Budget should have been more ambitious: CPD
Saturday, 13 June 2009
FE Report
The proposed national budget is conservative rather than an ambitious one as there are scopes to do more for achieving higher economic growth than 5.5 per cent, said distinguished fellow of Centre for Policy Dialogue (CPD) Dr Debapriya Bhattacharya on Friday.
Finance minister AMA Muhith rolled out Thursday a Tk 1.138 trillion national budget for the fiscal 2009-10, with a resolve to mitigate effectively the global recession impacts, maintain macroeconomic stability and develop infrastructures relying more on the public private partnership concept
The government should spend more to provide health, education and other services to the people and the budget should accommodate more expenditure on these areas, he said at a press briefing on the national budget.
It's surprising that the government has fixed the growth target downward, he said.
"The country has achieved 5.9 per cent GDP growth in the current fiscal under a worst situation, while the growth is targeted to be 5.5 per cent in the new budget for 2009-10. This is really surprising… We don't understand how such a target was fixed when a better and healthy situation is prevailing in the country," he added.
If the agriculture sector grows at a rate of 3.0 per cent and service sector at 6.0 per cent rate, 6.0 per cent growth rate can be achieved if industrial sector performs well, he explained.
The expansionary revenue and expenditure structure in the proposed budget is inconsistent with conservative growth and investment targets, he added.
The finance minister has fixed the investment target at 23.7 per cent of gross domestic product for the next fiscal and it is 24.2 per cent in the current fiscal, he said.
"It seems that the government does not have enough confidence to increase the investment scenario," he added.
The government should have enough confidence to spend on public investment channelised mainly through annual development programme (ADP), he said.
"The Awami League government in 1999-2000 fiscal implemented 99 per cent of the ADP and it can do it again if all the ministries and government agencies works sincerely," he added.
The government assumes that private investment will decline and the reasons for thinking so best known to them, Dr Debapriya said.
"A significant enhancement in public investment would thus imply a rather depressing future for private investment," he said.
The government announced a Tk 305 billion ADP for the next fiscal and the original ADP was Tk 256 billion for the current fiscal.
The budget did not mention anything about savings, which means there still is a concern for domestic savings, he said.
"In the last two years, savings started to decline due to high prices of commodities and still there is no good sign in this front," he added.
The CPD fellow said the government did not make any distinction between 'income earned legally and undisclosed' and 'income earned illegally and undisclosed.'
"The provision for accepting any undisclosed income, earned legally or illegally, without any question for the next three fiscals is very unfortunate," he added.
The decision to accept undisclosed money for three years will encourage tax evaders to wait until the last moment and maximize the returns on untaxed money, he explained.
The government will face five challenges in the coming fiscal including energizing investment, Dr Debapriya said.
"Investment must get maximum attention of the government be it domestic or foreign," he said.
Power and energy sector should get priority and government agencies should be strengthened to attract investments, he added.
The other challenges are consolidating agriculture, protecting external sector, strengthening public finance and revamping public administration, he said.
"It is not enough to collect only revenue as the government must have capacity to spend it," he pointed out.
Regarding public-private partnership, he said it is not a new concept as the government has partnership with private sector in power generation but this is the first time it is included in the budget.
About the monetary outlook, Dr Debapriya said an expansionary fiscal policy must be backed by expansionary monetary policy, which is not visible, at least, for now.
"The broad money growth is fixed at 16.3 per cent from 17.2 per cent and net domestic assets at 17.5 per cent from 18.6 per cent, which shows an inconsistency between the fiscal and monetary policies," he said.
The government has taken the right direction in expanding social safety net programme, he added.
The CPD fellow said the country has enough resources but problem lies on ways to use it.
"The government must ensure proper utilization of surplus national savings, excess liquidity in the banking system and foreign aid in the pipeline," he said.
It is better to maintain integrity of public finance framework and fiscal discipline should not be distorted by issuing statutory regulatory orders, he added.
The proposed national budget is conservative rather than an ambitious one as there are scopes to do more for achieving higher economic growth than 5.5 per cent, said distinguished fellow of Centre for Policy Dialogue (CPD) Dr Debapriya Bhattacharya on Friday.
Finance minister AMA Muhith rolled out Thursday a Tk 1.138 trillion national budget for the fiscal 2009-10, with a resolve to mitigate effectively the global recession impacts, maintain macroeconomic stability and develop infrastructures relying more on the public private partnership concept
The government should spend more to provide health, education and other services to the people and the budget should accommodate more expenditure on these areas, he said at a press briefing on the national budget.
It's surprising that the government has fixed the growth target downward, he said.
"The country has achieved 5.9 per cent GDP growth in the current fiscal under a worst situation, while the growth is targeted to be 5.5 per cent in the new budget for 2009-10. This is really surprising… We don't understand how such a target was fixed when a better and healthy situation is prevailing in the country," he added.
If the agriculture sector grows at a rate of 3.0 per cent and service sector at 6.0 per cent rate, 6.0 per cent growth rate can be achieved if industrial sector performs well, he explained.
The expansionary revenue and expenditure structure in the proposed budget is inconsistent with conservative growth and investment targets, he added.
The finance minister has fixed the investment target at 23.7 per cent of gross domestic product for the next fiscal and it is 24.2 per cent in the current fiscal, he said.
"It seems that the government does not have enough confidence to increase the investment scenario," he added.
The government should have enough confidence to spend on public investment channelised mainly through annual development programme (ADP), he said.
"The Awami League government in 1999-2000 fiscal implemented 99 per cent of the ADP and it can do it again if all the ministries and government agencies works sincerely," he added.
The government assumes that private investment will decline and the reasons for thinking so best known to them, Dr Debapriya said.
"A significant enhancement in public investment would thus imply a rather depressing future for private investment," he said.
The government announced a Tk 305 billion ADP for the next fiscal and the original ADP was Tk 256 billion for the current fiscal.
The budget did not mention anything about savings, which means there still is a concern for domestic savings, he said.
"In the last two years, savings started to decline due to high prices of commodities and still there is no good sign in this front," he added.
The CPD fellow said the government did not make any distinction between 'income earned legally and undisclosed' and 'income earned illegally and undisclosed.'
"The provision for accepting any undisclosed income, earned legally or illegally, without any question for the next three fiscals is very unfortunate," he added.
The decision to accept undisclosed money for three years will encourage tax evaders to wait until the last moment and maximize the returns on untaxed money, he explained.
The government will face five challenges in the coming fiscal including energizing investment, Dr Debapriya said.
"Investment must get maximum attention of the government be it domestic or foreign," he said.
Power and energy sector should get priority and government agencies should be strengthened to attract investments, he added.
The other challenges are consolidating agriculture, protecting external sector, strengthening public finance and revamping public administration, he said.
"It is not enough to collect only revenue as the government must have capacity to spend it," he pointed out.
Regarding public-private partnership, he said it is not a new concept as the government has partnership with private sector in power generation but this is the first time it is included in the budget.
About the monetary outlook, Dr Debapriya said an expansionary fiscal policy must be backed by expansionary monetary policy, which is not visible, at least, for now.
"The broad money growth is fixed at 16.3 per cent from 17.2 per cent and net domestic assets at 17.5 per cent from 18.6 per cent, which shows an inconsistency between the fiscal and monetary policies," he said.
The government has taken the right direction in expanding social safety net programme, he added.
The CPD fellow said the country has enough resources but problem lies on ways to use it.
"The government must ensure proper utilization of surplus national savings, excess liquidity in the banking system and foreign aid in the pipeline," he said.
It is better to maintain integrity of public finance framework and fiscal discipline should not be distorted by issuing statutory regulatory orders, he added.