budget reactions

FE Team | Published: June 08, 2012 00:00:00 | Updated: February 01, 2018 00:00:00

Jasim Uddin Haroon
The proposed budget for the upcoming fiscal year (2012-13) received mixed reactions from the country's leading economists.
Some of them called the budget, as proposed by Finance Minister A M A Muhith, as 'unrealistic' in terms of its financing and attaining GDP (gross domestic product) growth rate, while some others called it a 'reform-oriented' one.
Some economists expressed concern over probable political turmoil over the caretaker government issue, which might hit the economic activities in the next fiscal.
In his reaction Dr Mirza A B Azizul Islam, a former finance adviser, told the FE: "Budget financing will be very difficult in the next fiscal year. I think realisation aid disbursement target will be too tough for the funding budget."
Mr Islam said financing from the non-banking sources, which is targeted at 1.0 per cent of the GDP in the proposed budget, will also be difficult for the government.
"So far in the outgoing fiscal, the government has earned Tk 3.8 billion by selling savings certificates. How can we expect to earn Tk 74 billion from the same source?", he asked.
He said the government will ultimately have to depend on bank borrowing to fund the budget. "Private sector will be rather crowded out, if the government depends largely on banks."
Mr Islam also said the projected 7.2 per cent GDP growth target for the next fiscal is ambitions.
"We've to raise the investment-GDP ratio to 29 per cent, if we want to attain 7.2 per cent GDP growth."
"If the government's borrowing increases than its estimated target, private investment will be seriously affected," he added.
Mr Islam said the ADP (Annual Development Programme) implementation will also be a challenging task for the government.
"The government does not have adequate administrative support to implement such a large-sized ADP."
Zaidi Sattar, chairman of the Policy Research Institute of Bangladesh (PRI), said the government has taken some good measures in the proposed budget to meet the domestic and external challenges, particularly in the backdrop of the Eurozone crisis.
"The budget speech should have incorporated the trade policy, it is very important for the growth of our economy," he noted.
He said attaining 7.2 per cent GDP growth rate is a big challenge for the government at a time when the country's major export markets are facing economic meltdown. Attaining the high GDP growth rate is possible, if the external situation improves.
Regarding the government's borrowing target from the banking sector, he said: "The government's bank borrowing must not exceed 2.2 per cent of the GDP."
Mr Sattar also said: "Some duties have been rationalised, while others have not been rationalised, especially some supplementary duties."
He said proposals about various reforms, especially in the case of value added tax and income tax, are the positive sides of the budget, and such measures will boost revenue mobilisation.
Dr Mustafizur Rahman, executive director of the Centre for Policy Dialogue (CPD), in his instant reaction on the budget, said: "The budget speech has incorporated a long list of reforms. These are very essential to boost the country's economic growth."
He said implementation of the large-sized ADP will be a big challenge for the government, as it is almost 30 per cent higher than that of the outgoing fiscal.
Mr. Rahman said the Finance Minister has rightly proposed for reducing the import duties of capital machinery of various promising sectors, like those of pharmaceuticals and ship-building.
The CPD chief also said disbursement and utilisation of external aid will pose tough challenges to the government. The government's borrowing from the banking sector will lead to higher inflation.