It was feared before the announcement of the national budget for fiscal year (FY) 2013-14 in June, 2013 that many alterations were likely to be made in the budget. The Finance Minister was reluctant to accept that political uncertainty would prevail in the country. All the time, he was found brushing aside the reality of political elements in the implementation of the budget.
But the Finance Minister has been saying since mid-January, 2014 that the government is going to downsize the national budget of FY 2013-14 taking basically two factors into consideration. The first is that revenue mobilisation could not be done effectively to meet the target over the first six months of the financial year. Secondly, the economy suffered a lot during the November-December period, 2013 due to political unrest. It simply implies that the revenue target, the country's Annual Development Programme (ADP) and the growth of the Gross Domestic Product (GDP) will have to be revised downward. The Finance Minister did not keep it secret. Recently he said that the government was planning to revise downward the GDP growth to 6.3 per cent from the projected 7.2 per cent for FY 2013-14.
It may be mentioned that the Finance Minister placed the national budget for the current fiscal 2013-14 in June, 2013 in parliament with the GDP growth projection at 7.2 per cent. Meanwhile, the World Bank unveiled a projected growth rate of 5.9 per cent for FY 2013-14 for Bangladesh.
The revenue income of the budget for FY 2013-14 was shown as Tk. 1,674.59 billion of which the National Board of Revenue (NBR) would collect Tk. 1,360.9 billion. The growth of NBR revenue was fixed at 21.23 per cent over FY 2012-13. The NBR had suggested Tk. 1,225 billion during preparation of the budget. Now it is learnt that the NBR is planning to submit a revised revenue target of Tk. 1,225 billion. Till December, 2013 the collection of revenue fell short of the target by Tk. 85 billion. Moreover, the submission of income tax return is also less than that of the previous fiscal 2012-13.
In spite of extending the dates of submission several times and finally up to December 31, 2013, this fiscal year finds about 1,00,000 income tax returns short of the last FY's figure. All these are attributed to political unrest that stagnated business, trade, export, import and other economic activities. The 2013-14 ADP, with political project overloads, is sure to be downsized. Its present outlay is Tk. 658.70 billion. It will be axed most likely in a mechanical way by Tk. 100 billion. The avenue lies easily in the case of the Padma Multipurpose Bridge Project for which an allocation of Tk. 68.52 billion was earmarked in the ADP of FY 2013-14. The project could not take off. Hardly Tk. 800 million can be spent for 'river administration'.
One grey area of the budget will perhaps remain unchanged. That is the government borrowing. In the budget for FY 2013-14, the government has planned to take loans of Tk. 339.64 billion from domestic sources of which the borrowing from the banking sector would account for Tk. 259.93 billion. The government, according to media reports, has already borrowed nearly two-thirds of its projected amount of borrowing.
Against this backdrop of downsizing the budget of FY 2013-14, the Finance Minister has recently hinted that the country is going to have for the next FY 2014-15 a budget of Tk. 2,500 billion. Given the size of the economy of Bangladesh, this is not a big amount. This is simply a 10 per cent increase over the budget of FY 2013-14. If so, this is the traditional bureaucratic approach of increasing the amount of income and expenditure by 10 to 15 per cent. If everything goes well, the size of budget for the next fiscal year can be to the tune of Tk. 2,700 billion. The GDP growth target may be fixed at 7.0 per cent.
In order to achieve the targeted growth rate, the macro-economic stability should be maintained. There should be required investment, possibly 32 per cent of the GDP, export growth and compatible level of inflation. It further requires concerted and co-ordinated fiscal, monetary and trade policies. All development activities should be directed in line with these policies. In the present scenario, the availability of gas and electricity is must for economic development. In addition to economic framework, all efforts should be there for good governance including law and order and fighting corruption.
In the present context of Bangladesh, the issues of political uncertainty and image crisis are reigning high. Recent image crisis has stemmed from political uncertainty, some tragic events in the garment sector and irrational attempt of portraying Bangladesh a country of extremism. The outside world is critical of political development and mismanagement in the readymade garments sector. For the later, the US GSP (Generalised System of Preferences) was suspended. The European Union (EU) is pressing hard for safe, healthy and just environment in the RMG sector. They are also saying that they are against violence. The local business community, however, is worried about political stalemate.
Bangladesh politics, though quiet for the time being, may become volatile at any time. One cannot ignore the dissenting sentiments of at least half of the population. There was a parliamentary election on January 05, 2014. That was a constitutional necessity, according to the ruling circles. The largest opposition party or alliance did not participate in that election. The opposition parties are, however, participating in the upazila parishad elections and fared extremely well in the first of the four-round of the elections.
The opposition has already threatened to launch again tough political programmes if the festering political crisis is not solved immediately through dialogue. This may again lead to hartals and blockades. The economy of the country will be back to square one as it experienced during October-December, 2013.
Prudence suggests that in the present context of Bangladesh, an effective formulation as well as implementation of budget depends on political stability. All quarters are looking forward to see how the Finance Minister, and for that matter the government, handled the situation.
The writer is an economist and columnist. chowdhuryjafar@ymail.com
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