Bangladesh
Finance Minister AMA Muhith Thursday,10 June unveiled a Tk.1.32 trillion
national budget for 2011 fiscal aimed at spurring higher economic growth, aided
by increased spending on energy and power and also encouraging private
investments.
Laying out a record
spending plan, the minister said the economy would chalk out a 6.7 per cent
growth in 2010-11 financial year, helped by global economic recovery, continued
growth in agriculture, and sustained domestic demand.
He said that the
upward growth projection was influenced by enhanced flow of private investment
and a competitive external sector such as foreign trade, aided by a stable
exchange rate.
The economy has
continued to slow down since 2007, with growth slumping to 5.5 per cent in June
– the lowest in seven years – as manufacturing and agriculture fared poorly.
"Expected
progress will be achieved by augmenting revenue collection, crowding in private
sector investment through ADP implementation," Mr Muhith said in his
budget speech.
The economic planner
designed spending as a way to draw more private investment in the
infrastructure sector, particularly in energy and power. Private investors have
almost shunned energy and electricity business for years, thanks to the low
levels of public investment that has hovered at 4.0 per cent for years.
The finance minister
Mr Muhith, arguably a spendthrift, will find it difficult to finance his big
budget, although he is sure to bet on higher revenue growth – as high as 20 per
cent.
It is still unclear
how he will boost revenues from value added tax (VAT) or income tax as he
outlined no major reform steps.
It also remains to be
seen whether the National Board of Revenue's efforts would be effective to rope
in half a million new taxpayers in view of its abortive past record.
The finance minister
wants to tax real estate developers, institutional investors in the capital
market and the wealthy who are often blamed for evading taxes.
The minister will ask
for Tk.611 billion for the energy and power sector given the severe energy and
electricity crisis, which has not only mounted public sufferings, but also
slowed down industrial output and sapped trade.
In his budget
document, he laid out a five-year roadmap to produce 9,425 megawatt of
electricity by 2015 with furnace oil and diesel as new fuel sources apart from
natural gas.
The finance minister
is hopeful that the gap between the demand and supply of electricity will be
closed by 2012 and the energy and power crisis will not remain as an obstacle
in the development process from 2015 onwards.
The roadmap is
expected to allow citizens to monitor the latest state and development of
specific power projects as part of the sector's reform, often plagued with
graft.
The budget has
allocations for the state-owned energy companies to conduct oil and gas
exploration and also develop gas grid.
Despite his
profligate spending plan, Mr Muhith has promised to keep his budgetary deficit
within 5.0 per cent of gross domestic product (GDP), relying mainly on domestic
borrowing from banks and non-banking sources.
He also expects to
receive Tk.156 billion – or 2.0 per cent of GDP – in foreign aid to help close
the budgetary gap, but he may find it difficult to bring in such a big amount
as donors' purses strained in the wake of the global recession and the current
sovereign debt crisis in Greece and other Euro-zone area.
Like in the maiden
budget, the minister left no stone unturned to give a human face to the new
budget by increasing support for grey-haired groups, disables, pregnant
mothers, widow and divorced women, street children, orphans and beggars.
Building on the
current success, the budget has requested Tk 10 billion for fostering jobs for
the ultra-poor who make up 40 per cent of the population.
Mr Muhith took up a
Tk385 billion Annual Development
Programme (ADP), which will focus on regional parity, improved infrastructure
and quality of spending.
In the proposed ADP,
top recipients will be human resources sector, followed by agriculture sector,
power and energy.
To sustain farm
growth, the budgetary measures have placed an emphasis on agricultural
productivity and diversifying agri-products.
Farm subsidies,
however, will amount to Tk 40 billion, down from Tk 49 billion in the revised
budget.
In the proposed
budget, physical infrastructure will get over 30 per cent for the outlay, while
23.9 per cent will go to human development and technology.
To develop skilled
manpower, the budget has set aside Tk 315 billion, with major portion going to
education, health and information and communication technology sectors.
But whatever may be
the allocation, implementation will – as always –prove to be a key to achieving the target of
ADP spending.
The budgetary
measures are unlikely to build up inflationary pressure, even though the
potential spike in international commodity prices could have a bearing on it.
The budget has
promised to keep inflation at 6.5 per cent in the next year and "gradually
lower it in the coming years."
The minister said the
Bangladesh Bank has increased both the margin of cash reserve requirement and
statuary liquidity ratio of the banks in order to reduce inflationary pressure
arising from excess liquidity in the banking sector.
In this context it
may be mentioned that in the country's 40-year political history the main
opposition political party presented its thoughts and proposals on the national
budget formally before announcement of national budget by the government.
BNP Chairperson and
former premier Begum Khaleda Zia suggested Monday, 7 June not to hike tax rates
in upcoming national budget and stressed for modernising tax collection
mechanism to ensure higher revenue growth.
"Higher tax
rates slow down revenue collection," she said adding, "tax
administration should be revamped and the net be widened if necessary."
Bangladesh
Nationalists' Party (BNP) believes in a legitimate tax policy, which would not
make people feel shy of paying taxes, she said while placing the party's view
and proposal over the next budget in a city hotel.
Putting forward a set
of proposals for the 2010-11 budget, scheduled to be placed in the national
parliament Thursday, 10 June, the BNP chief proposed that the tax-free income
be fixed at Tk 240,000 instead of the existing Tk. 165,000.
Regarding agro-sector
Khaleda Zia, who is also the leader of the opposition, suggested introduction
of insurances for crop, fish, poultry and livestock to help the farmers avert
risks and assist them in farming.
"The government
should set up a fund worth Tk 1.0 billion dedicated for agro sector
insurances," she said.
Former prime minister
also suggested construction of at least one cold storage in every Upazilla or
more to check perishing of agro-products.
"I propose
establishment of a dedicated fund worth Tk 2.0 billion in this
connection," said the BNP chief.
She also proposed
increased subsidy on fertilisers in the next budget to bring down production
cost of farmers.
Khaleda Zia suggested
withdrawal of tax at source on different saving instruments to encourage
savings.
Regarding power and
energy sector Khaleda Zia suggested for building coal-based and nuclear power
plants to ensure sustainable electricity at cheap rates.
It should rather put
emphasis on renovation of the aged power plants from where around 700 megawatts
(mw) of electricity could be available within seven to eight months, she added.
The government should
draw out a long-term plan to ramp up generation of around 20 per cent of
electricity every year, she said.
The BNP chairperson
proposed launching of a state-run television channel dedicated to broadcast
education related programmes alone.
She also suggested
allocating Tk 2.0 billion for research works at university level to ensure
world standard education.
Khaleda Zia suggested
for continuation of zero duty benefits for ICT related equipment to accelerate
growth.
She also stressed for
strengthening road, rail and waterway infrastructure to ensure quick and smooth
transportation across the country.
The BNP chief
suggested introduction of a sizeable quantity of double deckers in Dhaka and
Chittagong and a circular waterway around the capital.
For development of
small and medium enterprises (SMEs) Khaleda Zia suggested easing of loan terms
for the entrepreneurs with minimum interest rates.
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