Terming attainment of the government's proposed revenue-collection target and deficit financing as the major 'challenging tasks', experts and economists on Sunday suggested prudent measures to meet the budgetary goals.
Mentioning the ballooning fiscal subsidy as another area of concern, they also prescribed large government spending to meet the growing needs of the economy.
The observations and recommendations were made at a post-budget panel discussion jointly organised by the American Chamber of Commerce in Bangladesh (AmCham), Chevron Bangladesh and International Beverages Private Limited (Coca-Cola) at a city hotel.
AmCham President Syed Ershad Ahmed moderated the discussion while Planning Minister MA Mannan was present as the chief guest.
Former adviser to caretaker government Dr AB Mirza Azizul Islam talked as a panelist while Policy Research Institute of Bangladesh (PRI) Executive Director Dr Ahsan H Mansur presented the keynote paper.
Mr Islam said the government expenditure in proportion to gross domestic product (GDP) is around 15 per cent while around 15.1 per cent was proposed in the new budget which was much lower than those in other countries and the lowest in the world.
"So I don't think the government should go for a contractionary expenditure policy," he went.
Regarding public debt he said it was about 41 per cent of GDP with the risk threshold at 70 per cent and the external debt was 10 per cent with the risk threshold at about 23 per cent. "And we are in a better situation."
He said revenue collection performance was poor. He asked whether the proposed target was achievable or not.
He suggested that the National Board of Revenue show more confidence and accountability in this regard. Only 2.9 million tax returns until March last were submitted out of about 7.2 million TIN holders.
The proposed budget emphasized investment accounting for 31.5 per cent of GDP, he said. The private sector credit would be crucial in achieving the 7.5 per cent GDP growth rate.
He also welcomed corporate tax reduction and suggested favourable other conditions including ease of doing business and good governance to get the desired benefit.
Terming foreign direct investment which is 1.0 per cent of GDP as 'much lower', Mr Islam said with stagnant private sector investment for more than decades, large FDI generation would be difficult.
Presenting the keynote, Mr Mansur said the new budget would face three uncertainties. One is the revenue side followed by managing the ballooning fiscal subsidy and financing the growing fiscal deficit
The NBR's revenue target for FY23 has been set at Tk 3.7 trillion, which will require the collection to grow by about 28 per cent, compared with the actual growth rates ranging between 13 per cent and 15 per cent per year.
"Revenue shortfall in FY23 will be about Tk 400 billion," he said.
Given the uncertainties over commodity prices, the subsidies and incentive allocation of Tk 720 billion might not be adequate, he said. The amount might go up 15-20 per cent, given the lack of urgency in partly passing over the increased costs to the consumers, he added.
"Bangladesh's economy is passing through a difficult patch due to external sector imbalances and inflationary pressures," he said.
The reduced size of the budget (in relation to GDP), would help reduce domestic demand pressure, although some upfront price adjustments for other products with regulated prices (like the increase in gas prices), would have helped contain the demand pressure further, he observed.
His recommended that the exchange rate be left to the market, and Bangladesh Bank should only focus on ensuring its stability without interfering in its trend.
The interbank foreign exchange market must be allowed to work freely (without interference), he said. He recommended that the monetary policy be used as a proper tool to contain demand, reduce inflation, and help stabilise the exchange rate.
Currently, with deposit and lending rates capped, there cannot be any monetary transmission and thus there is no scope for using the monetary policy for the stabilisation purpose and price stability cannot be achieved without proper use of the monetary policy, he noted.
He, however, said there remained challenges but manageable, provided application of the right policy instruments for right objectives.
AmCham president Syed Ershad Ahmed suggested few measures in the proposed budget. Bangladesh was preparing itself for the post-pandemic recovery strategy as well as keeping up the momentum for the economy returning to the double-digit growth amidst unpredictability of the geopolitical environment.
"We recommend tackling the twin challenges focusing on crisis management, prioritizing expenditures management and foreign exchange reserve, inflation control, infrastructure development , human resource development to attract foreign direct investment (FDI) as well as private sector, policy assistance and continuity to emphasize key procedural matters in several sectors," said Syed Ershad Ahmed.
Hailing reduction in corporate tax, he recommended gradual reduction in days ahead and withdraw of AIT adjustment and VAT from industrial raw materials' import to enhance domestic production capacity.
He called for more incentive in the agriculture sector and price reduction for agricultural equipment, increase in allocation for employment and social safety net for those including women and youth-led micro, small and medium enterprises (MSMEs), innovation and start-ups to counter poverty and income inequality by establishing a robust social safety net system.
The AmCham's recommendation included that NBR should adopt automation at all possible levels at the same time to focus more on expanding the tax net and introducing the e-payment and e-TDS system and digital payment incentives to ensure accountability and transparency throughout the process.
"We are not in favour of the system of repatriation of embezzled wealth mixing in disguise with the earnings of hardworking taxpayers of Bangladesh," he said. He suggested effective modernisation for managing all ports' operation and allowing bonded warehouse facility for non-RMG exports.
"AmCham believes budget execution is what matters in the end and that should be measured based on both quantity and quality," he noted.
Speaking on the occasion Planning Minister MA Manna said the country was doing better and even during the Covid, it did better.
He called upon all to get united to ensure social safety and stability in the country.
Regarding NBR's performance he also admitted that changes were needed in terms of technology and legal framework.
The NBR was tasked with more than it could digest, he noted.
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