Hard to achieve Say top economists

Md Fazlur Rahman

The government is likely to face mounting challenges in implementing its new budget as economists, while welcoming some new initiatives, were unconvinced about the country's capacity to execute the finance minister's ambitious plans.
"The budget targets are quite impressive, and if realised, they will do justice to the development demands of Bangladesh," said Debapriya Bhattacharya, distinguished fellow of the Centre for Policy Dialogue (CPD).
He welcomed the cut in corporate tax, and hailed the introduction of the first-of-its-kind children budget and the continuation of the gender budget.
The noted economist soon turned his attention to the challenges the budget for the 2015-16 fiscal year faces.
He said he was concerned about some overarching targets in the new budget.
For instance, Debapriya said, the total revenue growth in the last three years never exceeded 10 percent. "But the new budget aspires to achieve 27.5 percent revenue generation growth. It is actually 36 percent more than the final figure of 2014-15."
Similarly, the expenditure growth averaged below 10 percent in the last three years, but the proposed budget has stipulated the growth to be 23 percent, said Debapriya.

"Again, the new growth target is 42.5 percent higher from the closing figures of the outgoing fiscal year.
"In the budget, we have not found any list of measures to drive this kind of beyond-the-trend growth," he told The Daily Star, adding that similar trends might also be observed in the case of deficit financing.
Mirza Azizul Islam, former finance adviser to a caretaker government, said first it has to be seen whether the government would be able to mobilise adequate financing.
"Secondly, we have to see whether the government has the administrative and institutional capacity to implement the budget even if the fund is mobilised. If it can't do so, the budget is ambitious."
The NBR revenue target is nearly 30 percent higher than that of the revised budget of the outgoing year, he said. Bangladesh has never in its history achieved such year-on-year higher growth."
Islam also said there is apprehension among investors and businesspeople that the NBR might push for reaching its revenue generation target. "If that happens, it will hamper private investment."
The former CG adviser also said if the government borrows more from the banking sector, it would obstruct credit flow to the private sector, thus disrupting private sector investment.
He also said the government's target on sales on savings instruments to manage deficit financing might overshoot in the next fiscal year as it happened in the outgoing year, putting pressure on the government in repaying interest on borrowing and curbing the budget's ability to spend more on productive sectors.
Mirza Azizul Islam, however, supported the finance minister's priority for transport, energy and power, human resources development, health, education and social safety net programmes.
Former Governor Salehuddin Ahmed of Bangladesh Bank said implementation of the budget is the major challenge.
Zaidi Sattar, chairman of Policy Research Institute of Bangladesh, said he has not found anything in the budget that is consumer-friendly, though ideally a budget should be friendly to consumers.
He said the GDP target of 7 percent is ambitious but sometimes there is a need to be ambitious, especially when the country has for long been trapped in the 6-plus percent economic growth.
"But achieving 7 percent GDP growth will be transformative and it will not be easy to attain," he said.
Sattar also does not think that the budget which is 17.2 percent of the GDP is that large. "Nepal's budget size is 21 percent of its GDP, while it is about 17 percent in many of our neighbouring countries."
He said the finance minister has unveiled a big budget riding on the macroeconomic stability which the country has been enjoying for a while. "There is also incentive for high target."
Extrapolating from the country's past experience, Khan Ahmed Sayeed Murshid, director general of Bangladesh Institute of Development Studies (BIDS), said the budget may not be implemented fully.
He said the country can't raise its GDP growth without the much needed investment. "The private sector is not making investments. Although there are talks about innovative financing, we don't see any innovation."
"Public-Private Partnership has played key roles in many countries including China. But we have yet to be serious about it ... If we can't be serious about innovative financing, public financing alone can't                  meet the country's huge needs," he added.

Financing the budget is the challenge: CPD

Debapriya Bhattacharya, economist and distinguished fellow of Centre for Policy Dialogue speaks at a post budget reaction at Brac Centre Inn on June 5, 2015. Photo: Star

Star Online Report

Financing the 2015-16 fiscal budget will be its biggest challenge, Centre for Policy Dialogue (CPD) said today placing doubts on whether the revenue target can be met.
The think-tank expressed this in its reaction on the Tk 2.95 lakh crore budget, the biggest ever in history, placed at the Jatiya Sangsad yesterday by Finance Minister AMA Muhith.
The mega budget aims 7 percent growth and targets over Tk 2.08 lakh crore in revenue – 84 percent of which will be provided by the National Board of Revenue (NBR) in the form of VAT, income tax, import duty and others.
Think-tank CPD arranged a press conference in Brac Centre Inn in Dhaka to voice its reaction to the proposed budget. CPD’s distinguished fellow and eminent economist Debapriya Bhattachariya made their presentation on the budget. CPD Executive Director Mostafizur Rahman placed the welcome speech.
The think tank 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 two years.
CPD also hailed the slash in corporate tax rate and a hike in the source tax for exporters. However, it stated that the Tk 4,000 uniform minimum tax for all taxpayers is “unfair”.

Goal high on hopes Muhith unwraps lofty budget, dwells on problems, gives no solution

Inam Ahmed

For Finance Minister AMA Muhith, it was a moment of reality check, strategizing and some shifting of blame for failure when he proposed the budget for the next fiscal year yesterday. But he fell way short in actually proposing or visualising what big things he wants to do to achieve his growth target of 7 percent next year.
He was candid and truthful when he said his plans did not gather “expected momentum” during this year and private investment was not forthcoming. But then he put political uncertainties as a scapegoat of non-achievement of targets for this year and also for possible shortcomings next year too as he mentions “making further progress hinges on favourable political environment”.
In his proposed budget he did not show us how he was going to solve some of the nagging problems like easing land acquisition process, diversifying exports, goading the lethargic bureaucracy into action or increasing the inflow of foreign assistance in projects to get the elusive 7 percent growth.

His budget is stuck in the usual quagmire of big expenditure and big revenue earning. Much of the spending will be on the increase in government sector salary -- from this year's Tk 29,350 crore to Tk 45,153 crore -- and interest payment -- a sign that the government's internal borrowing is soaring rapidly (26 percent this year) as foreign funds dry up.
With a glut of big projects already in place, many of which are dragging, he actually had little new projects to showcase for next year.
His ambitious revenue target -- 27 percent higher than this year's revised figure -- will be challenging to achieve although the wisely proposed three-fold increase in advance income tax on garment exports will rake in huge money.
Muhith's tough call will be to ensure a 40 percent higher foreign funding for projects by removing the bottlenecks in the pipeline. He himself is doubtful as he states “if we can increase disbursement from the huge pipeline”.  That “if” sticks out like a sore thumb.

And if that does not happen, the economy will be caught in further domestic borrowing with incidence of interest rate payment going up. Or in the alternative scenario, expenditure will be cut to make up for a likely shortfall in revenue collection.

The net impact of this will be again to be caught up in the 6 percent growth cycle.
The finance minister has prepared his recipe of growth on accelerating aggregate demand through improvement in energy, roads and economic zones. Pay rise, he hopes, will generate consumer spending.
But his budget book shows no new road plans other than the ongoing Dhaka-Chittagong and Dhaka-Mymensingh ones. His energy chapter contains no major announcement on infrastructure while the ongoing ones are slow-going. Economic zones will take years to materialise.
Muhith knows that an increase in private investment holds the key to higher growth but he has yet to find an answer about how that will happen in the face of a sluggish bureaucracy, dearth of good governance, a crippled Board of Investment, and above all the great political uncertainty that he has ranted about a lot. The factors he himself listed as impediments to private investment -- delay in getting utility services, institutional complications, high interest rates or land scarcity -- remain unresolved.

Good governance prospect does not look bright. He promises little on public administration, police force and judiciary. And strengthening the local government, a crucial ingredient for development, remains full of empty talks. On top of that he now mulls devolution of power, another far-fetched idea.
Muhith instills no new hopes on roads, gas supply, and traffic jam in Dhaka city that hurts the economy so bad. There is no remedy for a wilting agriculture or the flagging manpower export.

In short, Muhith in his budget wants good growth with a clear idea of what needs to be done, only that the specific actions are missing once again.