OPINION: Desperate times, desperate measures

The government has, reportedly, revised its bank and non-banking borrowing targets to meet the budget deficit for the current financial year (FY).
The revision of targets, in fact, became inevitable for a number of reasons, including the outbreak of COVID-19.
The non-bank borrowing target has been slashed by half to Tk 150 billion, mainly because of poor sale of the national savings certificates (NSCs) in the months before the novel coronavirus started taking its toll on life and living across the country. The sale of NSCs dropped substantially since the government made production of national identity cards, eTIN certificates mandatory while purchasing the same. COVID-19, a highly contagious disease, has only made the situation worse during the past three months.
The officials at the finance ministry are hopeful about the sale of NSCs picking up to some extent in the month of June, the final month of the fiscal year. Taxpayers, usually, crowd banks and other relevant sales points tend to purchase the savings tools and claim tax rebates against those. However, any rush for buying the NSCs is unlikely this year as many small savers have already exhausted in full or part of their savings because of the pandemic.
Under the prevailing circumstances, the government is left with no option other than lifting its bank borrowing target to compensate for the shortfall in resource mobilisation through non-bank borrowing. But the government plans to borrow from banks an amount almost double the shortfall, mainly due to substantial shortfall in tax revenue collection during the current financial year.
Even before the start of the current financial year, most people, including taxmen, were certain that there would be a shortfall in tax receipts. It has become more of a practice on the part of the National Board of Revenue (NBR) to set tax targets at highly ambitious levels in the annual budget, coming under pressure from the finance ministry honchos. No amount of criticism could deter the taxmen from fixing unrealistic tax revenue targets.
The COVID-19 pandemic has made the revenue collection situation even more difficult for the NBR. Import duty has declined because of lower imports. The collection of VAT (value added tax) has been facing hurdles of different types since the introduction of new VAT law. COVID-19 has made hurdles even stiffer.
The taxmen are not that optimistic about even going closer to the income tax receipt targets. They are aware that the businesses, big or small, are seriously hurt by the pandemic.
The government's bank borrowing might get even bigger than the revised target. In that case, implementation of the relief packages, valued at about Tk 1.0 trillion, announced for the various sectors of the economy might come under pressure. The central bank has put in place some policy measures and offered other supports to enable banks to extend low-interest loans to pandemic-hit businesses. But the government's planned bank borrowing might make it difficult for banks to lend the targeted volume of loans to businesses.
In such a situation, the government might consider one option---trimming the annual development programme (ADP) for the current FY, keeping in view the actual rate of project execution--- to reduce its targeted bank borrowing.
During the first eight months of FY20, only 38 per cent of the ADP could be executed, in terms of funds release. Virtually, there had not been any notable project execution between March and May. Any major improvement in the execution rate in June is also very unlikely.
However, the government might stick to the old practice of releasing funds for different development-project executing agencies in the final month of the current FY, only to show higher rate of execution of ADP. In reality, the funds will be spent during the next FY. If it is so, funds could be earmarked in the next ADP for the carryover projects. That would leave some breathing space for the government as far as fund disbursement is concerned. However, it all depends on the government. The ADP has already been revised downward. Let there be another downsizing. Desperate times call for desperate measures.

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