Several economists think that the budget for FY 2014-15 lacks the compatibility between income and expenditure. They presume that the plan to balancing between income and expenditure by getting foreign and domestic loan wouldn’t be much successful leaving 5% budget deficit in GDP. On the other hand, the size of the ADP is also extraordinarily huge to implement. Although Mr.A H M Mustafa Kamal, MP, Minister for Planning said the government did well in gradually achieving the revenue targets in previous budgets and will do so in the future. He hoped for future reforms in the National Board of Revenue (NBR) and a more inclusive budget in future to make the economy more sustainable.
Centre for Policy Dialogue (CPD) on a program, ‘Analysis on National Budget’ at BRAC Centre Inn on June 6, 2014, says, “Private sector investment should reach at least 25 percent from 21 percent. That means, around Tk. 75,000 crore additional amount of investment will be needed.” Which CPD said “an impossible target”. To achieve the target, the total investment should be at 83-84 percent. Of the amount, around 7-8 percent may come from the public sector.But in the proposed budget it was assumed that around 21 percent investment would come from private sector, said Dr.Debapriya Bhattacharya, distinguished fellow of CPD.So, it is a matter of concern that what will be the source of the additional amount of investments. In the history of Bangladesh, this has not happened, he said.
Meanwhile, the CPD questioned the base year for setting the target of GDP growth rate in the proposed budget. The target of growth rate has been set by selecting 2005-2006 fiscal as base year, while the other calculations have been done on the basis of 1995-1996 fiscal, he said. But the booklet on the budget provided by the finance ministry reads as all calculation have been done by taking 2005-2006 fiscal as base year, he said. So, there will be some confusion – which year will be the base year for the 7.3 growth rate, he added. “We fear that the double use of statistics, in one hand 1995-1996 fiscal and on the other hand 2005-2006 fiscal, will affect our various discussions,” he said. “So, we suggest all the budget discussion and calculation should be done immediately by taking 2005-2006 fiscal year as base year.” he added.
The government will take loans of 32 thousand crore from domestic banks to balance the budget deficit for the next FY 2014-15 as proposed in the budget. This amount would be higher if the huge target of collection of revenue fails. And if it happens, the inflation as well as the private investment will be aggrieved. It will have two opposite actions, one is, money demand will increase, on the other hand, production and flow of loans to private sectors will be reduced. Hence, the balance on demand and supply will be lost. Again, if the government takes the bank loans instead of getting foreign aid to makeup the deficit will be devastating on investment. After that, even increase in financial incentives wouldn’t attract the investors and entrepreneurs.
Another source of payments for the expenditure is the internal loans behind the revenue. Some of it comes from the bank excluded loans. Again, huge portion of these loans come from selling bonds. In FY 2014-15, it is expected to bring 9 thousand 56 crore Tk. from bonds and 3 thousand crore from other sectors. Thus, if it fails to finance by these formulas, government will have only two ways. One is to reduce the expenditure. Other is to take loans from domestic banks. But getting loans from domestic banks have negative effects on investment. And the growth will be hampered.
General people need employments. If they get employed, even price hike won’t be problematic for them. But if the government couldn’t ensure employment, it’ll be subversive situation. For this, employment and investment favored budget is needed.To achieve a comprehensive economic goal, there’s a need for establishing an Agricultural Price Commission to ensure fair prices of agricultural commodities, to ensure incentive price for the producers while maintaining market stability.
It is to be concerned that the non-governmental investment continues to diminish from 2010. Main reason behind it is the crash in the share market in 2010. And following it, the aggression and corruption in banks and fraud in loans in 2011-12 is another reason. The occurrence is mainly due to administrative inefficiency.
However, reduction in the allocation in education should be criticized. The main priority of the country should be the educational sector. Reduction in allocation in this sector will not be fruitful. Again, allocation in agriculture and rural development sector should be increased to support peasant farmers. And whitening the black money should be stopped.
We need to emphasize the need for economic reforms including implementation and oversight capacities. The ambitious budgetary targets should not exceed the reality of implementations challenges as the budget is subject to critical planning within a precise framework.
It isnecessary to introduce performance-based budgeting in Bangladesh instead of having a hypothetical discussion over the budgetary measures as regards the goals and achievements in the budget. n