Home ›› 18 Jun 2022 ›› Editorial
The proposed budget for the new financial year is focused on ongoing problems, but the finance minister did not mention sufficient initiatives to resolve those issues. It will be difficult to tackle inflation due to global factors, so the government should instead boost allocations for the social safety net programmes and increase the number of beneficiaries, former finance adviser to caretaker government Dr ABM Mirza Azizul Islam told The Business Post’s Talukder Farhad in an exclusive interview
What do you think is absent from the proposed budget for FY23?
I do not think that the proposed budget left anything unaddressed. However, though the Finance Minister AHM Mustafa Kamal mentioned key issues such as inflation pressure, rising subsidies, devaluation of Taka, declining reserves, etc. in the proposed budget, he did not detail enough steps to tackle them.
What steps do you feel necessary for tackling inflation?
In the proposed budget for the next FY, import duties have been reduced in some cases in a bid to bring down inflation. But this will not be enough. The cause of inflation is largely global, so it will not be easy to reduce it.
In this situation, the government should increase the allocation of the social safety net (SSN) programmes in the budget. However, we found that the allocation of SSN declined for the upcoming financial year in the proposed budget, compared to the current financial year – FY22.
In the revised budget for FY23, the government should increase the allocation of SSN.
Where would the extra allocation for SSN come from?
The budget deficit amount can be increased to get additional allocation of that money. In the proposed budget, the deficit is 5.5 per cent of the GDP, which can be increased to 6 to 6.5 per cent. I think no one has any objection to increasing the deficit.
But this will increase subsidies as well. How would the govt tackle it?
The government has tools to mitigate the subsidy. There are many state-owned enterprises that are incurring losses for years for their corruption, inefficiency and weakness.
The government should increase the efficiency of those enterprises, and stop their subsidy facilities. This saved amount can be used for social safety nets.
How crucial is market management for tackling inflation?
Market management is not very effective at controlling inflation. In most cases, the goods have vanished from the market when the government started cracking down on businesses. Instead, the government should take steps to increase the supply of goods.
The supply of essential commodities at reasonable prices to the poor must continue. For example, programmes such as selling rice for Tk 10 per kg, Vulnerable Group Development (VGD), Vulnerable Group Feeding (VGF) should be strengthened.
The government will have to make certain that only the extreme poor are able to get rice on subsidised prices. The actual beneficiaries under the SSN program have to be selected properly. In this case, it is necessary to ensure that there are no irregularities or misconduct.
Do you agree with the govt decision to hike rice prices for the poor?
In the budget, it has been proposed to increase the price of rice by Tk 10 to Tk 15 per kg. In that, I do not see much objection. Because, in the market, rice price is Tk 60 – Tk 65 per kg, but it is available at Tk 15 per kg for the poorer communities.
What is your opinion about the amnesty to be offered to anyone bringing back laundered money?
The opportunity granted to launderers for bringing laundered money back to Bangladesh cannot be an acceptable initiative. Past experiences show that granting the opportunity to whiten black money has not been very fruitful.
People who laundered money have illegal income, and they will not return it.
On the other hand, honest taxpayers will be disappointed because of this unethical advantage. Encouragement to pay taxes will decrease among them. The new decision could also increase the likelihood of people getting involved in illicit earnings and money laundering.
So, I am opposed to this opportunity.
The aim of the special tax treatment of undisclosed offshore assets is to increase foreign currency. This is not a solution. We should reduce the import payment to increase foreign currency.
Besides, we have to focus on increasing remittance income through legal channels. Then the volatility of the exchange rate will stabilise and forex reserves will also increase.
Income-tax ordinance offers a way to whiten undisclosed money, should it exist?
In many cases, the legal income can become illegal due to non-payment of taxes on time. In that case, undisclosed income can be disclosed with the specified amount of tax. But those with illegal income should not get any such opportunity.
What issues could arise over the govt.’s reliance on banks to cover the budget deficit?
To mitigate the budget deficit, the government plans to rely on bank loans in the proposed budget, and the target for bank borrowing in FY23 is about 40 per cent higher compared to the current FY.
If govt. takes so many loans, what would be left for the private sector to borrow? Because we know that most of the investment capital sources are bank loans.
The government wants to achieve higher GDP growth. However, the government is trying to borrow more from banks, which are contradictory initiatives. This will increase pressure on the banking sector.
The government should focus on boosting foreign aid instead. The target for sale of savings certificates should also be reduced.
Can the 7.5 per cent GDP growth target be achieved in FY23?
I have doubts regarding whether Bangladesh can achieve the GDP target set in the proposed budget. Because the International Monetary Fund (IMF), the World Bank, the Asian Development Bank (ADB) have all projected that the growth is below 7 per cent.
So the 7.5 per cent target is not realistic. To achieve this growth, more private sector investments are needed. However, the investment targets currently set for the private sector are unlikely to be achieved as well.
What steps do you suggest to further develop the banking sector?
There are many problems in the banking sector. The biggest problem is defaulted loans. There is glaring lack of good governance. Many loans are being given on the basis of political consideration.
Although the number of cases in the loan court has gone up, most are yet to be settled. Many defaulters are taking loans again after securing stay orders from the High Court. We know about these problems. We also know the solutions to these problems.
But there is still no set banking commission, which was declared by the finance minister last year in the budget for FY22. Again, there is no guarantee that the government will accept the recommendation of the banking commission.
The government needs strong political will to solve these problems.
Mandatory submission of return slips or certificates against 38 types of services has been proposed, how do you see this move?
I do not support this move. It will increase the trouble of many people. As per the National Board of Revenue (NBR), the number of TIN holders till March this year was 72 lakh, out of which only 29 lakh submitted returns.
The NBR should look into those who have TIN but do not submit a return.
Individual tax free income ceiling remains at Tk 3 lakh, should this
go up?
The ceiling for individual tax free income should go up. It should align with other countries’ tax-free income limits. In addition, the limit should increase based on the calculation of per capita income, inflation and the cost of living.
How did the proposed budget for FY23 address the capital market?
There is nothing new in the budget regarding the capital market. A corporate tax rate cut by 2.5 per cent for listed companies is proposed, but I do not think it will be of any help to companies yet to get listed.
Instead, Bangladesh Securities and Exchange Commission (BSEC) and stock exchanges need to work together to find good companies and bring them to the capital market.
