Economists approve of big budget but say cost of living likely to go up

The economists mostly approve of the large budget but have said the cost of living would most likely go up as a side-effect of the revenue earning demands to fund the financial outlay.

Finance Minister AMA Muhith placed a Tk 4 trillion budget in parliament on Thursday, banking on an unprecedented revenue target for about Tk 2.88 trillion.

Of the total revenue, the National Board of Revenue is expected to come up with Tk 2.48 trillion.

Debapriya Bhattacharya, distinguished fellow of the think-tank Centre for Policy Dialogue, was critical of the ambitious revenue target, which is an increase of 34 percent from the current year.

Subsequently, the cost of living or inflation will most likely edge up, he said, adding that the production costs in both the agriculture and industrial sectors will increase.

But Zaid Bakht, director of the Bangladesh Institute of Development Studies, differed with Bhattacharya’s opinion: the prices would not rise.

Ahsan H Mansur, executive director of the Policy Research Institute, criticised the proposal of increasing the excise duty on account balance of more than Tk 100,000.

“This is totally unacceptable. It goes against the objective of extending the economic and financial sector,” he said.

Bhattacharya was at one with Mansur on this.

“Those who are already paying tax, the government is trying to tax them more,” Bhattacharya said.

“Those who are earning money through unfair means; those who are involved in money laundering; those who are not paying tax or paying little tax, there is not policy guidelines to bring them under tax net,” he added.

Mansur also criticised the raise in VAT turnover ceiling from Tk 80,000 to Tk 15 million. “The limit is much lower in neighbouring India,” he added.

Economist Qazi Kholiquzzaman Ahmad said the progressive increase in budget size is normal given the growth rate of the economy.

The first budget that Muhith placed under the current Awami League regime was of Tk 951 billion, which was for fiscal 2009-10. The budget size has expanded more than fourfold in the eight years since.

“I was asked by many people, why this large budget? Is there any politics in it?” Ahmad said.

“I told them the economy is growing, the demand is rising, so the budget is getting bigger proportionately. I do not think it is an ambitious budget,” he added.

Mansur and Bakht are of the same opinion.

“In the present day context, Bangladesh needs this big budget.  The big budget may help to relieve the stagnation in investment,” Bakht said.

He, however, thinks collecting the revenue for such a big budget would be a challenge.

“Revenue collection is the main challenge of this budget, especially the target of Tk 910 billion from VAT,” he said adding that the NBR should start working from the first day of the fiscal year to achieve the target.

Ahmad was more concerned about the implementation of the budget rather than the size.

“Effective implementation is important. We have to keep an eye on that. We are extending our goal but not working to achieve it -- that will not be acceptable.”

On the economic growth target of 7.4 percent, Ahmad put more emphasis on improving the investment infrastructure.