Need an implementable budget, not only of allocations and promises
Sunday, 30 May 2010
Mamun Rashid
The Finance Minister is scheduled to present the second budget of the government in power on June 10, 2010. The members of the business community have made their demands to the Finance Minister in view of the upcoming budget. Economists, think tanks, and other professionals and citizens of the country have made recommendations for the budget. As a citizen I also have expectations about the budget which are not much different from many others. That is to have a budget which would attempt to fulfill the needs of the broader section of the society and accelerate the development momentum of the country. In this respect some thoughts on a number of issues are presented here.
Size and consistency of the budget: The government has declared the budget for the current fiscal year, 2009-10, in the light of its election manifesto. Sectoral targets and plans were outlined to be achieved by 2021, the year of the Golden Jubilee of our independence. We hope to see some of the yet unfulfilled plans to be implemented in the current fiscal and continuation of the on-going projects as planned.
It has been indicated that the size of the budget may increase by about 16 per cent to Tk. 1.30 trillion (one lakh thirty thousand crore) in fiscal year, 2010-11 over current fiscal's Tk. 1.13 trillion (one lakh 13 thousand crore). Revenue budget and development budget (Annual Development Programme or ADP) will increase by Tk. 100 billion (10 thousand crore) each. According to that estimation, revenue budget will be Tk. 0.95 trillion (95 thousand crore), an increase of 12 per cent over Tk. 0.8459 trillion (84 thousand 591 crore) of the current fiscal. And core development budget's size will be around Tk. 400 billion (40 thousand crore), an increase of 33 per cent over Tk. 305 billion (30 thousand 500 crore) of the current fiscal.
As has been discussed widely, we have to bear in mind that a bigger challenge here would be the implementation of the budget. Increasing the mere numbers will bring us no good if skills for implementation are not there to back it up.
GDP and inflation: It is expected that in the interest of the country's development, the target for gross domestic product (GDP) will be set at least over 6.0 per cent. Target for keeping the annual average inflation rate between 6.0-6.5 per cent should also be in the budget.
Much-discussed PPP: Budget for the FY2009-10 had a separate allocation of Tk. 25 billion (2.5 thousand crore) for Public Private Partnership (PPP) for the first time ever and this was one of the budget's innovative measures. Apparently no expenditures have been made for investment other than a small amount for preparation of the guidelines. Though a lot of frustration has been expressed from several quarters, we expect that the government will keep allocations for PPP in the next budget and find out ways to utilise the fund without any delay.
Highest priority sector -- power: Though in view of acute power crisis the government has taken some quick measures to tackle the situation, the problem has to be solved in a permanent manner by increasing power generation through budgetary measures. Thus the next budget must propose the highest allocation for the power sector. We also want to see steps to implement small power projects through PPP. Besides, agricultural research, climate fund, and solar energy production deserve significant budgetary allocation.
In the interest of economic development as well as overall progress, the upcoming budget must increase allocation in the infrastructural development, apart from power and gas. Focus should be given to the establishment of coal-based power plants by finalising the Coal Policy as soon as possible.
Budget deficit: The current budget had a deficit of Tk. 343.3 billion (34 thousand 358 crore) or 5.0 per cent of GDP. Since the size of the budget will go up, the next fiscal might see a larger deficit too. But the government may not receive foreign aid and loan as expected, which will lead to greater dependency on the banking system. This could in turn hamper the distribution of credit to the private sector.
Block allocation: It is known that much of Tk. 42.88 billion (4288 crore) made as block allocation has not been spent in the current fiscal. Since there are always some controversies over the utilisation of this fund, it is better to keep this fund in the government's exchequer than be misappropriated or misused. The new budget surely will have block allocation too. But this allocation should be made in a transparent way and used in an effective manner.
Annual Development Programme: Although ADP is never fully utilised, its size is increasing every year, which is subsequently downsized towards the end of the fiscal year. For instance, the proposed Tk. 305-billion (30,500 crore) ADP for current FY2009-10 was later downsized by Tk. 20 billion (2,000 crore). Moreover, during first nine months of the fiscal year, only 44 per cent of the original ADP (47 per cent of the revised ADP) was utilised. I would like to request the government not to include unnecessary or less important projects in the ADP on political considerations.
Employment generation: In the current fiscal, a project named "National Service" has been launched to create employment opportunities for the youth in two Upazilas who have completed Higher Secondary education. Let the project be more pervasive and well-planned through the next budget.
Broadening the tax net and adding new sectors: In order to increase revenue income and make the country financially self-sustainable, tax should be imposed on new sectors and industries. People/institutions that have the ability to pay taxes should be taxed even at a nominal rate. This will increase the total number of tax payers in the country. Besides, the next budget must take measures to collect income tax return from every person holding a TIN number. This is because in the current fiscal year, only over 0.7 million (7.0 lakh) tax returns have been submitted out of 2.23 million (22 lakh 38 thousand) TIN holders.
As new sectors, capital gain from capital markets, large exporters, agro-based business or commercial agriculture and real estate can be brought under tax net. However, since capital market of the country is still at the emerging state and is a volatile sector, interests of the small individual investors must be protected while planning for taxing this sector so that small investors are not discouraged. The government may take steps to initiate additional benefits for the tax payers by introducing "Income Tax Card" to encourage tax payers.
Revenue sector reforms: "Tax net expansion", "prevention of tax evasion" and increasing the revenue income etc., require reform in the tax-related laws and regulations. The process for income tax return submission should be made easier. The next budget should also have provision for online submission of tax returns and reducing the size and volume of income tax description. It must be ensured that the common people are not harassed by unscrupulous officials in the name of collection of tax and VAT.
Industrial sector: It is important to take measures to increase the contribution of industrial sector to the national GDP from current level of 28.61 per cent (at current price). In order to do that, the new budget must give highest importance to the power and energy sector, Dhaka city communication network, rail and waterways and Dhaka-Chittagong trade corridor and other infrastructural development.
Undisclosed income and black money: The current budget provided opportunities for whitening black money by paying tax only at a rate of 10 per cent and fulfilling the condition of investing in three specific sectors. Somehow, this did not create much of a buzz among the black money holders. According to newspapers, only 53 persons legalised Tk. 472.50 million (47 crore 25 lakh) in total until March 31, 2010. The government earned a revenue income of only Tk. 42.07 million (4.207 crore) from this initiative. Since opportunities like these do not really bring in any substantive result and discourage honest taxpayers, the government may rethink over the issue.
It is understandable that hopes are high about the upcoming budget while challenges are big too. Moreover, budget is only a mechanism for implementing the long-term objectives of a government on an annual basis. An objective budget is one that sets targets with a long-term perspective and targets of which are implemented within the stipulated time frame and allocated resources of the annual budgetary framework. We hope the next budget will be the one of this kind.
The writer is a banker and
economic analyst. He can be reached at: mamun1960@gmail.com
The Finance Minister is scheduled to present the second budget of the government in power on June 10, 2010. The members of the business community have made their demands to the Finance Minister in view of the upcoming budget. Economists, think tanks, and other professionals and citizens of the country have made recommendations for the budget. As a citizen I also have expectations about the budget which are not much different from many others. That is to have a budget which would attempt to fulfill the needs of the broader section of the society and accelerate the development momentum of the country. In this respect some thoughts on a number of issues are presented here.
Size and consistency of the budget: The government has declared the budget for the current fiscal year, 2009-10, in the light of its election manifesto. Sectoral targets and plans were outlined to be achieved by 2021, the year of the Golden Jubilee of our independence. We hope to see some of the yet unfulfilled plans to be implemented in the current fiscal and continuation of the on-going projects as planned.
It has been indicated that the size of the budget may increase by about 16 per cent to Tk. 1.30 trillion (one lakh thirty thousand crore) in fiscal year, 2010-11 over current fiscal's Tk. 1.13 trillion (one lakh 13 thousand crore). Revenue budget and development budget (Annual Development Programme or ADP) will increase by Tk. 100 billion (10 thousand crore) each. According to that estimation, revenue budget will be Tk. 0.95 trillion (95 thousand crore), an increase of 12 per cent over Tk. 0.8459 trillion (84 thousand 591 crore) of the current fiscal. And core development budget's size will be around Tk. 400 billion (40 thousand crore), an increase of 33 per cent over Tk. 305 billion (30 thousand 500 crore) of the current fiscal.
As has been discussed widely, we have to bear in mind that a bigger challenge here would be the implementation of the budget. Increasing the mere numbers will bring us no good if skills for implementation are not there to back it up.
GDP and inflation: It is expected that in the interest of the country's development, the target for gross domestic product (GDP) will be set at least over 6.0 per cent. Target for keeping the annual average inflation rate between 6.0-6.5 per cent should also be in the budget.
Much-discussed PPP: Budget for the FY2009-10 had a separate allocation of Tk. 25 billion (2.5 thousand crore) for Public Private Partnership (PPP) for the first time ever and this was one of the budget's innovative measures. Apparently no expenditures have been made for investment other than a small amount for preparation of the guidelines. Though a lot of frustration has been expressed from several quarters, we expect that the government will keep allocations for PPP in the next budget and find out ways to utilise the fund without any delay.
Highest priority sector -- power: Though in view of acute power crisis the government has taken some quick measures to tackle the situation, the problem has to be solved in a permanent manner by increasing power generation through budgetary measures. Thus the next budget must propose the highest allocation for the power sector. We also want to see steps to implement small power projects through PPP. Besides, agricultural research, climate fund, and solar energy production deserve significant budgetary allocation.
In the interest of economic development as well as overall progress, the upcoming budget must increase allocation in the infrastructural development, apart from power and gas. Focus should be given to the establishment of coal-based power plants by finalising the Coal Policy as soon as possible.
Budget deficit: The current budget had a deficit of Tk. 343.3 billion (34 thousand 358 crore) or 5.0 per cent of GDP. Since the size of the budget will go up, the next fiscal might see a larger deficit too. But the government may not receive foreign aid and loan as expected, which will lead to greater dependency on the banking system. This could in turn hamper the distribution of credit to the private sector.
Block allocation: It is known that much of Tk. 42.88 billion (4288 crore) made as block allocation has not been spent in the current fiscal. Since there are always some controversies over the utilisation of this fund, it is better to keep this fund in the government's exchequer than be misappropriated or misused. The new budget surely will have block allocation too. But this allocation should be made in a transparent way and used in an effective manner.
Annual Development Programme: Although ADP is never fully utilised, its size is increasing every year, which is subsequently downsized towards the end of the fiscal year. For instance, the proposed Tk. 305-billion (30,500 crore) ADP for current FY2009-10 was later downsized by Tk. 20 billion (2,000 crore). Moreover, during first nine months of the fiscal year, only 44 per cent of the original ADP (47 per cent of the revised ADP) was utilised. I would like to request the government not to include unnecessary or less important projects in the ADP on political considerations.
Employment generation: In the current fiscal, a project named "National Service" has been launched to create employment opportunities for the youth in two Upazilas who have completed Higher Secondary education. Let the project be more pervasive and well-planned through the next budget.
Broadening the tax net and adding new sectors: In order to increase revenue income and make the country financially self-sustainable, tax should be imposed on new sectors and industries. People/institutions that have the ability to pay taxes should be taxed even at a nominal rate. This will increase the total number of tax payers in the country. Besides, the next budget must take measures to collect income tax return from every person holding a TIN number. This is because in the current fiscal year, only over 0.7 million (7.0 lakh) tax returns have been submitted out of 2.23 million (22 lakh 38 thousand) TIN holders.
As new sectors, capital gain from capital markets, large exporters, agro-based business or commercial agriculture and real estate can be brought under tax net. However, since capital market of the country is still at the emerging state and is a volatile sector, interests of the small individual investors must be protected while planning for taxing this sector so that small investors are not discouraged. The government may take steps to initiate additional benefits for the tax payers by introducing "Income Tax Card" to encourage tax payers.
Revenue sector reforms: "Tax net expansion", "prevention of tax evasion" and increasing the revenue income etc., require reform in the tax-related laws and regulations. The process for income tax return submission should be made easier. The next budget should also have provision for online submission of tax returns and reducing the size and volume of income tax description. It must be ensured that the common people are not harassed by unscrupulous officials in the name of collection of tax and VAT.
Industrial sector: It is important to take measures to increase the contribution of industrial sector to the national GDP from current level of 28.61 per cent (at current price). In order to do that, the new budget must give highest importance to the power and energy sector, Dhaka city communication network, rail and waterways and Dhaka-Chittagong trade corridor and other infrastructural development.
Undisclosed income and black money: The current budget provided opportunities for whitening black money by paying tax only at a rate of 10 per cent and fulfilling the condition of investing in three specific sectors. Somehow, this did not create much of a buzz among the black money holders. According to newspapers, only 53 persons legalised Tk. 472.50 million (47 crore 25 lakh) in total until March 31, 2010. The government earned a revenue income of only Tk. 42.07 million (4.207 crore) from this initiative. Since opportunities like these do not really bring in any substantive result and discourage honest taxpayers, the government may rethink over the issue.
It is understandable that hopes are high about the upcoming budget while challenges are big too. Moreover, budget is only a mechanism for implementing the long-term objectives of a government on an annual basis. An objective budget is one that sets targets with a long-term perspective and targets of which are implemented within the stipulated time frame and allocated resources of the annual budgetary framework. We hope the next budget will be the one of this kind.
The writer is a banker and
economic analyst. He can be reached at: mamun1960@gmail.com