New budget aims to make everyone happy ahead of polls

Finance Minister AMA Muhith walked a careful line in the national budget he presented in parliament on Thursday as the ruling Awami League looks to the upcoming election.

Abdur Rahim Badalbdnews24.com
Published : 7 June 2018, 03:50 PM
Updated : 7 June 2018, 05:27 PM

The finance minister attempted to win the hearts and minds of workers with the introduction of a new universal pension system in the Tk 4.65 trillion budget for fiscal 2018-19, his twelfth as finance minister.

Muhith said he had gone from the ‘world’s beggar’ to a ‘successful finance minister’ in the same way that Bangladesh had gone from a ‘bottomless basket’ to the ‘development miracle’.

Economists have found very little new in the 2018-19 budget, considering it mostly as an expanded version of the budget for the current year.

Social security has been expanded under the new budget with an eye on the coming election. An additional 1.1 million people in poverty have been added to the list. With their inclusion, Muhith will have brought social security to nearly 10 million people in Bangladesh.

Accordingly, Muhith has allocated Tk 650 billion to the sector—nearly 14 percent of the budget and 2.55 percent of GDP.

People are glued to the TV screen as Finance Minister AMA Muhith presents national budget in parliament on Thrursday.

The government will raise the rate of allowances, widen beneficiary coverage and introduce ICT-based reform programmes aiming to make social welfare plans target-oriented, transparent and accountable.

Among the programmes is the G2P (Government to Person) payment method where beneficiaries will have their allowances sent directly to the bank accounts or mobile bank accounts of their choice.

A digital database with national ID integration has been developed to prevent duplication and new applications are being incorporated to handle allowances, complaints, budget allocation, disbursement and other services.

Though Muhith did not raise the tax exemption threshold for individuals, he lowered corporate tax for listed banks and non-banks by 2.5 percentage points, much to the cheers of investors.

All in all, it seems that the aim of the budget was to keep everyone happy before the parliamentary polls due in December.

The budget proposal was approved at a cabinet meeting chaired by Prime Minister Sheikh Hasina earlier in the day.

In his speech, the finance minister highlighted the revised figures of government spending and revenue from the current year and expressed his hope that 92 percent of it would be implemented by the end of the year.

The Tk 4 trillion in spending for the outgoing fiscal year was revised down to Tk 3.71 trillion, while the revenue was revised down from Tk 2.88 trillion to Tk 2.59 trillion.

“Bangladesh’s huge potential amazes and inspires me,” he said. “I am overwhelmed when I see how the people of this country can turn around after tremendous shocks.”

“None can stall the progress of a country that is endowed with over 20 million prospective youths in its labour market; where digital infrastructure has been expanded to remote villages and inaccessible hilly areas; where there is boundless unexplored marine resources; where new prospects are being unlocked every moment; and where the country’s main driver of the economy is its 160 million people.”

VERY LITTLE NEW

All that is needed is continued, competent leadership to ensure the nation’s development, Muhith said, in reference to the coming national polls.

“Overall there is very little new in the budget,” said Ahsan H Mansur, executive director of the Policy Research Institute. “But one positive aspect is the various allowances and advantages extended to more of the poor.”

“Another positive is that the finance minister has spoken of implementing a universal pension system. He noted, however, that there could be many problems. If he manages to do it, it would be very good.”

“But the government revenue targets are completely impossible,” said Mansur. “It would not be possible for the current revenue system to earn that amount without significant reforms.”

Asked whether various tax deductions ahead of the elections could cause any significant problems, Mansur said it was unlikely to cause problems at the management level, but at the implementation level.

Economist Zaid Bakht said the proposed budget was simply an expanded version of those from previous years.

“In my opinion, the new budget is larger, but in line with previous years.”

The corporate tax cut will stimulate the private sector and have a positive effect on the economy.

LARGELY UNCHANGED

Muhith has kept unchanged the existing tax rate for publicly listed companies at 25 percent and for non-publicly traded companies at 35 percent.

The highest corporate tax rate will be 40 percent, and the second highest rate will be 37.5 percent, except for tobacco manufacturers and non-listed mobile phone operators.

Bakht said the ‘huge’ revenue target would be difficult to achieve, but not ‘unachievable’ considering that 18 percent growth in revenue in the fiscal year was ‘satisfactory’.

He hoped new taxpayers would make it possible for the government to get a ‘good’ sum of revenue even if the target was not achieved.

“We must keep it in mind that neither a budget is fully implemented nor the revenue target is completely achieved. So the focus should be on maintaining quality, accountability and transparency, and checking corruption and irregularities in implementing the budget,” Bakht said.

The measures for people’s welfare taken in the budget, which are said to fulfil political goals ahead of the election, should be considered positively, he said.

Value-added tax is the biggest contributor with Tk 1.1 trillion, followed by income tax with over Tk 1 trillion and customs Tk 858 billion.

The budget deficit will be kept at 4.9 percent of the GDP.

Muhith plans to meet the deficit with loans from foreign and local sources, including banks and savings certificates.

The public administration has been allocated the most—18 percent of the total budget, followed by 14.6 percent for education and 12.2 percent for transport and communication.

Muhith has also outlined his plan to introduce universal pension scheme for all service holders in Bangladesh.

He said they would start piloting the scheme in some special places this year.

The finance minister, like in his previous budget speeches, spoke about ‘unlimited possibilities that lie in Bangladesh’.

He has called for the people’s participation in realising the budget.

UPHILL TASK FOR NBR

Sayema Haque Bidisha, who teaches economics at the Dhaka University, sees reflections of the past on the latest budget.

“There is no policy change. The finance minister said he will not levy any new tax in the election year. This is noticeable.”

However, she said the revenue target projected in the budget will be challenging for the National Board of Revenue.

The NBR will face an uphill task to boost tax receipts by 31.5 percent to Tk 2.96 trillion from 3.5 million potential payers.

“I do not see any clear guidelines in the budget as to how the NBR will achieve the revenue target in a short period of time. There is also no clear direction about measures to widen the tax net.”

Bidisha said the budget lacks specific steps to bring institutional and tax laws reforms to achieve the long-term goals.

For Selim Raihan, executive director of South Asian Network on Economic Modelling or SANAM, the budget offers no major surprises or changes.

But he found some inconsistencies. “A large budget has been announced, but we were hoping it will have an outline or a strong message about its implementation, which we did not get.”

On the revenue target, Raihan said: “It imposes no new taxes this year. Moreover, some tax rebate has been mentioned and there is a proposal to reduce the corporate tax. So, how will such huge revenues be collected?”

“The projected revenue is not realistic. At the end of the day, we may see many development projects dropped and then the budget implementation will face challenges.”

About the tendency to go for additional expenditure ahead of the general election, Raihan said: “Before the polls, we will see a trend of extra expenditure.”

“We also fear that the big tasks ahead of us like implementing sustainable development goals and the seventh-fifth year plan can be disrupted if the election-centric expenditure gets priority.”

“Subsequently, it will be a burden for the new government.”