Budget for FY'08: Pragmatic yet conventional
Monday, 11 June 2007
Shamsul Huq Zahid
THE budget presentation this year lacked the usual ambience. The clicking noise and blinks of flash lights of press photographers' cameras, thumping of desks by ruling party members in approval of the finance minister's budget speech, boos from opposition members in disapproval of the same and, finally, their noisy walkout in the parliament -- all were missing this time. Nor was there any pre-arranged pro-budget or anti-budget procession on the streets within minutes after budget presentation. Instead, the people listened with rapt attention to the recorded budget speech of a technocrat finance adviser of the interim administration broadcast by the state-owned electronic media.
The speech was not loaded with usual clichés and rhetoric that are frequently used by politicians either to convince or mislead the people. Finance Adviser Mirza Azizul Islam was rather frank about ground realities. For instance, the finance adviser has proposed in the budget a number of fiscal measures and limited government intervention in the market to rein in prices of essential commodities. But, at the same time, he has asked the people not to pin much hope on those since the price situation is very much dependent on external factors.
However, the content of the budget is more important than quality of the budget speech. The people do not have any mechanism to make known their support or opposition to budgetary measures. Others -- politicians, businesses, economists and research organisations, do speak for them.
The politicians, the most vocal section in the society, have, for obvious reasons, restrained themselves from making any provocative statement on the budget, except for the head of one of the two major political parties. The chief of that party has questioned the constitutional basis of budget presentation by the interim administration.
Most business bodies have welcomed the budget describing it pro-poor. Yet they have pointed out some inconsistencies what, they feel, might go against the interest of the domestic industries.
Some so-called private think tanks and a few economists have described the budget ambitious and traditional while some have found it to be welfare-oriented.
The finance adviser in reply to reactions given on budget by different quarters last Friday claimed that the budget was neither ambitious nor traditional.
Many, while taking into consideration the actual receipt of revenues vis-à-vis the targets during the last few financial years, have expressed serious doubt about the government's ability to achieve the revenue target set in the proposed budget for the next fiscal. The budget envisages a 17 per cent growth in revenue next fiscal over that of the revised budget and 7 per cent over that of the original budget for the outgoing fiscal. The shortfall in revenue mobilisation this fiscal has been estimated at about 9.0 per cent.
Though the finance adviser in his post-budget press conference dismissed the criticism that he had set rather an ambitious revenue target for the next fiscal, he in his budget speech admitted the fact that 'raising the revenue GDP-ratio to 10.8 per cent will turn out to be a great challenge'. He said achieving the target would require undertaking a formidable task of tax base expansion, improved quality of tax assessment, strengthened collection procedures, office automation, transparency and accountability of tax administration and applied research. Since the National Board of Revenue is under his ministry, the finance adviser should be familiar with the actual efficiency level of its officials. But it is likely to a difficult task for the interim government to meet all the requirements that have mentioned by the finance adviser and achieve the revenue target set for the next fiscal.
Moreover, the projected domestic borrowing target, in spite of the assurance given by the finance adviser, might trigger a few unsettling effects on the flow of credit to the private sector and the rate of inflation.
The budget for next fiscal is unconventional only in the matter of inclusion of contingent liabilities of a couple of state owned organisations, including the Bangladesh Petroleum Corporation (BPC) and offering subsidy to farmers to compensate for the additional amount to be paid by the latter due to hike in the price of diesel. But it has traversed through the same old orbit so far as allocations to different sectors and so-called safety net programmes, except for the increased allocations to the power sector and higher subsidies to agricultural sector.
The interim administration would have done better had it decided to make a realistic Annual Development Programme (ADP). There is no denying that public development spending plays an important role in the national life but it needs to be made within the financial ability of the government. The finance adviser should have avoided the conventional way of making a bloated ADP that at the fag end of every fiscal is downsized because of the non-availability of adequate resources. This could be done just by discarding unimportant projects. For instance, the size of the original ADP for this fiscal was Tk. 260 billion and as a matter of tradition, this has been downsized by Tk. 216 billion.
Some business bodies have opposed the changes in the duty slabs for raw materials, intermediate goods and finished goods. They feel that these would hurt the local industries. But the hike in duty slabs has been well compensated through the complete withdrawal of development surcharge and merger of two slabs of supplementary duties.
The proposal to withdraw zero-duty facility from textile machinery and computer parts and accessories seems to be an ill-conceived one and contradictory to the government's own declared policy for the development of the sectors. The proposal deserves a review by the finance adviser.
The one of the laudable steps proposed by the finance adviser in the budget is the curtailment of the discretionary powers of the tax officials. However, there are many things in laws and rules that are meant to help the general people. But, in reality, the people get little or no benefit out of such laws and rules. The relevant government officials flout those with total impunity, much to the inconvenience of the common man. The taxpayers would expect the tax officials to be truly cooperative in making them (taxpayers) to be more tax-complaint rather than creating a sort of tax-phobia.
THE budget presentation this year lacked the usual ambience. The clicking noise and blinks of flash lights of press photographers' cameras, thumping of desks by ruling party members in approval of the finance minister's budget speech, boos from opposition members in disapproval of the same and, finally, their noisy walkout in the parliament -- all were missing this time. Nor was there any pre-arranged pro-budget or anti-budget procession on the streets within minutes after budget presentation. Instead, the people listened with rapt attention to the recorded budget speech of a technocrat finance adviser of the interim administration broadcast by the state-owned electronic media.
The speech was not loaded with usual clichés and rhetoric that are frequently used by politicians either to convince or mislead the people. Finance Adviser Mirza Azizul Islam was rather frank about ground realities. For instance, the finance adviser has proposed in the budget a number of fiscal measures and limited government intervention in the market to rein in prices of essential commodities. But, at the same time, he has asked the people not to pin much hope on those since the price situation is very much dependent on external factors.
However, the content of the budget is more important than quality of the budget speech. The people do not have any mechanism to make known their support or opposition to budgetary measures. Others -- politicians, businesses, economists and research organisations, do speak for them.
The politicians, the most vocal section in the society, have, for obvious reasons, restrained themselves from making any provocative statement on the budget, except for the head of one of the two major political parties. The chief of that party has questioned the constitutional basis of budget presentation by the interim administration.
Most business bodies have welcomed the budget describing it pro-poor. Yet they have pointed out some inconsistencies what, they feel, might go against the interest of the domestic industries.
Some so-called private think tanks and a few economists have described the budget ambitious and traditional while some have found it to be welfare-oriented.
The finance adviser in reply to reactions given on budget by different quarters last Friday claimed that the budget was neither ambitious nor traditional.
Many, while taking into consideration the actual receipt of revenues vis-à-vis the targets during the last few financial years, have expressed serious doubt about the government's ability to achieve the revenue target set in the proposed budget for the next fiscal. The budget envisages a 17 per cent growth in revenue next fiscal over that of the revised budget and 7 per cent over that of the original budget for the outgoing fiscal. The shortfall in revenue mobilisation this fiscal has been estimated at about 9.0 per cent.
Though the finance adviser in his post-budget press conference dismissed the criticism that he had set rather an ambitious revenue target for the next fiscal, he in his budget speech admitted the fact that 'raising the revenue GDP-ratio to 10.8 per cent will turn out to be a great challenge'. He said achieving the target would require undertaking a formidable task of tax base expansion, improved quality of tax assessment, strengthened collection procedures, office automation, transparency and accountability of tax administration and applied research. Since the National Board of Revenue is under his ministry, the finance adviser should be familiar with the actual efficiency level of its officials. But it is likely to a difficult task for the interim government to meet all the requirements that have mentioned by the finance adviser and achieve the revenue target set for the next fiscal.
Moreover, the projected domestic borrowing target, in spite of the assurance given by the finance adviser, might trigger a few unsettling effects on the flow of credit to the private sector and the rate of inflation.
The budget for next fiscal is unconventional only in the matter of inclusion of contingent liabilities of a couple of state owned organisations, including the Bangladesh Petroleum Corporation (BPC) and offering subsidy to farmers to compensate for the additional amount to be paid by the latter due to hike in the price of diesel. But it has traversed through the same old orbit so far as allocations to different sectors and so-called safety net programmes, except for the increased allocations to the power sector and higher subsidies to agricultural sector.
The interim administration would have done better had it decided to make a realistic Annual Development Programme (ADP). There is no denying that public development spending plays an important role in the national life but it needs to be made within the financial ability of the government. The finance adviser should have avoided the conventional way of making a bloated ADP that at the fag end of every fiscal is downsized because of the non-availability of adequate resources. This could be done just by discarding unimportant projects. For instance, the size of the original ADP for this fiscal was Tk. 260 billion and as a matter of tradition, this has been downsized by Tk. 216 billion.
Some business bodies have opposed the changes in the duty slabs for raw materials, intermediate goods and finished goods. They feel that these would hurt the local industries. But the hike in duty slabs has been well compensated through the complete withdrawal of development surcharge and merger of two slabs of supplementary duties.
The proposal to withdraw zero-duty facility from textile machinery and computer parts and accessories seems to be an ill-conceived one and contradictory to the government's own declared policy for the development of the sectors. The proposal deserves a review by the finance adviser.
The one of the laudable steps proposed by the finance adviser in the budget is the curtailment of the discretionary powers of the tax officials. However, there are many things in laws and rules that are meant to help the general people. But, in reality, the people get little or no benefit out of such laws and rules. The relevant government officials flout those with total impunity, much to the inconvenience of the common man. The taxpayers would expect the tax officials to be truly cooperative in making them (taxpayers) to be more tax-complaint rather than creating a sort of tax-phobia.