The Centre on Budget and Policy, a local think tank, on Tuesday demanded that the government stop subsidising the country’s messy banking sector through the finance bill as bankers now take the bailout for granted.
The Dhaka University-based think tank made the suggestion at a post-budget press conference in the capital.
The organisation said that ‘discriminatory’ and ‘inappropriate’ corporate tax cut proposed in the national budget for the fiscal year of 2018-19 for the financial entities would also create problem in the revenue generation.
It also rejected the finance minister AMA Muhith’s claim that the tax cut would reduce interest rate as there was no economics and aspiration in this argument that higher profit of the banking sector reduces interest rates.
CBP director and DU development studies chairman professor M Abu Eusuf said that immediate formation of a strong banking reform commission would provide much needed advice for cleaning up the mess in the banking system.
He emphasised improved monitoring, transparency and accountability of the public resource use and rationalisation of re-capitalisation of the public sector banks.
He said that the revenue projection based on 30 per cent growth rate was unrealistic as in the budget there was no major reform in the tax areas.
Implementation capacities of the public sector agencies are weak in Bangladesh and if new measures are not taken, the budget cannot be fully implemented for another year.
The current state of sluggish private investment is unlikely to create significant multiplier effect in the economy that failed to enhance employment opportunities, Eusuf said.
He said that it was required to conduct need assessment prior to allocating budget for the education sector.
The CBP urged the government to increase allocation for the education and health sectors.
The insufficient allocation for the education sector will adversely impact the country’s economy and vision, it said.
According to the World Health Organisation, the allocation for the health sector should be 5 per cent of the country’s GDP while it is 0.94 per cent in Bangladesh.
DU vice-chancellor Akhtaruzzaman said that the documents on the budget should be made public in December so that there should be scope for taking advice from the stakeholders before finalising the budget.
He also asked the government to change the fiscal year as it was found that the government rushed to implement the budget at the end of the fiscal year when flood and other environmental calamities prevail in the country.
DU economics department professor Selim Raihan said the budget policymakers need to come out from the comfort zone and find out the reasons for failing to implement the budget.
There are some inconsistencies in the budget including income target, implementation that should be removed, he said.
Selim urged the government to make the fiscal year from April 1 to March 31 to avoid the natural calamity during April-July when most development works are done.
Economist and former International Trade, Commonwealth Secretariat head MA Razzaque said to make up the deficit in the budget, the government has to take finance from the banking sector with double digit interest rate, which is illogical as the government has option to take fund from the foreign organisations with less than 1 per cent interest rate.
He also said that the government consistently failed to implement the budget due to taking illogical targets.
The government rushes to implement the budget at the end of a financial year, bringing the quality of the execution under question, he said.
He also said that the government should provide proper direction regarding the export sector as the growth of the sector was declining as the county was becoming import dependent.
Bangladesh Institute of Development Studies senior research fellow Nazneen Ahmed said that the allocation for women in the budget should be reviewed.
She also requested the government to cut corporate tax for all other sectors by the same rate as offered for the financial entities.
Nazneen said that the government should patch up the holes in the banking sector urgently to prevent current turmoil in the sector.
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