'Administrative revolution needed'

CPD says it will be a tough ask to implement the 'mysterious' budget". Full story

Dhaka, June 8 (bdnews24.com) – Finance Minister AMA Muhith's hope for a 7.2 percent GDP growth and pegging the inflation rate at 7.2 percent in the new fiscal year will be very tough to achieve, Centre for Policy Dialogue (CPD) observes.

The private research organisation made the observation while presenting its analysis of the budget for the 2012-2013 on Friday at a press briefing at the capital's BRAC Centre Inn.

CPD's Distinguished Fellow Dr Debapriya Bhattacharya said, "Though the inflation rate on food is decreasing but inflation on a point-to-point basis is still over 9 percent while the average inflation rate is more than 10 percent."

"The budget indicates that the prices of fuel and power may be increased in future. Then the prices of food products will escalate the inflation rate. Then it will become very tough to curb the inflation," he said.

He said, "The measures needed to achieve the goal of this budget are not in clearly outlined in the Finance Minister's proposal. Administrative revolution is necessary to implement this budget."

About the proposed facility in the budget to whiten 'black money', Dr Bhattacharya said, "CPD has always been vocal against the facility. This system will discourage the real taxpayers."

The new budget proposes to expand the facility for whitening 'black money' with a 10 percent penalty without any bars on where that money has to be invested. The Finance Bill states that untaxed money will be allowed to be legalised in case of undisclosed income.

"The Finance Minister did not say anything about this issue in his budget speech. A change in the Finance Bill has provided the backdoor for the facility. We are still protesting the facility of whitening black money," Bhattacharya said.

The CPD also protested the budget's proposal to increase minimum income tax to Tk 3,000 from Tk 2,000.

Bhattacharya said, "We had suggested increasing the tax-free income level from Tk 180,000 to Tk 200,000 in the budget. But we are surprised that the Minister did not consider our suggestion. But increasing the minimum tax to Tk 3,000 was the real surprise."

"It's against social justice since inflation is going up gradually. This decision brings the people with lower income under income tax."

He, however, did not think the deficit of Tk 520 billion is too big a figure to be worried about. "In numbers, the deficit can look like a very big one. But it's not big considering that it is 5 percent of GDP."

"What we are actually worried about is the bank borrowing."

"The budget proposes to borrow Tk 338.84 billion from domestic sources, of which Tk 230 billion will be borrowed from banks. This may reduce the rate of loan flow to the private sector as well as hamper the investment sector," the former Executive Director said.

Foreign funding included, the proposed budget has a deficit of Tk 460.24 billion and the shortfall is Tk 520.68 billion excluding foreign funds.

To meet the shortfall, the government plans to borrow Tk 338.84 billion from domestic sources, including Tk 230 billion from banks. The government also plans to get Tk 74 billion from savings certificates.

"The Finance Minister earlier had said a portion of the subsidy of the current fiscal will be transferred to the next fiscal year's budget. But he did not say anything about it."

Bhattacharya said the budget also did not mention the total size of subsidy.

The CPD was critical of the drop in the budgetary allocation for the agriculture sector and increase in the power and energy sector. Bhattacharya maintained that equality should be followed in budgetary allocation for all the sectors.

"Discrimination should not be created between urban and rural areas."

He said the prices of urea and Muriate of Potash (MOP) fertilisers would have to be increased if subsidies were not increased in the farm sector. "As a result, the production costs will go up and prices of food products will also increase. Inflation will edge up as a rule."

The CPD Distinguished Fellow also expressed his concern over the implementation of Tk 550 billion ADP. "The expenditure of the current year has to be increased by one and a half times to execute the ADP."

About the proposal to impose a flat 1.20 percent tax at source on all kinds of exports from the upcoming fiscal abolishing the existing tax slabs of 0.60 percent and 0.70 percent, he said that a negative scenario was created in the export sector in the last few months.

"I think that it was not proper to raise the tax rate to a large extent at this moment."

He remarked that the funding for the social security programmes was not enough.

"Though many organisations like the Pay Commission, Regulatory Commission etc. were thought to be made effective in the next budget, it didn't come true. Non-implementation of the PPP is also regretful."

The economist said the government signed a loan agreement with the IMF just a year ahead of the next general election.

"For this reason, the government has to cut the amount of subsidies. On the other hand, it has to raise taxes. So, this budget can be called 'mysterious'."

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