Govt unveils Tk 34,358cr deficit budget
Net outlay Tk 1,13,819 crore, focus on industries, agriculture
Courtesy New Age 12/6/09
Shakhawat Hossain
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The finance minister, AMA Muhith, on Thursday proposed higher spending and fiscal measures aimed at spurring industrial growth and economic activities in the face of global recession as he placed in parliament the national budget worth Tk 1,13,819 crore for 2009-10 fiscal year.
The first budget of the Awami League-led alliance government prioritised agriculture, rural development and human resources development, industry and trade and social safety net in line with the ruling party’s election pledges.
‘The budget for FY 2009-10 will be the first step towards our journey to realise the dreams enshrined in our Vision,’ he said in the parliament in absence of the major opposition Bangladesh Nationalist Party and its allies.
He said the budget is not just a statement of the government’s income and expenditure, but a vehicle to ensure growth, poverty reduction and commitment to achieving the macroeconomic fundamentals.
However, the finance minister relied heavily on borrowing — which amounts to Tk 34,358 crore — to finance the ambitious annual development programme of Tk 30,500 crore and the newly introduced public-private partnership worth Tk 2100 crore.
Some Tk 13,215 crore has been earmarked as loans and grants from the multilateral lenders and another Tk 20,555 crore from domestic sources to meet a record deficit of 5 per cent. The revenue generation target has been fixed at Tk 79,461 crore.
Muhith, however, admitted that the proposed Annual Development Plan was quite ambitious and would need effective supervision and monitoring for its proper implementation to achieve the targeted 5.5 per cent GDP growth in the next fiscal.
Experts and economists said the main challenge of the government was to implement the ambitious budgetary projections by mobilising resources in the context of falling revenues amid the global financial recession.
It will be a big task for the government to keep the balance of the budget without which inflation may rise, said MK Mujeri, the director general of Bangladesh Institute of Development Studies.
‘The cost of doing business of the local entrepreneurs and manufacturers may go up,’ he said, adding that higher government borrowing would crowd out the private sector.
Besides, ‘misuse’ of the funds is a big concern as the highest budgetary allocation goes to interest payment constituting 14 per cent of the outlay.
‘The trend will eventually trap the country in a vicious cycle of borrowing,’ said MM Akash, a professor of economics at
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Compared to the allocation for debt servicing at 14 per cent, projected allocation for health and education combined is less than 20 per cent. It raises doubts whether it would be sufficient to improve the limping state of public health and education.
The Awami League election manifesto envisaged 100 per cent primary school enrolment by 2010 and universal access to pure drinking water by 2011.
The experts and economists, however, agreed that the finance minister tried to meet the short-term challenges of the global financial meltdown with his measures to encourage higher public and private investment.
In the proposed development programmes, the AL-led government earmarked 7.8 per cent for the agriculture sector, 22.1 per cent for local government, 14 per cent for power and energy, 15.7 per cent for communication and 23.5 per cent for human development.
Muhith announced a stimulus programme of Tk 5,000 crore for continued assistance to the country’s exporters of readymade garments, jute and frozen food.
He also laid the importance on domestic demand amid global financial recession, saying that the country should expand domestic and regional markets for goods and services.
The finance minister announced a two per cent duty cut from the existing seven per cent on more than 2,000 imported raw materials that is expected to benefit local manufacturers.
FBCCI president Annisul Huq appreciated the measures saying it would help revive domestic manufacturers after a decline of 1.29 per cent in the country’s manufacturing sector in the outgoing fiscal (5.92 per cent in 2008-09 from 7.21 per cent in 2007-08).
The finance minister announced some ‘populist tax measures’ such as continuation of tax holiday, provision for legalising undeclared money (black money) in the share markets, real estate and other industries.
Retaining the lowest income ceiling on income tax, Muhith announced a series of measures and reforms in the revenue board targeting an increase of 300,000 new taxpayers.
As expected, he raised tariffs on luxury products including vehicles, electronics, dry fruits, juice and drinks and tobacco.
Apart from the short-term measures, the finance minister clearly hinted about major changes in the government’s economic policies from the next fiscal.
Muhith said he hoped to present a district level budget in 2010-11 fiscal to ensure transparency and accountability. He said the national budget is prepared centrally and fails to consider the hopes and aspirations of the people at the grass-roots.
The finance minister stated that among other major shifts, the government would do away with the Poverty Reduction Strategy Plan, which was a three-year rolling programme, and resume the previously practised five-year plan from the year 2012.
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