Not complacency, budget needs reforms
Published : Wednesday, 13 June, 2018 at 12:00 AM Count : 355
A budget is a populist one ahead of next general elections. It is a budget of peoples' complacency so on and so forth. What is the harm? In contrast budget would be non-populist. People would find it detrimental to their interest. What is the correct way? In democracy, for a political government, every day from their first day to their last day is committed to voters and the people.
Budget is a short term exercise. Its aptness is to be judged on to what extent it has become inclusive in nature, to what extent it contributes to macro fundamentals in their go for equilibrium and are able to be conducive to economic and social good governance. It is also to be seen to what extent budget proposals have become congenial to the continuity of our 7th five year plan and perspective plan.
What is our concern to day? Behind our fabulous success in economic and social sectors, we are now facing a stagnant private investment, inadequate job growth, deteriorating health of the financial system, rising interest rates on lending and the cost of doing business, depreciating exchange rate, low tax receipts, widening trade and current account deficit, nose diving stock prices and the waning capacity of the authority to implement the budget. These are matters of concern.
In addition, our concern goes to a new height onto considering coming general election, our entrepreneurs may shelve their fresh investment plan. There are challenges on external front also. Oil prices are hiking up day by day. Our BPC is telling every day it is losing 30 crore taka. The ongoing turbulence on the global political and economic fronts, including trade war between the US and the EU and China and instability in the Middle Eastern economies may affect Bangladesh economy in the days to come.
4.64 trillion taka intends to be spending for the next financial year. Of the amount, 63.7 percent is projected to come as tax revenue (NBR), 7.2 percent as non-tax revenue, 15.3 percent as domestic loans and 1.8 percent as foreign loans. We are not intending to do munching repeatedly the statistics of budget which are already in the know of the readers. Yet is it a big considering the total area of GDP stands to TK22 lakh 38 thousand crore. Next year budget only represented 16 percent of the GDP. But it should have been 24 to 26 percent. Our economy is becoming bigger continuously. There is scope for even a bigger budget. People from different strata including freedom fighters, destitute mothers, deserted women, widows will find a sigh of relief at increased allocation for social safety networks. Some fiscal measures will boost local industry for having protection.
Discouraging rice import by enhancing duty to the extent of 28 percent is a very positive proposal considering producers' interest. This year bumper production in haor areas in addition to sufficient food stock will ease marketable surplus with no question of deficit. But sorry to say the current rising trend of food price rise is occurring due to lack of effective monitoring.
But budget framers are keeping mum on any reform issues. Budget is not only a statement of income-expenditure of the government for a particular period of time. It is also the reflection of political will and economic philosophy of the incumbents. The finance minister will take stand in the form of reform measures against financial sector's anomalies. On the contrary, we have seen he is continuing to treat banks with kid gloves instead of going tough on them for the rampant financial irregularities and continued poor judgment.
The latest in the line of mercies came in the declared budget in the form of a slash in corporate tax for banks and financial institutions by 2.5 percent in the coming year. The move will cost the government about TK1, 000 crore in the lost revenue. The corporate tax rates for the other sectors have been kept unchanged by the finance minister. This corporate tax cut will balloon the profit margins of private banks, creating disparity without finding any buck in investment or having no impact on lessening of interest rates. Even many times finance minister has said about forming a "Banking Commission." This flickers our hope for having governance in the financial sectors. But he has departed from his commitment. We don't understand this stand of him. Regressive tax is an unwanted tax, once the British imposed it on salt in colonial India. This tax implies the more property you have, the less tax you are to pay. The less property you have, the more tax you are to pay. The tax proposed in the budget on flat purchase in different sizes is regressive tax. It will fuel disparity.
Some think tanks argue our rising growth is skidded off creating of employment in its desired level. We differ to some extent. With growth, ample informal sectors are being opened up for expanded job market. There opportunities are opened for unskilled labourers. They are getting jobs. Dearth of day labours in agriculture is the proof of our postulates. It is true for educated labour force. They are not getting jobs. The rate of unemployment among people with education up to the tertiary level increased to 11.2 percent in fiscal 2016-17 from 9 percent in the previous year, according to the latest labour force survey by BBS. The cause of it is the quality of education from the existing system does not match the requirements of the job market. Unemployment also grew among those with other levels of education in the last fiscal year. Only those with no education saw a rise in employment opportunities.
The rate of unemployment has increased at a time when higher numbers of graduates are coming out of universities and the economy is registering steady growth. Finance minister has given a flicker of hope, such as development of 76 economic zones will be created. Keeping inflation in control must have its salutary impact on macro fundamentals. But due to lack of reform and conventional methods, the financial sector yet remains questionable.
Writer is a freelance contributor