Borrowings by the government from the banking sector at a higher level than before will further raise its debt burden swell its domestic debt servicing, in terms of interest payments and repayments of the principal amount of its loans that are met out of its revenue budget and also add fuel to the inflationary pressure in the upcoming fiscal year.
This view has been expressed by the country's leading economic analysts, while noting that the achievement of the next fiscal's revenue collection target would be a challenging task.
According to them, if the government borrows heavily from the banking system, it would have an adverse impact on credit flows to the private sector.
The government is eying a 21 per cent growth of tax collections to help bolster its revenue earnings in the next fiscal, in accordance with the targets and objectives of its Sixth Five-Year Plan.
Expressing their doubts over achieving the revenue collection target of TK 1.36 trillion, up by 21 per cent growth in the upcoming fiscal over the level of the current one, the analysis termed such a target 'unrealistic,' given the uncertainties about political developments centering the next general election late this calendar year or early next one.
They also feared a shortfall in revenue collection target in the current fiscal as the overall economy is not performing up to the projected level because of likely shortfall in meeting the export target, decline in domestic consumption, lower rate of growth of import activities and slowdown in local and foreign investment.
The government set Tk. 1.12 trillion as the tax collection target for fiscal year 2012-13, reflecting a 17 per cent rate of growth over the level of the previous one. For the upcoming fiscal, the government has indicated about setting Tk. 1.36 trillion as the tax collection target by the National Board of Revenue (NBR) that will reflect a 21 per cent rate of growth over the NBR-portion of tax revenues during the current fiscal.
On the contrary, the government's expenditure out of the domestic budgetary resources will be affected by the failure to meet the tax collection target. It might entail higher domestic borrowings, leaving a growing public debt burden on the budget itself.
The government has also recently revised downward its gross domestic product (GDP) growth rate this fiscal year as services, wholesale and retail trade, manufacturing and other production-oriented sectors are severely affected by the current volatile situation.
The Bangladesh Bureau of Statistics (BBS) has recently estimated GDP growth rate during the current fiscal to be 6.03 per cent from what was carrier projected at 7.2 per cent. The multilateral capital donors have, however, predicted the growth rate of the Bangladesh economy in the current fiscal at a level even further lower than that of the BBS.
For achieving the revenue collection target in the upcoming fiscal year, the government will have to impose new taxes but that will hurt private sector investment under the given circumstances
Setting revenue collection target on the basis of the Sixth Five-Year Plan is 'unrealistic' as the targets, goals and objectives of the plan itself are most unlikely to be met, he observed.
However, the NBR chief expressed his optimism over achieving the target for revenue collection of this fiscal even amid sluggish economic growth.
Economists have projected a sharp decline in import growth, looming uncertainty about the export sector performance following last month's tragedy at Savar, a declining trend about credit sanctions to private sector and the BBS's revision of the GDP growth rate as major causes for uncertainty over achieving the tax collection target for this fiscal.
Until April this fiscal, the NBR collected an aggregate amount of Tk. 821 billion in tax revenues achieving a 14 per cent growth rate over the level during the corresponding period of the previous one. It will have to collect Tk. 299 billion in additional revenues in May and June to achieve its annual target.
Hope that Govt. would withstand the pressure and arrange to stabilize its liquidity profile decisively.
