The World Bank on Tuesday said that the proposed budget for the upcoming fiscal year was full of ambitious targets, but devoid of specific actions required to achieve the targets.
At a press conference held at its Dhaka office on the proposed budget finance minister AMA Muhith placed before parliament on June 1, the multilateral lending agency also said that the budget was long on hopes but short on measures.
WB Dhaka office lead economist Zahid Hussain said that it would be impossible to achieve the targets without making necessary reforms particularly in the financial sector.
He said that the overall budget implementation would largely depend on the successful enforcement of the new measures on value-added tax.
The government’s target is increasing the country’s GDP by boosting revenue generation, but it would depend mostly on the implementation of the new VAT law.
The WB also ruled out any adverse impact on the essential commodities because of the implementation of the complete VAT and Supplementary Duty Act-2012 from July 1 this year.
WB country director Qimiao Fan said that the proposed measures in VAT were investment friendly.
Quoting a study by the International Monetary Fund, Zahid said inflation might increase by 0.05 per cent following the enforcement of the new VAT Act.
He, however, said inflation might register further increase because of propaganda by vested quarters.
The WB also criticised retention of supplementary duty for protection of the local industry in the proposed budget.
Export-oriented industries would face problem and local consumers would not be benefited from the step, it said.
It also criticised the proposal for keeping Tk 2,000 crore in the new budget for recapitalisation of state-owned banks.
Zahid suggested making a policy regarding interest rate for national savings
certificates as a significant amount of fund would be spent for domestic debt servicing.
He said that mainly urban people invested on the national savings certificates for which the government would pay Tk 156 crore as interest in the upcoming fiscal year.
It [the spending] looks very odd as the government has earmarked only Tk 178 crore for cash-based social safety net programme in the rural areas, he said.
He also suggested increasing subsidy for rice and easing the import duty on the staple to recoup the losses of rice to flash floods in the country’s haor areas.
Want stories like this in your inbox?
Sign up to exclusive daily email
More Stories from Banking