Home ›› 20 May 2023 ›› Front
The biggest challenge is that the FY24 budget is not a complete budget for the government, former NBR chairman Muhammad Abdul Mazid tells The Business Post’s Talukder Farhad in an interview.
How do you see the budget for the new fiscal year? Why is this budget important?
Budget is announced every year. But this year’s budget is important for three reasons. The first is that this is the last budget of the current government. The next government will get a budget for six months. It means that the incumbent government will not be able to prepare a full budget for FY2024.
Apart from this, the national election will be held by the end of this year. So, the new budget will be election year budget. This is a psychological challenge. It will not be a normal and regular full year budget. It will be a budget of two governments for two years.
Admit it or not, there is a complicated situation for the FY24 budget. That is this is the first challenge, besides planning and implementing projects, its continuity or cost overruns will not be easy.
The second challenge is that this is an election year. The government may take some measures to satisfy the voters. Then more taxes should be paid or various allowances should be increased. But from where extra revenue will come?
Besides, the government will want to increase spending due to an election year, but it will have to reduce spending to meet the loan conditions set by IMF. In such a situation, the new budget will be a debt-dependency budget with tough reform conditions.
We are facing a specific crisis and taking more loans from international lenders like the World Bank and IMF to handle the situation. These loans are not general liability. It is a loan with strict restructuring conditions.
We have to make many reforms to fulfil the conditions against loans. If we go for reforms, the government could not satisfy the voters. This is another challenging aspect of the new budget.
What is the next challenge?
The third challenge is the global unstable situation due to Russia-Ukraine war which may affect our remittance and export income as well as overall external trade. The economic analysts express fears that cost of living will increase further.
Besides, we are now trying to recover our economy from the Covid-19 pandemic impact. Now we need more development and resources. Steps are needed to create more employments and increase income for lower and middle-middle income people.
In this context, global unstable situation and recovery from the pandemic is the third challenge.
In order to avert the crisis, the conditions have to be met for taking loans from the World Bank and IMF and subsidies given to the people should be reduced. This situation will become very challenging. Even though it was a normal year and not an election year, we had to face this crisis.
Is there any opportunity for the government to transition from the situation?
Opportunities are limited. Since the loan has been taken, the conditions have to be met. Again the amount of interest is increasing a lot. Interest amounting to Tk 1 lakh crore more will have to be paid in the new financial year.
In the recent past, some supplier credit has been taken on tough terms which are increasing the interest rate while repaying.
In the upcoming budget, revenue target may be set at Tk 5 lakh crore while NBR’s target may be Tk 4.3 lakh crore. Do you think it is possible to achieve this target?
The National Board of Revenue is doing its job, but we have to understand the environment from which the NBR will earn revenue. We have not been able to strengthen that environment or the economy. So, getting more revenue from a weak economy is actually difficult.
Though the authorities are politically committed to improving the situation, they will need some reforms of their own. The government institutions owe a lot of money which can be collected.
Besides, most of the parliamentarians are now businessmen. They are only getting the opportunity, but the VAT collected is not properly deposited in the government treasury. Many are evading taxes. They have to make commitment. Initiatives should be taken to prevent leakages.
Target of non-tax revenue may be set at Tk 50,000 crore and non-NBR at Tk 20,000 crore for FY24. Is there already a proposal to raise various fees? Will it create more pressure?
There is no way to increase it.
Where will non-tax revenue come from?
This money should come from income from the projects that have already been completed.
Why is that income not coming? Why is return not coming?
Many projects are not completed on time due to non-tax income that was supposed to be generated from these projects but not realised. Returns are not coming on time. That is why the interest and budget deficit is increasing.
Is it possible to achieve the revenue target in next fiscal year?
If the economy becomes healthy, vibrant and responsible, it is definitely possible to attain the target. I use the word ‘responsible’ because it appears that VAT is being collected but not being deposited to the government exchequer.
Even if it was evasive at other times, this type of leakage must be stopped now because there is a shortage of resources. No one is coming forward and telling us to stop that.
Although political budget, the things that are coming, especially reforms, will mount pressure on the people in the budget?
The condition of the IMF is to reduce subsidy. When the government will reduce it, the price of electricity will be increased. And price hike will increase pressure on the people.
So, I again repeat that leakage has to be reduced and the government has to be committed to reducing it. There were tax loopholes. As we are facing problem now, these loopholes must be closed.
