The national budget for 2013-14 fiscal year has been announced late last week. The large-size election-year budget is challenging and ambitious. It is targeted to stimulate local demand, provide protection to selected domestic industries and deliver a wide range of social safety measures.
Finance Minister AMA Muhith announced a Tk 2.22 trillion budget for the next fiscal year, with a Tk 550.32 billion deficit. Of the deficit, the finance minister expressed his hope that Tk 210.68 billion may come from foreign sources and the rest from the domestic ones, mostly by borrowing from the banking sector. The revenue earning target has been set at Tk 1674.59 billion, while the annual development programme (ADP) is set to get Tk 658.70 billion.
Critics have identified financing and implementation of the large-size budget as two major challenges. Implementation capacity of the government is not up to the mark now. It needs to be developed to accelerate development of the human resources. Until last April, only 42 per cent project work of the ADP could be implemented. Many doubt about full implementation of the ADP in two months and the quality of the work.
However, the finance minister, during his post-budget press briefing, asserted that the proposed budget could be implemented however 'ambitious' it might be, if there was no threat of political instability. He said that not only the new budget, but the previous ones were also aimed at 'pleasing' people.
The proposed budget for 2013-14 fiscal year having a target of 7.2 per cent growth in gross domestic product (GDP) and inflation at 7.0 per cent offered scope for investing undisclosed money in the real estate sector. Muhith said the realtors were facing problems and the offer had been made in line with the government initiatives to curb accumulation of undisclosed money. He noted that crackdown on 'black money' holders was not a viable option to contain the percentage of undisclosed money in the economy.
But critics say the offer to invest undisclosed money in real estate was 'immoral' and 'unethical' as it would encourage the 'black money' holders and discourage honest taxpayers. Allowing black money for real estate investments would push up land prices further and pose a risk to businesses which already find the prices too high to set up their factories. However, the finance minister admitted that he had to make compromises in many areas, including the budgetary provision to legalise undisclosed money in the real estate sector.
Of the total outlay, Tk 1741.29 billion will come from revenue as the government is hoping to tap at least two million new taxpayers in the new fiscal year. Many pointed out that the revenue target was overambitious and would be difficult to attain in the election year. The minister said the target had been fixed after consulting with the revenue board officials. He said the new GDP target too was not ambitious as described by many critics.
The Centre for Policy Dialogue (CPD) -- a think tank-however, termed the revenue target ambitious on the basis of the outgoing fiscal year's target, not the actual collection. Revenue earnings in the first 10 months of the current fiscal year show that the amount falls short of the target set for the period. It is really doubtful about achieving a 22 per cent revenue growth target next year.
Critics say the financial structure of the budget is very weak because of its poor connection with reality, and the projection of earnings made in the budget is inconsistent with the reality, historical trends and possibilities.
The government received $2.0 billion foreign aid in the outgoing fiscal year and has set the target at $3.8 billion for the next year, which is likely to be impossible to get. Expenditure projection is also inconsistent with the implementation capacity of the budget.
As the current government is not getting a full year to implement the budget, what actions it will take to complete the work in advance remain unclear. The current political uncertainties may continue until a compromise is reached on how the next parliamentary elections will take place and this will seriously undermine the possibility of taking advantage of various proposals to speed up investments.
In fact, the government should limit its borrowing from the banking system within the projected amount of Tk.259.93 billion. If the actual borrowing exceeds the targeted amount, it could result in crowding out private sector credit growth and cause liquidity problem for banks and financial institutions.
Falling investment, one of the country's macroeconomic problems, failed to get adequate attention in the budget. The monetary growth targets do not match the envisaged growth-investment target. Rising payments for interests is also becoming a burden on the government.
Nevertheless, the finance minister has put major emphasis on boosting growth, curbing inflation and creating more jobs. The main drivers of growth next fiscal will be higher revenue collections, expanded size of public sector development expenditure, expected higher levels of private investment etc.
However, against the backdrop of current inflation rate at 7.90 per cent, on an average basis, the finance minister's target to bring it down to 7.0 per cent next fiscal appears unattainable. Last year's pledge to reduce the inflation rate could not be materialised. Taming the inflation rate is considered by many as one of the key challenges before the government in maintaining macro-economic stability.
The credibility of the budget will largely depend on its implementation, which requires a radical change in the implementing agencies. It is to be seen how the concerned agencies, with their present structures and sizes, do their jobs in implementing development projects for the next fiscal.
Source: The Financial Express
