BUDGET RESPONSE
Businesses demand not reflected: FBCCI
Lacks clear plan to boost investment: CPD
The Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) said in its final reaction that the proposed budget has been made more complicated with some new strategies for collection of value-added tax (VAT). The federation also complained that its demands have not been reflected in the new fiscal document for 20162017. THE FBCCI had placed seven proposals four months before the announcement of the budget, but those demands have not been reflected in the budget, FBCCI president Abdul Matlub Ahmad said at a press conference yesterday on budget analysis and its reactions, held at its Motijheel office. Earlier, on Thursday, the premier umbrella organisation for businesspersons, in its immediate reaction to the budget, had stated that the proposed budget was business-friendly. We noticed the proposed budget is big. It means a big revenue collection. It also means businessmen will have to pay more money, Matlub Ahmad said yesterday. The federation said the government has introduced new formulas for small businesses. It said it would be difficult to collect money if VAT or other taxes are imposed unfairly on traders.
To analyse this huge budget, we need more time. Alongside positive reactions, we are getting reactions from the jewellers association, importers of hybrid cars, e-commerce enterprises, and small and medium-sized enterprises (SMEs), who are all experiencing problems in the proposed budget, said the FBCCI president. He added that the FBCCI would issue its detailed reaction through another press conference on June 8 or 9. Matlub Ahmad said, We have 480 associations, 80 chambers and many joint members. Many of them cannot accept the proposed budget. They are eager to inform us of their reactions. We will talk to them and inform the government of their problems. We will also examine those parts of our proposals that were taken up by the government and those parts that were not heeded. The federation president said the FBCCI has always been against black money. However, if money is being smuggled out of the country, then the government must take action to keep the money within the country, he said.
Meanwhile, Centre for Policy Dialogue (CPD), a civil society think-tank yesterday said, the proposed budget for the 201617 fiscal year suffers from limitations in respect of credibility for fiscal planning in many areas, including sources of financing, revenue income and expenditure.
The think-tank shared its analysis at a media briefing at a city hotel, a day after finance minister AMA Muhith unveiled the national budget for 201617 in Parliament. The CPD, however, agreed with the budgetary goals and objectives outlined in the governments 201617 fiscal plan, saying that all major parameters of the fiscal framework would have to register higher growth rates to attain the targets compared to those planned in the outgoing fiscal year. It said the achievement of the targeted 7.2 per cent growth of the gross domestic product (GDP) was not impossible. But an additional private investment of Tk. 80,000 crore is needed to attain the target, for which the government has not chalked out any clear policy. The think-tank also believes that sufficient initiatives have not been taken in the budget to boost private investment in the country, which has remained sluggish over the past few years.
The CPDs distinguished fellow, Dr Debapriya Bhattacharya, who made the presentation on behalf of the think-tank, said, We are not concerned about the size of the budget. Our concern is rather about the financing of the budget and the financing mix to implement it.
He said the budget was not a big one, compared to the GDP. Since we have a steady annual growth, by nature, the budget has to be bigger than the one of the previous years. But as economists, we see the budget in terms of real money, not in terms of size, he explained. If the economic parameters are considered, we will see that the budget has remained confined to 14 per cent of the overall size of the economy. In some cases, some of the parameters have actually fallen, he added.
Since FY1213, revenue as a percentage of GDP has declinedit was 10.9 per cent in comparison with the proposed 9.7 per cent in FY1617. Since FY1314, expenditure as a percentage of GDP has declined when it was 14.7 per cent in comparison with the proposed 14.2 per cent. Since FY1415, the Annual Development Programme (ADP) expenditure as a percentage of GDP has also declined, when it was 4.1 per cent in comparison with the proposed 4 per cent.
So, we do not see any point in being complicit about the record size of the budget, said Debapriya Bhattacharya. He, however, noted that this years budget was placed in a comfortable macroeconomic environment. We now have robust GDP growth, low inflationary pressures, favourable balance of payments (BoP) and augmented foreign exchange reserves, he said, adding that the economy also enjoys a declining interest rate, resilient growth of export earnings, a manageable fiscal deficit and low level of global commodity prices.
The CPD observed that there is no doubt that investments have to be increased to accelerate the pace of the economy, and that revenue collection as percentage of the GDP, too, has to be raised. There is also no disagreement about the need for higher expenditure for the economy, it added.
In the think-tanks opinion, attaining the proposed fiscal framework for FY1617 would be an uphill task if the inability to mobilise the targeted domestic resources and spend the earmarked allocation, and failure to use foreign aid in the pipeline while opting for non-concessional foreign loans, persist.
It observed that the fiscal gap of revenue income has continued to widen, as it stood at 20.4 per cent in FY1617 from 15.4 per cent in FY1516. The new budget has targeted an additional Tk. 65,351 crore revenue with a 35.4 per cent growth over the revised figure of the outgoing fiscal year.
This is not a realistic target in the light of our past experiences, observed the CPD. Commenting on this, Debapriya Bhattacharya said, To finance the budget, the government has increasingly become dependent on bank borrowings, which will affect credit flow to the private sector. The size of the expenditure does not matter, but how the funds will be sourced actually matters. He said the budget mentioned USD 5.7 billion worth of foreign assistance for financing the deficit, which means Bangladesh needs to use around USD 3 billion foreign aid more than it usually uses. But history says that Bangladesh has always failed to use less than USD 3bn foreign aid. So the aim of financing the incremental deficit by using foreign sources cannot be sustainable in the long term, he added. The CPD observed that the growth of non-development expenditure is higher than development expenditure, which is a new feature of the budget. Explaining this phenomenon, the CPD said non-development expenditure has gone up massively mainly because of the salary hike of public servants, subsidies, big allocations for investments in the capital market and incentives for some export items.
