Kamal defends FY23 budget, claims he’s crafted it to protect the poor

Some economists have criticised the FY23 national budget for not offering any direct giveaways for the poor while it has a range of opportunities for businesses, but AHM Mustafa Kamal is not ready to accept it.

“I believe it’s a budget supportive of the marginal people. Businesses, as well as those who pass their days in misery, will benefit from it. I’ve designed it so that everyone can benefit from it,” he said.

Flanked by Agriculture Minister Abdur Razzaque, Education Minister Dipu Moni, Health Minister Zahid Maleque, State Minister for Planning Shamsul Alam, Bangladesh Bank Governor Fazle Kabir and several top officials, the finance minister faced the media on Friday, a day after he unveiled the Tk 6.78 trillion budget.

“I’m an accountant. I don’t make mistakes in numbers. It’s true for the budgets I tailored in the past three years.

“I was poor. So I know to the bone the pain of being poor. This is why I prioritise the poor in the budget. You don’t have to worry about it,” he asserted

Bangladeshis, apparently a victim of the ongoing ‘geopolitical crisis’, are struggling with household finances as inflation has soared to a new high in the last 18 months.

The upsurge in prices of essentials, which could not be tamed with subsidies, has been putting additional pressure on the foreign exchange reserves. The official value of the taka is dropping like a sack of flour almost every day, even with a floating exchange rate in place.

In his budget speech on Thursday, Kamal was upfront, admitting that ballooning subsidies on fuel, electricity, gas and fertiliser, which will be 1.9 percent of the total GDP in the new year, compared to 1.7 percent now, would pose a challenge to the budget management. But he did not chart a clear path out of the looming storm.

On Friday, Kamal again acknowledged that it was a “challenging time” for Bangladesh. But he was quick to add: “When the challenges come, opportunities also start arriving. I think we'll get numerous opportunities. Did anyone think our exports would reach $50 billion? No other country has enjoyed such growth in exports.”

Remittance inflow “doubled” after the government started giving cash incentives, he said.

Kamal also sees the scope for raising revenues. “As many as 40 million people are in the middle-income bracket. We will digitalise the system [to collect tax from them],” he said.

‘MADE IN BANGLADESH’

In the 2021-22 fiscal year, Bangladesh announced a 10-year tax exemption for six individual sectors in agro-based industries to generate employment under the 'Made in Bangladesh' title and tackle the drought in investment during the pandemic.

This time he has reduced taxes on Bangladeshi export-oriented products so that ‘Made in Bangladesh’ “can be made a global brand”.

“I don’t take it well when we import products that are also made locally. This idea is reflected in the budget. We’ll discourage the import of products that are also made in the country. This is how we will take forward ‘Made in Bangladesh’,” he said on Friday.

CUTTING BACK TO BECOME THE NEW NORMAL?

The finance minister said in his budget proposal policymakers need to be very strategic to tackle the challenges ahead and the stability of the economy may be disrupted if even one of the challenges are not properly dealt.

Mustafa Kamal said reining in existing demand by increasing supply could play the key strategy in this aspect when he was asked whether people are forced to cut back their current demand due to two major perils in the economy at the moment- inflation and lack of supply in the market.

“Our job is to ensure there’s no mismatch between demand and supply. We are taking action against market syndicates [cartels]. Every year, we propose a budget which is slightly higher than the budget we need so that if we can execute our plans, there is a real chance of implementation of the budget. This time, what we meant by demand is what’s manageable, gettable,” he said.

Kamal, however, was pragmatic about the effect of the ongoing major geopolitical issues too.

“Everyone is aware of the global market situation. The prices of commodities and essentials rose by 30 percent in most countries in the world. Inflation occurs when prices of local and imported products soar. We were able to keep the prices of local products in check. But prices of imported goods are spiralling globally.”

Replying to criticisms that his proposed policies lack directions on how to keep inflation under control and manage the market situation, the minister said he is giving his words that the market won’t remain this volatile eventually.

“We are taking many measures to check the volatility. I strongly believe we will not fail,” he said.

In reply to another question on the so-called economic strategy, Finance Secretary Abdur Rouf Talukder gave a laundry list of measures the government has put in place. “What we meant by increasing supply is increasing production. That’s the reason why the agriculture sector has received the highest allocation. Alongside, revenue board [National Board of Revenue] is taking several measures too,” the secretary said.

“On the other hand, what we meant by reducing demand is shrinking the median size of the budget. For example, the proposed budget in the outgoing fiscal was GDP's [Gross Domestic Product] 17.5 percent. The new budget proposal is GDP’s 15.2 percent. The government has already set up some austerity mechanisms in place, and after July, you will see more.”

“We will discourage matters of less importance. Import of products which are manufactured domestically will be discouraged. Two objectives are taken into consideration when you initiate a government project- either it will bring revenue, or help bring in revenue. Only a handful of projects are there which doesn’t do either. We will increase the number of the first two kinds of projects,” Talukder said.

The secretary has also laid out the government’s plan to increase food production in the country at the briefing.

State Minister for Planning Shamsul Alam said: “The new budget proposal is a bit contractionary in nature. Government expenditure means revenue for people. An increase in revenue means the creation of new demands. That is why the budget was contracted to 15.5 percent [of GDP] from 17.5 percent.”

LAUNDERED MONEY

On Thursday, Kamal rolled out a Tk 6.78 trillion spending plan for the upcoming fiscal year starting July 1. The amnesty for undisclosed offshore assets is one of the proposed avenues for funding the expenditure.

But the proposal has drawn heavy criticism. Economist Selim Raihan sees it as a "kind of endorsement" of money laundering. And Prof Mustafizur Rahman, distinguished fellow at the Centre for Policy Dialogue, said the proposal was not "morally acceptable, economically justified and politically wise".

"Those who took [their assets] abroad did so without understanding [the consequences]. This initiative is geared towards bringing these [assets] back into the mainstream of the economy," Kamal said, addressing the issue on Friday.

"What has been smuggled out is the right of the people of this country. If we place obstructions, the assets will not come back and in that case, how will we be benefitted? We want to do what other countries do. Seventeen countries are granting amnesty to bring back money into their economies."

The finance minister claimed that similar measures are in place in the United Kingdom, the United States, Germany, Malaysia and Norway.

“Money has a distinctive feature. It goes where the return is higher. Those who smuggle money do not do so in suitcases. We're in the digital age now. It can be done in various ways."

Governor Kabir said the draft budget does not speak of laundered money, rather it mentions earnings made abroad.

“There is law, departments and the Financial Intelligence Unit to fight money laundering. The media often points out money deposited in the Swiss Bank. But 95 percent of that money is earned by Bangladeshis overseas.”

“We never found proof that the money kept there was laundered from Bangladesh.”

BANK LOANS NOT AN ISSUE

The deficit is Tk 2.45 trillion in the draft budget, the highest in the country’s history, and accounts for 5.5 percent of the GDP.

Kamal announced plans to borrow Tk 1.12 trillion from other countries and Tk 1.46 trillion from internal sources to meet the deficit.

On whether the bank loans will hamper the development of industries, Finance Secretary Abdur Rouf Talukder said, “We'll take Tk 1.06 trillion from our total money supply. It is only 6 percent of the supply and the other 94 percent will be reserved for the private sector.”

“The monetary policy estimates a 14 to 15 percent growth. If we can meet a 15 percent money supply growth in real terms next fiscal year, we'll be able to take the loan from there. The banks will have a scope to provide the government with their unused money.”