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Faculties and Departments => Business Administration => Business & Entrepreneurship => MBA Discussion Forum => Topic started by: Rozina Akter on June 10, 2014, 04:32:54 PM

Title: Achieving the ambitious growth target in budget
Post by: Rozina Akter on June 10, 2014, 04:32:54 PM
Ensuring good governance, maintaining political stability, providing necessary power and gas are key challenges for the implementation  of the national budget for the fiscal year 2014-15. The finance minister has defended his Tk 2.5-trillion budget which has, according to him, a high growth projection in revenue earning and implementation of the annual development programme (ADP).

Analysts say the budget implementation will ultimately hinge on non-economic dimensions of institutional and policy environment, such as implementation capacity of the state, oversight capacity and capacity for reforms. But the financial structure of the budget is not strong enough. The projection of earnings made in the budget is inconsistent with the reality, historical trends and possibilities.

Addressing a post-budget press conference, Finance Minister AMA Muhith said despite being 'ambitious', the budget is realistic and quite 'achievable'. He ruled out the possibility of the deficit and bank borrowing crossing the projections made in the budget for the next fiscal.

The think tanks, trade and business circles welcomed the proposal to widen the tax net and provide incentives to protect the local industries. Banks will be a major source of funds to finance the budget deficit, and the government has set the borrowing target at Tk 312.21 billion. However, they said high dependence on bank borrowing may have a negative impact on the likelihood of private companies to getting loans from banks.

The government's proposal to impose 1.0 environment protection surcharge as green tax on polluting industries has been acclaimed as a good move. But the government needs to take appropriate steps so that taxmen do not harass the companies while collecting such a surcharge.

Country's garment manufacturers say the proposed budget will have a positive impact on the readymade garment sector as it was given special priority. They commended the government for reducing the tax to 3.0 per cent from 5.0 per cent on the earnings from cash incentives given by the government to the exporters.

Chamber bodies hailed the proposals to reduce the rate of corporate tax for unlisted companies and the rate of customs duties on a number of raw materials consumed by the pharmaceuticals industry. The government was also praised for the withdrawal of tax at source on opening letters of credit to import basic commodities like potatoes, onions, garlic, gram, lentils, ginger, turmeric, pepper, rice, wheat, flour, maize, salt, edible oil and sugar.

However, the government's aspiration to achieve the 7.3 per cent GDP growth appears to be highly ambitious as the economy faces an impossible task of raising private investment by Tk 750 billion in fiscal 2014-15. According to an expert, in order to achieve this, private investment needs to rise to 25 per cent of gross domestic product (GDP) from the present 21 per cent - which is an uphill task. In fact, a 4.0 to 5.0 percentage point increase in private investment did never happen in Bangladesh's history.

The finance minister is banking heavily on 'favourable weather' and 'political stability' to achieve 7.3 per cent increase in GDP. But the analysts think this might not be materialised as it does not have any substantive basis. About the revenue growth target of 16.8 per cent, many think it is not attainable considering the dismal growth in the outgoing year. The overall revenue collection may fall short by Tk 120 billion from the target next fiscal.

Economists say while the government is failing to implement large power sector projects, it is extending the phase-out period of quick rental power plants. It is nor proper to keep on depending on the quick rental power plants. They say if there is 67.35 per cent slash in fuel subsidy, the petroleum prices would increase, which will trigger inflation.

Bangladesh bank governor, however, said the rate of inflation is coming down and this is due to the central bank's prudent monetary policy. The central bank carefully prepares the monetary policy so that it cannot create inflationary pressures on the economy, he said and added the growth of broad money and reserve money was kept below the target just to keep the inflationary pressure at tolerable level.

The finance minister said 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. He said the country will be free of extreme poverty by 2018 as development and advancement would keep going on.

Estimates say only around 50 people now pay Tk 10 million or more in taxes. But, in fact, there are at least 50,000 people in the country who can pay Tk 10 million or more in taxes. It means we can collect at least Tk 500 billion from them as income tax. This additional money should be spent to reduce economic and social inequality.

The government should make mandatory the payment of fees through account payee cheques for professional firms such as consulting, outsourcing, doctor chambers, law and accounting firms. It will enhance revenue incomes of the government. The prices of properties should be re-valued every three years to generate more revenues from the sector.

The government needs to raise allocation for social safety net schemes by 25 per cent, as more than 75 per cent of two 20 million households eligible for the benefit do not get the benefit. The final budget should spell out steps how it can reduce spending and wastage for the sectors such as public administration, as the proposed budget does not say anything about it clearly.

Economists say the budget did not explain in detail about steps to develop human resources and continue reforms in the stock market. They also criticised large allocations for sectors such as administration and defence. The government's spending on unproductive sectors such as general administration, defence and internal security is unacceptably high, they added.

The significant allocation made for Padma Bridge, metro rail, transport, human resources development including education, rural economy, healthcare, local government, women employment, social safety net, power & energy, are commendable. Experts feel that the increased investment in physical and social infrastructures will help improve the quality of investment climate, people's lives, develop human resources and create better employment opportunities.

The credibility of the budget will largely depend on its implementation, which requires a radical boost of the capacity of the agencies involved in it. Experts suggest that all ministries and government agencies will have to follow the budget implementation guidelines of the finance ministry properly for enhancing effectiveness of implementation. There should be a provision to penalise the ministries and government agencies if they fail to follow the guidelines. The monitoring and implementation mechanism need to be strengthened and enhanced significantly in order to achieve the targeted growth rate - which is ambitious - of the economy.

Source: The Financial Express
Title: Re: Achieving the ambitious growth target in budget
Post by: fatema nusrat chowdhury on July 22, 2014, 11:15:00 AM
Informative sharing. Thank you :)