Also, money laundering by dishonest quarters including the loan defaulters responsible for the non-performing loans(NPLs) and over-invoicing of import bills remain among the factors causing liquidity crisis in the banks.According to the policy think tank, the Center for Policy Dialogue (CPD), such borrowing by the government has created new money amounting to Tk3831.24 billion, which it thinks has crossed the threshold if compared to the global practice in this regard. Clearly, the government is already in an uncertain territory and should look for other ways to mobilise funds for budgetary support.
The government in the upcoming budget (FY2023-24), which is an election year one, will go for higher spending. The finance minister has already hinted at such a possibility. That means there will be more cash available in the market, a large chunk of which would be spent on the non-productive sectors. As usual, such money goes to create further inflationary pressure in the economy. Economists fear that given the weak revenue base, it is going to be harder this time to mobilize finance for the upcoming budget. If the government's increasing dependence on the central bank, as noted, continues, it will certainly not help its effort to contain inflation in the next budget. The government will also be facing an added pressure due to the IMF conditions of raising tax-to-GDP ratio to 11 per cent from the current level of 8.0 per cent, reforming tax administration, banking sector and public fund management.
Basically, the government will be facing the same old problems in a new package in the next financial year. That would include maintaining macroeconomic stability, especially containing inflation, stimulating revenue mobilisation, capacity development of the project implementing agencies of the government and establishing order in the financial sector through improving governance. The budgetary allocations as usual should be focused on alleviating poverty, reducing ever-widening income disparity and creating more employment and, of course, sustaining growth and so on and so forth.
But given the past experience in implementation of the budgetary targets such as revenue mobilisation, achieving growth target and ADP implementation, one wonders how similar targets of the next budget will be fulfilled. First set at 7.5 per cent, the GDP growth target was later revised down to 6.5 per cent. But that target, too, remained largely unfulfilled. Similarly, despite the high expectation of keeping the inflation just over 5.0 per cent (at 5.6 per cent, to be precise), it could not be manage in the long run. But,as noted earlier, after crossing 9.33 , as in March, it came down slightly to 9.24 per cent in April. Now, it is hovering on an average at over 8.6 per cent or more. In this context, whatever measures the government might be adopting to contain inflation in the next financial year, it would do well to reduce prices of fuel oil which is a major driver of inflation through increasing transport cost of commodities.Since the Bangladesh Petroleum Corporation (BPC), the government's main agency to import and market petroleum, has been making windfall profits selling fuel oils to the consumers at a higher rate even when oil prices in the international market fell, it can now share its profits with general consumers of fuel oils by reducing their prices. This is very much possible as BPC is a government body, not a profit-making private organisation. This will help reduce movement costs of people and goods. The government would, hopefully, find more innovative ways to keep inflation within tolerable limits.
Similarly, the government's tax collecting authority needs also find more innovative ways in addition to arranging tax fairs to mobilise revenue. Direct, rather than indirect, taxes should be stressed. Tax evasion should be shown zero tolerance, especially for the higher income group. To combat corruption in the tax administration, the faster its digitisation is completed the better would be its tax collection profile. Increasing tax revenue is the royal road to reducing budgetary deficit and thereby weaning the government from its dependence on bank, especially central bank borrowing.
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