Muhith zeroes in on growth

Success hinges on political stability, says finance minister while unveiling budget for FY 2015-16

Finance Minister Abul Maal Abdul Muhith yesterday proposed a national budget of Tk 295,100 crore for the 2015-16 fiscal year (FY) with the aim of taking the country on a higher growth trajectory by projecting a 7 per cent growth, while setting a Tk 208,443 crore revenue target with a wider tax base. The minister also hoped for a stable political environment to achieve the goal. “We are trapped in the 6 per cent growth trajectory for the time being; our ultimate target is to transcend this cycle and transform our country into a developed nation by 2041. Political stability is the sine qua non for achieving this goal. I hope all patriotic political parties will refrain from violence and subversive activities and offer to cooperate in our progress towards prosperity,” the minister said in his budget speech yesterday.
“I am sure, achieving this goal will not be impossible if proper and timely implementation of these development plans and reform programmes are ensured,” he added.
The size of the proposed budget is 23.12 per cent higher, compared to the budget of the current fiscal that ends on June 30.  
Muhith, who has a record of placing ambitious financial plans, placed his seventh budget in a row at the parliament around 3:30pm yesterday.
For the first time, the minister proposed taxes on basic salaries, bonuses and festival allowances for both government and non-government salaried employees.
As per existing provisions, all allowances, excluding basic salaries of government servants, are tax-free, which is discriminatory, he said.
Muhith also proposed a uniform minimum income tax of Tk 4,000, instead of diverse rates based on locations. At present, taxpayers residing in city corporations, district headquarters and pourashava areas pay Tk 3,000, Tk 2,000 and Tk 1,000 in minimum taxes respectively.  
Commenting on the direct tax, Muhith said: “Direct tax is universal in nature, and as such, uniform rate should be applicable regardless of geographical locations in Bangladesh.”
However, considering prevailing inflation and higher living costs, tax-exemption threshold for individual taxpayers has been increased to Tk 250,000 from Tk220,000.
Meanwhile, the new budget will have to bear an additional burden of Tk 16,000 crore due to the upgraded pay scale for civil servants that comes into effect from July 1, the minister said.
The minister took a challenge by setting a target Tk 208,443 crore revenue collection in the upcoming budget, in which the share of the National Board of Revenue (NBR) will be Tk 176,370 crore.
Tax revenue from non-NBR sources has been estimated at Tk 5,874 crore, or 0.3 per cent of GDP. Besides, Tk 26,199 crore (1.5 per cent of GDP) is expected to be collected from non-tax sources.
Regarding the revenue target, the finance minister explained that it will be collected from four sources, namely Income Tax, Value Added Tax (VAT), supplementary Duty and Import Duty (Customs).
Muhith acknowledged that the revenue target, which is 30.62 per cent higher than that of the current fiscal, is ambitious.
However, Muhith said he believes the revenue target is achievable given the comprehensive reforms implemented in NBR tax collection and stability in economic environment.
The overall budget deficit has been estimated at Tk 86,657 crore, which is 5 percent of GDP, excluding grants. Finance minister proposed to manage Tk 56,523 crore (3.3 per cent of GDP) from domestic sources to meet the overall budget deficit. The rest, Tk 30,134 crore (1.8 per cent of GDP) will be financed from external sources.
Of domestic financing, Tk 38,523 crore (2.2 per cent of GDP) will come from the banking system and Tk 18,000 crore (1 per cent of GDP) from savings certificates and other non-banking sources.
“If we can increase disbursement from the huge pipeline of foreign assistance, we will be able to reduce our dependence on domestic borrowing. We will continue our efforts to this end so that foreign aid utilisation rate increases in the next year,” Muhith said.
Clarifying on the growth target, Muhith said the continuation of a growth-supportive monetary policy -- which includes targeted credit supply to productive sectors like agriculture, diminishing interest rates and market-sensitive exchange rates -- will create a wholesome environment for economic activities.
He further said industry and service sectors on the supply-side, and consumer spending and public and private investments on the demand-side, will be the drivers of this growth. Moreover, efficient coordination between fiscal and monetary policies will help realise the goal.
For the FY 2015-15, Muhith set inflation target at 6.2 per cent, reflecting fall in international oil prices, favourable agricultural production, continuous improvement in domestic distribution systems and the impact of restrained monetary policy.
In the proposed budget, 23.4 per cent of the total outlay has been allocated to social infrastructure sector, of which 20.4 per cent has been proposed for human resource sub-sector (education, health and other related sectors); 30.6 per cent has been proposed for the physical infrastructure sector, of which 13.9 per cent will go to the overall agriculture and rural development, 8.9 per cent  for overall communication and 6.3 per cent for power and energy sector; while 28 per cent has been proposed for the general services sector.
Besides, 2.2 per cent has been allocated for public-private partnership (PPP), financial assistance for various industries, subsidies and equity investment in state-owned banks, commercial banks and financial institutions; 11.9 per cent for interest repayment; and the rest 3.8 per cent for net lending and miscellaneous expenditure.
Earlier in the day, the cabinet approved the proposed budget at a special meeting at the parliament. Prime Minister Sheikh Hasina and other cabinet members were present at meeting held at 1:45pm.
In 2014-15 fiscal year, the national budget was of Tk 250,506 crore while in 2013-14 FY it was Tk 222,491 crore. In 2012-13, the budget volume was Tk 191,738 crore and in 2011-12 it was Tk 163,589 crore.

Muhith zeroes in on growth

Success hinges on political stability, says finance minister while unveiling budget for FY 2015-16

Finance Minister Abul Maal Abdul Muhith yesterday proposed a national budget of Tk 295,100 crore for the 2015-16 fiscal year (FY) with the aim of taking the country on a higher growth trajectory by projecting a 7 per cent growth, while setting a Tk 208,443 crore revenue target with a wider tax base. The minister also hoped for a stable political environment to achieve the goal. We are trapped in the 6 per cent growth trajectory for the time being; our ultimate target is to transcend this cycle and transform our country into a developed nation by 2041. Political stability is the sine qua non for achieving this goal. I hope all patriotic political parties will refrain from violence and subversive activities and offer to cooperate in our progress towards prosperity, the minister said in his budget speech yesterday. I am sure, achieving this goal will not be impossible if proper and timely implementation of these development plans and reform programmes are ensured, he added. The size of the proposed budget is 23.12 per cent higher, compared to the budget of the current fiscal that ends on June 30. Muhith, who has a record of placing ambitious financial plans, placed his seventh budget in a row at the parliament around 3:30pm yesterday. For the first time, the minister proposed taxes on basic salaries, bonuses and festival allowances for both government and non-government salaried employees. As per existing provisions, all allowances, excluding basic salaries of government servants, are tax-free, which is discriminatory, he said. Muhith also proposed a uniform minimum income tax of Tk 4,000, instead of diverse rates based on locations. At present, taxpayers residing in city corporations, district headquarters and pourashava areas pay Tk 3,000, Tk 2,000 and Tk 1,000 in minimum taxes respectively. Commenting on the direct tax, Muhith said: Direct tax is universal in nature, and as such, uniform rate should be applicable regardless of geographical locations in Bangladesh. However, considering prevailing inflation and higher living costs, tax-exemption threshold for individual taxpayers has been increased to Tk 250,000 from Tk220,000. Meanwhile, the new budget will have to bear an additional burden of Tk 16,000 crore due to the upgraded pay scale for civil servants that comes into effect from July 1, the minister said. The minister took a challenge by setting a target Tk 208,443 crore revenue collection in the upcoming budget, in which the share of the National Board of Revenue (NBR) will be Tk 176,370 crore. Tax revenue from non-NBR sources has been estimated at Tk 5,874 crore, or 0.3 per cent of GDP. Besides, Tk 26,199 crore (1.5 per cent of GDP) is expected to be collected from non-tax sources. Regarding the revenue target, the finance minister explained that it will be collected from four sources, namely Income Tax, Value Added Tax (VAT), supplementary Duty and Import Duty (Customs). Muhith acknowledged that the revenue target, which is 30.62 per cent higher than that of the current fiscal, is ambitious. However, Muhith said he believes the revenue target is achievable given the comprehensive reforms implemented in NBR tax collection and stability in economic environment. The overall budget deficit has been estimated at Tk 86,657 crore, which is 5 percent of GDP, excluding grants. Finance minister proposed to manage Tk 56,523 crore (3.3 per cent of GDP) from domestic sources to meet the overall budget deficit. The rest, Tk 30,134 crore (1.8 per cent of GDP) will be financed from external sources. Of domestic financing, Tk 38,523 crore (2.2 per cent of GDP) will come from the banking system and Tk 18,000 crore (1 per cent of GDP) from savings certificates and other non-banking sources. If we can increase disbursement from the huge pipeline of foreign assistance, we will be able to reduce our dependence on domestic borrowing. We will continue our efforts to this end so that foreign aid utilisation rate increases in the next year, Muhith said. Clarifying on the growth target, Muhith said the continuation of a growth-supportive monetary policy -- which includes targeted credit supply to productive sectors like agriculture, diminishing interest rates and market-sensitive exchange rates -- will create a wholesome environment for economic activities. He further said industry and service sectors on the supply-side, and consumer spending and public and private investments on the demand-side, will be the drivers of this growth. Moreover, efficient coordination between fiscal and monetary policies will help realise the goal. For the FY 2015-15, Muhith set inflation target at 6.2 per cent, reflecting fall in international oil prices, favourable agricultural production, continuous improvement in domestic distribution systems and the impact of restrained monetary policy. In the proposed budget, 23.4 per cent of the total outlay has been allocated to social infrastructure sector, of which 20.4 per cent has been proposed for human resource sub-sector (education, health and other related sectors); 30.6 per cent has been proposed for the physical infrastructure sector, of which 13.9 per cent will go to the overall agriculture and rural development, 8.9 per cent for overall communication and 6.3 per cent for power and energy sector; while 28 per cent has been proposed for the general services sector. Besides, 2.2 per cent has been allocated for public-private partnership (PPP), financial assistance for various industries, subsidies and equity investment in state-owned banks, commercial banks and financial institutions; 11.9 per cent for interest repayment; and the rest 3.8 per cent for net lending and miscellaneous expenditure. Earlier in the day, the cabinet approved the proposed budget at a special meeting at the parliament. Prime Minister Sheikh Hasina and other cabinet members were present at meeting held at 1:45pm. In 2014-15 fiscal year, the national budget was of Tk 250,506 crore while in 2013-14 FY it was Tk 222,491 crore. In 2012-13, the budget volume was Tk 191,738 crore and in 2011-12 it was Tk 163,589 crore.