Poll-friendly massive budget on the cards
Pre-budget info hints at higher allocation for rural millions, loosened grip on VAT regime
and reduction in corporate tax
FAISAL MAHMUD
With the national election likely at the end of the year, the government is gunning for a massive Tk 4,68,200 crore budget for the 2018-19 fiscal year, predictably taking the path of planning big to woo the voters. The planned budget would be about 17 per cent higher than ongoing ambitious one.
The government plans fall very much in line with the predictions made by experts, who say it is no surprise that the government would pursue a big budget ahead of the polls aiming to appease the bottom and mid-bottom of the economic pyramidrepresenting the largest vote bank.
Pre-budget numbers and measures on the government chalkboard hint at an increased allocation for rural millions, a loosened grip on VAT regime to give middle class a breathing space and a reduction on corporate tax to even keep the upper echelon in the loop, as the ruling Awami League (AL) government apparently plans to go for the full Monty to rope-in voters from all socio-economic classes.
The government is also likely set a GDP growth target of 7.8 per cent for the upcoming fiscal.
Experts said Finance Minister Abul Maal Abdul Muhiths record 12th budget will be an opportunity for the AL government to showboat before the national election. This is the last budget of the governments two consecutive terms spanning a decade.
Muhith, however, brushed aside such remarks and said the budget for 2018-19 is just a continuation of the last few budgets of his government. After meeting with Prime Minister Sheikh Hasina and discussing the budget recently, the finance minister told the media that 2018-19 budget will not have any special focus on the national election, likely to be held at the end of this year.
Information obtained from the pre-budget documents indicates the governments plan of broadening the subsidy for farmers and widening the social safety net and the individual tax-free income ceiling. Ministries closely related with implementing sustainable development goals (SDG) are also likely to get bigger slices of the pie.
The government also thinks of taking some populist measures including increased rice-subsidy for ultra-poor and introduction of a rural rationing system. It is also likely to give an increment to over 12 lakh government employees through budgetary measures.
It has also planned to pay heed to the appeal of businessmen to reduce corporate tax and hasten the implementation of some fast-tract project like Padma Bridge and LNG terminal construction at Maheshkhali.
The proposed budget is likely to have a deficit of Tk 1,27,425 crore and the revenue generation target would be fixed at Tk 3,40,775 crore. The government plans to source Tk 2,96,201 crore from the National Board of Revenue (NBR) and Tk 11,462 crore from non-NBR taxes. The non-tax revenue target would be Tk 33,112 crore.
Pre-budged documents also indicate non-development expenditure amounting Tk 2,95,200 crore, eating up about 64 per cent of Tk 4,86,200 crore total expenditure, out of which Tk 66,224 crore would be spent on government salaries and allowances. Another Tk 51,335 crore would be earmarked for interest on government loans while Tk 31,700 crore would be spent for welfare services. Translating the numbers, noted economist Dr Mirza Azizul Islam said there is nothing extra-ordinary in the upcoming budget.
The budget for 2018-19 obviously is going to be bigger than the current one as Bangladesh has maintained a steady growth rate in the last one decade, he said. The problem, however, is that in the revised budget it will be about 20 percent higher, which means an unwanted rise in the deficit as well, he added.
Mirza Azizul, a former advisor of a caretaker government, told The Independent that since this is the last budget before an election, the government is likely to put extra emphasis on its Annual Development Program (ADP).
True to his assumption, the government has planned an ADP of Tk 1,73,000 crore for the upcoming budget which is Tk 19,669 crore higher than the revised one of the ongoing fiscal.
The governments in Bangladesh historically have a tendency to take more projects than it can implement in the ADP, he said, adding, Also they take unusually long period in implementing those.
In this highly competitive world, the real cost of any project increases with each delay, so the budgetary allocation for it exceeds almost certainly, putting a bigger dent in the government exchequer, said Mirza Azizul.
Meanwhile, the deficit of the proposed budget amounts five per cent of the GDP, which in monetary term translates into Tk 1,27,425 crore. The deficit in the ongoing fiscal is Tk 1,12,275 crore. So, the deficit in the upcoming one is also likely to increase by Tk 15,150 crore
To mitigate the deficit, the government plans to take loan of Tk 59,283 crore from banks, which is almost double the amount it has borrowed from the same in the current fiscal. From saving certificates, the government targets Tk 29,197 crore, which is Tk 16,903 crore less than the amount taken in the ongoing budget. Apart from these, there is a plan to source Tk 38,945 crore through foreign financing.
Dr Khondokar Golam Moazzem, research director of Center for Policy Dialogue (CPD), told The Independent that the government couldnt take the amount of loan it predicted it could from the banks in the current fiscal.
Finding no other option, it opted more for the costly savings certificates which result further disruption in the income-expense ratio of the national exchequer, he said.
About the targeted GDP growth of 7.8 per cent, he said This growth wouldnt yield desired benefits unless the government ensures a sustainable growth rate in employment.
According to Dr Moazzem, the above seven per cent GDP growth could not lift income of labors, rather the average real monthly income eroded by 2.50 per cent in the ongoing fiscal despite the increase in employment.
Decent job creation is now more important than achieving GDP growth at a higher rate, as currently the jobs are mostly created in informal sectors where wages are very low, he said.
The CPD researcher also said the ongoing fiscal hasnt seen any significantly large investment from the private players.
So, what Im interested to know is the sourcing for meeting the target GDP growth of 7.8 per cent. As far as I have seen the details of the upcoming budget, I dont see any new or innovative ways of sourcing finances for the expenditures, he said.
