Finance Minister AMA Muhith kept one eye on the upcoming parliamentary election as he unveiled a Tk4.64 trillion budget proposal on Thursday. While it lacks the bold moves needed to steer the economy towards even firmer ground, the budget is reasonably even-handed.
Although many expected a stridently political budget, the government has instead laid down a responsible proposal, so much so that most commentators are saying that there was not much to say about it.
Some issues remain outstanding. The budget has neither the numbers nor the measures to back up the 84-year-old finance minister’s strong words about the banking sector or his commitment to infrastructure, communications and roads.
The deficit – while remaining within the prescribed range of 5% of GDP – is still hovering strongly around 27% of the entire outlay, down from over 28% last year.
And other than a handful of measures to widen the tax net – such as a tax on virtual businesses and a surcharge on wealth – there were no other major proposals to increase the exchequer’s revenue, and also none of the anticipated election measures.
It is perhaps owing to Muhith’s reluctance to step on too many toes in an election year that he did not burden the richer sections with higher taxes. Such measures as were taken, such as high taxes on helicopter rides and chocolate, affect a negligible segment of the population.
Unable or unwilling to tax the corporations and richer sections, the finance minister was compelled to resort to burdening the entire population to fill the government coffers.
The finance minister appears to have played it by the numbers - betting heavily on revenue from VAT rather than from income tax or foreign or domestic borrowing.
The VAT’s contribution to a declining deficit notwithstanding, it is impossible to ignore that it is a form of regressive tax, and burdens the poor and the middle class more than it does the rich.
Value added tax (VAT) revenues are to rise to 23.8% of the entire outlay – the highest proportion in Muhith’s 10 consecutive years at the helm of the Finance Ministry. Taxes on income, profit and capital gains remain fairly steady, however, at around 21.68%.
Despite some strong words about the banking sector which were delivered mostly sitting down, the 84-year-old seems to have done all he could to placate the financial institutions.
Muhith announced a tax cut – the only one in this budget – and a block allocation presumably for unhealthy (read: perilously close to bankrupt) banks.
Coupled with the government’s measure to have state-owned banks buy into “sick” banks, it does not appear that the government is serious about instilling the strong discipline of which the sector is badly in need.
While the finance minister stressed his government’s commitment to finish its marquee large infrastructure projects such as the Padma Bridge and Metrorail, the total outlay on these will actually decrease, from 12.5% to 12.2% in FY2018-19.
Education also saw a decrease from 16.4% of the budget to 14.6%. The outlays for health, social security and agriculture also decreased compared to the current fiscal, albeit marginally.
The increased volume of the outlay is perhaps accounted for by a significant increase in spending on public administration, from 13.6% of the budget in FY2017-18 to a proposed 18% in the next fiscal.
The bulk of that outlay would presumably pay the recently-fattened salaries of the civil service on whom the government is heavily reliant in an election year.
Other than a few measures to tax luxury goods and cosmetics, discourage polythene and slightly encourage green practices, Muhith’s budget did not give any firm direction to guide the economy towards wholesome development or inclusive growth that would see Bangladesh graduate to a higher level of development.
In delivering his 12th budget speech on Thursday, Muhith offered little that was innovative.
Unlike in previous years, however, his latest speech was directed less towards his fellow MPs on the details of the next budget, as it was a pitch to the broader electorate for another term in office for the ruling Awami League.
Titled “Bangladesh on a Pathway to Prosperity,” Muhith termed his 10 years in office a “decade of progress” as he compared economic achievements since his party came to power in 2009, and said it was time for “a longer-term vision and competent leadership.”
“I am confident [that] the people will stand by us by offering another mandate for implementing Vision 2041, as they did while taking forward the agenda of Vision 2021,” Muhith said.
In his carefully calculated bid to keep all quarters content, Muhith appeared to be quite content to just hold things on an even keel.