Though a large budget is the need of the hour, it will be, however, difficult to face formidable challenges in its implementation, the World Bank said in Dhaka yesterday, in its analysis on the proposed budget for the fiscal year 2014-15.
The global lender also came up with a view that the proposed budget is promising in terms of both expenditures and revenue collection, but it lacks time-bound road map in some areas such as enactment of VAT law, economic zones and PPP (Public Private Partnership).
The proposed budget is about 16% larger than the revised budget of FY14.
“Expectation is running high in case of budget preparation but many challenges, particularity resource mobilisation and effective ADP implementation still lies ahead to implement a large budget,’’ said Johannes Zutt, Country Director of World Bank Bangladesh, while addressing a press briefing at his office in the capital.
Replying to a question, he said political stability is obviously a very important factor for doing good businesses.
“Business always looks for level-playing field, favourable business climate and adequate infrastructure facilities.”
Regarding the target of 7.3% GDP growth by FY15, he noted that it is ambitious but what needs to be done to reach the target is to improve the country’s overall infrastructures, ensuring uninterrupted electricity supply, providing necessary lands and building skilled workforces.
In the wake of slowed export growth, weak private investment and vulnerability in the financial sector due to the increasing non-performing loans, the GDP growth target is an ambitious one, said Zahid Hussain, lead economist of the World Bank.
“In terms of the country’s development needs, it is not too large budget but the budget size seems to be larger enough in comparison with the implementation capacity as expenditures often remain below the target because of under utilization of ADP,” he added.
According to the bank’s analysis, excepting FY2011, revenue target was under achieved in the last five years. Consistent large gaps in between external financing and domestic financing overshoot when external financing undershoots.
Comparing the data of FY-13 with 112 other countries, the WB analysis said: Bangladesh’s per capita level of GDP, revenue to GDP ratio should be around 23% and expenditure-GDP ratio around 30% by FY2015, which is now 13.3% and 18.3% respectively.
“Expenditure shortfall far exceeds revenue shortfall, resulting in fiscal deficit consistently with the size of Bangladesh economy,” opined Hussain.
The WB has, however, welcomed the proposed budget for reducing subsidy in different sectors, including Bangladesh Petroleum Corporation (BPC) as the bank’s budget assessment said total subsidy allocation reduced by 18.2%, which is good.
But share of non-development capital expenditure increased to 10.4% of the total expenditures, compared with 8.7% in the revised FY14 budget, which is concerning, observed the analysis.
As non-development expenditures, the government put aside Tk5,000 crore for recapitalisation of the corruption-hit state-owned banks. In this connection, the WB analysis said budget speech is short on improving governance in the public sector banks.
ADP in FY15 budget is 32.1% of the total expenditures, which is much bigger than the implementation, said the bank’s assessment.
About the projects under ADP, World Bank said there are too many projects to implement as ADP contains 1,034 projects, another 959 unapproved projects listed in green pages and over 50% allocations to 352 ongoing projects. In FY14, only 64% of the target is achieved.
“To implement the ADP, the government needs economic viability and proper monitoring,” observed the assessment.
Regarding PPP implementation, which remains poor, the bank said: Without bringing reforms in legal framework and incentives policies, the ambitious US$11bn PPP projects will not be materalised.
Welcoming the tax measures and incentives, the bank said, “Measures are welcomed in principle, but revenue impact likely to face a setback.”
The World Bank also noted that the budget is weak on policies excepting in the RMG sector.
“Budget relies heavily on para tariffs, which is not consistent with the objective of export diversification.”
