The finance minister, AHM Mustafa Kamal, is set to propose the national budget of about Tk 5,23,191 crore for the next financial year in parliament today amid challenges of higher revenue generation and improving capacity to check big discrepancy between projection and implementation.
In his first budget scheduled to be placed at 3:00pm, Mustafa Kamal would also try to appease influential businesspeople by increasing cash incentive by Tk 1,500 crore for exports, especially readymade garment, decreasing tax for the benefit of realtors and doubling the tax-free ceiling of income from stock dividend.
The businessman-turned-politician is likely to propose an opportunity to invest undisclosed money in the industrial sector paying a 10 per cent tax in a bid to raise private investment.
Against the backdrop of a chaotic banking sector and the ‘biggest pressure on macroeconomic stability in 10 years’ as mentioned by Centre for Policy Dialogue, this would be the first budget of the current tenure of the present Awami League government formed following the December 2018 general election, marred by flaws and frauds.
According to finance division officials, the size of the proposed budget will be about Tk 5,23,191 crore with a deficit of Tk 1,45,380 crore to attain 8.2 per cent growth in gross domestic product and keep the rate of inflation at 5.5 per cent in the financial year 2019-20.
The new budget is likely to be 12.61 per cent higher from the original budget layout of Tk 4,64,573 crore and 18.22 per cent higher from the revised layout of Tk 4,42,541 crore in the outgoing FY19.
For financing of the projected deficit of Tk 1,45,380 crore in FY20, the government is likely to borrow Tk 60,000 crore from the foreign sources, Tk 54,800 crore from the banks and Tk 30,800 crore from non-bank sources, including saving certificates.
Mustafa Kamal, who will rely on a short speech to announce a typical expansionary budget, is likely to propose fix an income target for the National Board of Revenue at Tk 3,25,600 crore, up by Tk 45,600 crore from the revised target of Tk 2,80,000 in FY19.
Local think-tank Centre for Policy Dialogue has already identified revenue generation as one of the biggest challenges for the government in absence of proper reform in the financial sector.
Its distinguished fellow Debapirya Bhattacharya on Tuesday said that an increasing tax collection seemed an ‘insurmountable’ task in FY20 since the revenue generation growth in the outgoing financial year was the slowest in many years.
With the projected revenue shortfall of Tk 85,000 crore in FY19, the new target for the revenue board will also be a challenging one, he said.
By announcing modus operandi of the law on VAT, an unfinished task of immediate past finance minister AMA Muhith, Mustafa Kamal would try to motivate the tax officials to obtain the target.
The VAT law, passed in 2012 but remained suspended, would finally be implemented from FY20 with multiple rates insisted of initially proposed single rate.
Economists, including former finance adviser to interim government Mirza Azizul Islam, blamed the ambitious budgetary projections against the lacked capacity of the government agencies for the growing gaps between projection and implementation.
They criticised the present government for announcing expansionary budgets without improving the implementation capacity that created big discrepancy between original budget and the actual expenditure.
Average discrepancy between original budget and the actual expenditure was 14.5 per cent in FY2009 which rose to 23.9 per cent in FY18, highest since FY 2001, according to a CPD report released in April 2019.
The government has already set the size of the annual development programme at Tk 2,02,721 crore for the next financial year with transport sector once again getting the highest allocation.
Of the new ADP, Tk 1,30,921 crore or 64.58 per cent would be generated from the local sources while the remaining Tk 71,800 crore or 35.42 per cent would come from foreign sources as project assistance.
The proposed budget is going to be highlighted as a short speech would break with a long tradition of lengthy budget speech.
Unlike the traditional speech covering more than 100 pages, the upcoming budget speech would be of 50 pages.
The first 40 pages are expected to contain projections over economic indicators like gross domestic product, inflation, export and import while the last 10 pages are likely to deal with the revenue-related announcements.
To make the short budget speech attractive, a documentary of 15 minutes would be shown in multimedia presentation before the beginning of the speech to highlight various economic developments.
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