National Budget today: Big expenditure, limited income

Finance minister AHM Mustafa Kamal is presenting the national budget for the 2019-20 financial year in parliament today, Thursday. The size of the budget is estimated to be around Tk 5.23 trillion (Tk 5,23,300 crore).

While the size of the budget has expanded, the budget speech is to be much shorter than in the past.

The massive budget has expectations of high expenditure, but the government’s income capacity has decreased. The new finance minister has stiff challenges ahead. The main problem is the failure in collecting necessary revenue. Added to that is the fragile state of the financial sector.

Revenue challenge

With the inclusion of grants, the total estimated income of the coming budget is likely to be Tk 3.82 trillion (Tk 3,82,000 crore). Of this, the National Board of Revenue (NBR) will have to collect revenue of Tk 2.26 trillion (Tk 2,26,000 crore). Another Tk 150 billion (Tk 15,000 crore) is supposed to come from taxes outside of NBR and Tk 380 billion (Tk 38,000 crore) from various duty and tariff.

While NBR had the revenue target of Tk 2.96 trillion (Tk 296,000 crore) this fiscal, this was reduced in the amended budget to Tk 2.80 trillion (Tk 280,000 crore).

However, in the first nine months of the financial year, NBR managed to collect Tk. 1.530 trillion (Tk 153,000 crore). It is uncertain as to whether it will be able to meet the rest of the target, Tk 1.27 trillion (Tk 127,000 crore), in the remaining three months.

A large part of the total revenue is Value Added Tax (VAT). The VAT and Supplementary Duty Act 2012 will come into effect from 1 July. There will be four levels of VAT in the new law. The finance minister has announced that 10,000 university students will be appointed on a part time basis to collect these taxes. He is also considering using them to identify new taxpayers.

Speaking to Prothom Alo on the matter, former caretaker government advisor AB Mirza Md Azizul Islam said the tax net must first be expanded. There is no alternative to this. There are many people in the villages too now who are eligible to pay tax, but the government hasn’t reached them.

Mirza Azizul Islam felt that revenue collection with increase further if, in the case of corporation tax, manipulations to evade payment can be halted.

He said, on one hand an establishment doesn’t have VAT registration, or even if it does have the registration, it doesn’t use an electronic cash register (ECR). Or it imports a certain product, but has a different product on the records so as to evade tax. Revenue income will increase if this could be prevented.

Expenditure questions

In the current fiscal, the size of expenditure in the budget has been reduced to Tk 4.65 trillion (Tk 4,64,573 crore) to Tk 4.43 trillion (Tk 4,42,541 crore). In that sense, the coming budget is Tk 806.49 billion (Tk 80,649 crore) or 18 per cent higher than the last budget.

Of the total expenditure, Tk 3.10 billion (Tk 310,000 crore) is non-development expenditure). Of this, interest to be paid on domestic loans is Tk 530 billion (Tk 53,000 crore) and interest to be paid on foreign loans is Tk 40 billion (Tk 4000 crore). And around Tk 600 billion (Tk 60,000 crore ) will be spent on salaries and allowances of government officers and employees.

A question that looms large is about the quality of Annual Development Programme (ADP) implementation. The total development expenditure or ADP in this budget is estimated to be Tk 2.120 trillion (Tk 212,000 crore).

Chief economist of the World Bank Dhaka office, Zahid Hossain, told Prothom Alo, there are many examples in the country of the expenditure not being made properly and not being made in time. For instance, the DEMU (Diesel-Electric Multiple Unit) train that was purchased six years ago, is just lying idle.

He said, “I read in the media that BRTA is to purchase 700 vehicles for driving tests. Such decisions are taken with no consideration for national interests. That is why priorities must be determined at first before fixing the expenditure. It must be noted as to whether the expenditure will contribute to growth and help in poverty alleviation.”

Loans to meet deficit

As always, in this budget too, the deficit will remain 5 per cent of the GDP. That means the deficit could stand to be Tk 1.450 trillion (Tk 145,000 crore). It is being estimated that the size of the GDP will increase from this fiscal’s Tk 25.36 trillion (Tk25,36,000 crore) to Tk 28.86 trillion (Tk 28,86,000 crore) in the coming fiscal.

Sources say that the government will adopt certain measures to meet the deficit. Firstly, it will take foreign loans of Tk 750 billion (Tk 75,000 crore). The remaining deficit will be met by domestic loans. This includes Tk 470 billion (Tk 47,000 crore) as loans from the banking sector.

And Tk 300 billion (Tk 30,000 crore) from outside of the banking sector will be procured by selling savings certificates. This year the target had been to sell savings certificates worth Tk 260 billion (Tk 26,000 crore) but this was later increased to Tk 450 billion (Tk 45,000 crore).

Executive director of Policy Research Institute (PRI) Ahsan H Mansur told Prothom Alo, “There is no loan management and that is why the government is having to bear the high interest burden of savings certificates. I have been saying this for long, but the government doesn’t budge.”

What’s new?

There is consideration of providing subsidy in the new fiscal for sending remittance from overseas.

There will be allocation in the new budget for this subsidy. And even if any educational institution was not included in the MPO bracket after 2010, this will be done in the coming financial year.

The finance minister will announce a startup fund for young entrepreneurs.

Crop insurance and insurance for non-resident Bangladeshis will also be announced.

The budget will also speak of implementing the election commitment to build up planned villages.

All sorts of allowances and grants will be increased under the social security programme. The number of beneficiaries will also be increased for certain programmes.

Scholarships for students from the primary level to universities will be increased.

The monthly allowance for freedom fighters will be increased from Tk 10,000 to Tk 12,000.

Monthly allowance for the disabled will go up from Tk 700 to Tk 750.

Mobile phone charges may go up. The 5 per cent existing supplementary tax on mobile phone talk time may be doubled to 10 per cent. That means alongside 15 per cent VAT on talk time, there will be a 10 per cent supplementary tax and 1 per cent surcharge. This will mean the tax will be over 27 per cent. It is around 22 per cent at present.

Source: Prothom Alo