Random thoughts on FY 18 Budget

Dhaka,  Mon,  26 June 2017
Published : 19 Jun 2017, 20:33:34
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Random thoughts on FY 18 Budget

If flight of capital could be arrested, the finance minister would have been better placed to propose allocation of funds more judiciously, writes Syed Mahbubur Rashid
Mr. A.M.A. Muhith has been placing big budgets since he has been adorning the post of the finance minister from 2009. However, at the end of each year the budget is reviewed and reduced but this time the budget proposed is too ambitious and, according to many experts, virtually un-implementable even by sharply reducing the proposed allocations. 

For arranging funds for projects, regressive measures have been suggested in the proposed budget. Imposition of excise duty on bank deposit, reduction of rate of interest/profit on saving certificates and collection of VAT at 15 per cent are some of the key issues of concern. Agriculture Minister Matia Chowdhury discussed these issues in Parliament and urged the finance minister to recast the revenue-earning mechanism. If Tk 40 billion (four thousand crore) is a small amount (to quote the finance minister in a different context), then how insignificant is Tk. 100 thousand (one lakh) upon which the additional excise duty is to the imposed! Saving certificates have been in existence in the subcontinent for long. In Pakistan and India various types of saving certificates have been in operation, some are also of special types catering to the needs of the distressed sections of the society. In Bangladesh, some pundits have been urging the government to reduce the rate of the saving certificates on the plea that the government is losing money. But the amount, as Matia Chowdhuty mentioned, would cost Tk. 10 billion. 

Saving certificates should also be considered as part of the safety net programme. It is a fact that the items exempted from VAT have been increased, still imposition of higher rate will affect the lower and middle income people. It is not understandable why the figure 15 per cent is considered sacrosanct. It should be reduced to 10 per cent. Losses to be incurred for the aforesaid proposal can be made up if the government can stop fraud in the state owned banks. 

It has been proved long ago that the government cannot run banks. Ever since the banks came under the control of the government after liberation, these banks have been the victim of misuse of fund, loot and un-interrupted frauds. The collective bargaining agents (CBAs) are the main predators. Nominated directors also can not play their proper roles. Almost all of them are appointed by the government purely on political consideration with no economic knowledge, let alone the banking knowledge. 

This phenomenon has continued in case of all the governments -- autocratic or democratic. The best course for the government would be to sell the state-owned commercial banks. 

In the proposed non-development budget, expenditures on account of defence, law and order and general services have been allocated 27 per cent of the total outlay. If the payment of interest is taken into consideration, it stands at about 44 per cent. Health sector is proposed to receive 4.5 per cent and social safety and welfare 6.7 per cent. In the proposed budget, number of people entitled to receive government assistance under social safety net has been increased. But many needy sections are left out.  

Health and social safety net should be allocated more funds. But the problem will be very acute for the finance minister to re-adjust the allocation. Earlier twice in his budget speech he requested his colleagues to exercise austerity and practise belt tightening. But no body paid heed to it.

It has been stated in the proposed budget that the Bangladesh Bank, National Board of Revenue (NBR), BFID and BIDA have been working closely to stop flight of capital from the country. 

According to report published in newspapers, flight of capital has been going on unabated. Between 2005-2014, US$ 7.58 billion has been taken out of the country. If flight of capital could be arrested, the finance minister would have been better placed to propose allocation of funds more judiciously.

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