The proposed budget for 2013-14 is strategically social welfare oriented and pro-poor. The total size of the budget is Tk2.22tn, which is around 16% higher than the current one.
But it is doubtful the National Board of Revenue (NBR) will be able to fulfill the revenue receipt target, due to its ambitious nature.
Moreover, it is quite questionable whether this budget can be implemented, as it will go through three different transitions – the present government may continue from July to November, and then the government that will conduct the general elections, followed by the new government formed after the polls. Even if the present party comes to power, the finance minister may change.
Though the size of the budget is definitely justified when compared with our total population, how it will be implemented is a big question. Normally, in a transition phase, the country will go through different sorts of waves.
As a macro and financial economist, I always prefer a balanced budget for a country like Bangladesh. The proposed budget deficit is 4.6% of GDP, which may not be a big problem, but we will have to borrow from financial institutions or depend on foreign aid and loans. We should be fully aware of our capability.
Due to political unrest, not only does the growth rate of gross domestic product (GDP) decrease, but people have to face unemployment and a decline in purchasing power.
Here, I want to give a specific recommendation: during the tenure of the present government, the finance adviser should have an active role in the budget implementation process, working alongside the finance minister.
The time period the present government will get to implement the first part of the budget is very important. If they can successfully implement the budget during their tenure, voters will provide support to them.
Despite all the odd situations that have arisen, the government has been successful in keeping the GDP growth rate between 6.03% and 6.7%, although it has failed to achieve the target rate 7.2% in the current fiscal year 2012-13.
If inflation can be arrested below 7% in 2013-14, it will be a positive outcome. As elections will be held, inflation may increase to double digits due to the fact that the informal sector will affect the formal sector.
The current trend with regard to foreign reserves and remittance is in our favour. Furthermore, a fall in imports is good for the economy, as we must be balanced in our export-led growth and import substitution strategies.
I definitely support the whitening of black money in productive sectors. Otherwise, it will be siphoned off outside the country. Additionally, our garment workers need more help from a social perspective.
Macro-economic stabilisation along with political stability is required for maintaining economic progress. The estimated GDP growth rate for the coming year is 7.2%. If the country can achieve that, it will be a great outcome for us.
The activities of NBR have not been very impressive with regard to collecting tax and VAT. In recent years, the government has tried to improve collection, but it was unable to achieve its goal, due to huge corruption in the sector.
Those who honestly pay VAT and other taxes are relatively penalised when compared to those who do not. Though the government has made attempts to strengthen the capital market, the country lacks proper fiscal policies.
The government has done a good job of providing necessary power in the short term by ensuring a quick rental power system.
Now it is time for us to approach the question of power and electricity with a long-term outlook, ensure that we take proper steps and can create and implement relevant policies in an effective manner, so we can find ways to keep up with the growing demand of electricity from the different sectors of the economy.
The size of the ADP programme is Tk658bn, and in terms of GDP, it is 5.5%. But unproductive expenditure is 1.56, and the actual ratio in terms of GDP is 13.2%. This is quite high. Productive investment should rise, and downsizing of unproductive expenditure should occur.
I suggest the formation of a task force to implement the national budget, with a committee for implementation headed by the finance minister and including the finance adviser, finance secretary, commerce secretary, agricultural secretary, industry secretary and members from both the government and the opposition.
The Bangladesh Bank governor, the chairman of the NBR, economists and ex-secretaries can also work to implement the national budget. The task force is necessary to maintain stability during the three political different phases the budget will be witness to.