Will budget reflect public expectations?

Enayet Karim: Due to various reasons, the increase in the price of goods has brought a new life style among the common people. In such a situation, the government is giving a budget of Tk 8 lakh crore for the next financial year (2024-25). If everything goes well, Finance Minister Abul Hassan Mahmud Ali will present the budget proposal in the National Parliament on June 6. It is known from sources in the Ministry of Finance that a contractionary budget has been planned with the highest priority to control inflation.
Sources in the Ministry of Finance said that in preparing this year’s budget, special importance is being given to controlling inflation and protecting macroeconomic stability. At the same time, there is a plan to increase the revenue collection. The number of beneficiaries under the social security program can be increased with a view to providing some relief to the poor people of the country. Besides, increasing foreign direct investment (FDI), import control and increasing expatriate income through legitimate channels is also being emphasized.
Economists are also suggesting to reduce the deficit by reducing the budget of the next financial year. They say that the budget for the new financial year should be prepared keeping in mind the control of inflation and the stability of the macro economy. In that case, new money can’t be printed. To meet the budget deficit, minimum amount of money should be collected from domestic sources and more money should be taken from foreign sources.
Economists further suggest that considerable caution should be exercised in taking up new projects. It is better not to take up new big projects at this time. Maximum importance should be given in increasing revenue collection. It must also be ensured that genuine persons get benefits under social security programmes.
Several responsible officials of the Ministry of Finance told that the Prime Minister herself has suggested a contractionary budget this time. She spoke of taking development projects with caution. He also emphasized on controlling inflation. Following the advice of the Prime Minister, a small budget will be given this time.
In recent years, the budget size has been increased by 10 to 13 percent compared to the previous fiscal year. But the budget growth for the upcoming new fiscal year will be less than 5 percent. Officials of the respective ministries said that the budget for the new financial year will be increased by Tk 35 thousand crores from the original budget of the current year.
An official of the Ministry of Finance told on condition of anonymity that the import of luxury goods will be on the list of discouragement in the budget of the new fiscal year in order to control inflation. New areas may be taxed to raise revenue. In some cases, the amount of subsidy will be reduced. In some cases, the tax rate will increase. However, the government is taking steps to expand tax net keeping the pressure on the poor people. In this case, there may be an initiative to collect more tax from the rich in the budget.
He said that the budget of the new financial year is unlikely to have any major surprises. But it is natural to have some measures to attract foreign direct investment. At the same time, capital gains tax may be imposed on the stock market for the first time. In this case no tax has to be paid on capital gains up to Tk 40 lakh. 15 percent tax may be levied on the capital gain above Tk 40 lakh. In this case, if an investor makes a capital gain of Tk 41 lakh, then a tax of Tk 15,000 will be levied on him. There will be no pressure on small investors.
Another official of the Ministry of Finance said that the facility of duty-free import of cars for parliamentarians is unlikely to be included in this year’s budget. Calling on mobile phones may incur additional charges. However, the corporate tax may be reduced to 2.50 percent subject to conditions. Besides, there may be scope for tax amnesty facility or legalization of undisclosed income in the new budget. In this case, there is an opportunity to legalize undisclosed income by paying 15 percent tax.
State Minister for Finance Wasika Ayesha Khan said that the number of beneficiaries under the social security program is being increased to provide relief to low-income people. In addition, the highest importance is being given to controlling inflation.
The state minister told that the prime minister has given utmost importance to controlling inflation. He also gave instructions that the implementation of this year’s election manifesto of Awami League should be given the highest importance in the budget.
Eminent Economist Policy Research Institute (PRI) Executive Director Ahsan H Mansoor told that since we cannot increase revenue collection much, the budget size should be kept small at the moment. Some tax breaks should be reduced to increase revenue. Borrowing from the domestic market for government budget support should also be reduced. Otherwise, the market will be very unstable. The budget deficit should be reduced. Any shortfall will be met by foreign loans as far as possible. New money cannot be printed to support the budget.
He said that benefits are being given to one crore families in the social security sector. Keep it going. It has to be seen whether those who are eligible are really getting it or not. A survey can be done to see whether these benefits are actually being received by those who are supposed to be receiving them, or others are receiving them. But there is no need to increase from one crore families. Because, one crore family means about 4-5 crore people. No need anymore.
“There is no need to take up new mega projects in the next two to four years. However, projects that are ongoing and coming in Japanese currency, such as the Metrorail, will continue. They are discounted and Japanese debt is very cheap. Their work is also good. The government can keep these projects running. But at the moment it is better not to take Chinese loans or to take nuclear second power project’ – added Ahsan H. Mansoor.
Former Governor of Bangladesh Bank Atiur Rahman told that the budget for the next financial year should be formulated with the main goal of protecting the stability of the macro economy. For this both monetary and fiscal policy should be kept contractionary. It makes no sense to build a big budget by borrowing. Therefore, as there will be cuts in the budget, the revenue for the budget must also be increased. This revenue should be increased from within the country and also from outside. New entrepreneurs should be brought under tax to increase revenue collection.
He said that due to the pressure of inflation, the scope of social security should be increased. The number and quantity should also be increased. It’s not just us saying it, the IMF (International Monetary Fund) is saying it. Because, at this time, low-income people are in a lot of trouble. But the government also acknowledges this suffering of the people. So, the scope of social safety net should be increased.
“Agriculture is considered to be protected and the budget allocation should be increased in this sector. Despite the advice of international organizations, all incentives to the export and remittance sector should not be withdrawn until the economy is fully stabilized. If the incentive has to be withdrawn due to international reasons, alternative incentives should be created’ – said the former governor.
When asked, economist Zayed Bakht told that there is inflationary pressure. That is why it is advisable to have a tight budget. It is better to over-allocate to late-stage projects and not invest in new projects for the time being. Because, investment in new projects can further fuel inflation. The quality of public investment should be increased as much as possible, so that productivity increases. Keeping inflation in mind, the next budget should be formulated.
He said, we have to emphasize on direct taxes. It’s nothing new to say, it’s always been said. But we are failing to take effective action. Taxable people should be brought under tax. Tax evasion should be prevented. At the moment our revenue is very negligible. The coverage of social safety net should be increased. Because inflation is not going away easily. So those who are affected by its (inflation) impact should be given as much protection as possible by bringing them into the social safety net.
ADP of Tk 2 lakh 65 thousand cr
The annual development program (ADP) for the new financial year may be estimated at Tk 2 lakh 65 thousand crore, which is Tk 2 thousand crore more than the original ADP of the current financial year. Tk 20 thousand crores more than the Revised Annual Development Program (RADP). Out of this, the target of spending Tk 1 lakh 65 thousand crores from government funds and Tk 1 lakh crores from foreign loans can be set.
This time maximum allocation can be given to transport and communication sector. The amount of allocation for this sector can be Tk 70,687.76 crore. Besides, Tk 40,751.86 crores in electricity and energy sector, Tk 31,528.60 crores in education sector, Tk 24,868.03 crores in housing and community facilities sector, Tk 20,682.88 crores in health sector, Tk 17,986 crores in local government and rural development. Tk 13,219 crores can be allotted to agriculture sector.
Budget for current financial year at a glance
In the current (2023-24) financial year, the government announced a budget of Tk 7 lakh 61 thousand 785 crores. However, in the revised phase, the budget size was reduced to Tk 7 lakh 14 thousand 418 crores. The size of the expenditure was reduced by Tk 47,667 crores.
Besides, the revenue collection target was set at Tk 5 lakh crore, but later it was reduced by Tk 22 thousand crore. Although the tax collection target of Tk 4 lakh 30 thousand crore was fixed through the National Board of Revenue (NBR), it was reduced to Tk 4 lakh 10 thousand crore. That is, the target of revenue collection through NBR has been reduced by Tk 20 thousand crores.
Meanwhile, the deficit has increased in the revised budget. The main budget deficit is estimated at Tk 2 lakh 61 thousand 785 crores. Later, in the revised budget, the deficit increased to Tk 2 lakh 83 thousand 785 crores. The size of ADP is estimated at Tk 2 lakh 63 thousand crores. But finally, the size of ADP has been brought down to Tk 2 lakh 45 thousand crores. That is, the size of ADP has decreased by Tk 18 thousand crores.