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VOL 22 NO 202 REGD NO DA 1589 | Dhaka, Saturday, June 06 2015
Posted : 06 Jun, 2015 00:00:00 AA-A+
CPD questions clarity of budget's fiscal framework
Also finds budget financing major challenge
FE Report
CPD questions clarity of budget's fiscal framework
CPD Distinguished Fellow Dr Debapriya Bhattacharya at the organisation's budget analysis briefing on Friday. — FE Photo

The Centre for Policy Dialogue (CPD) identified mobilising the targeted huge revenue principally from domestic resources as a major challenge for the next budget and also doubted fairness of a few fiscal propositions.    

"We are not at all concerned about the size of the budget rather we are concerned about the financing of the budget which is highly dependent on internal resources," said CPD distinguished fellow Debapriya Bhattacharya at a post-budget media briefing Friday.

In its budget analysis styled 'Independent Review of Bangladesh Development (IRBD)' the private think tank also questioned the quality of fiscal framework as it thinks the budget does not provide any monitorable transparent plan for its implementation.

"The quality of fiscal planning has been deteriorating over the last four years, which is likely to continue in FY16," says the CPD analysis.

Finance Minister AMA Muhith Thursday placed in parliament a Tk 2.95 trillion budget for the fiscal year 2014-15 with a thrust on increasing revenues to meet at least two-thirds of the budgetary allocations.

The government set a target of 7.0 per cent GDP (gross domestic product) growth for the next fiscal and set the spending targets for different sectors accordingly from the lofty outlay.

According to CPD, the high revenue target and the absence of clear guidelines in achieving that improving efficiency of spending may lead to messing up in achieving the budgetary target. "All major parameters of fiscal framework will need to register higher growth rate to attain the targets," it said.

The government set revenue target for the National Board of Revenue (NBR) at Tk 1.76 trillion, about 30 per cent higher than that of this fiscal, which CPD feared might not be achieved.

"The revenue projected to grow is faster than public expenditure," says the analysis.

It noted dependence on domestic financing increased while utilisation of foreign loans and grants remained weak. To overcome the problem, the CPD suggested the government increase its foreign aid utilisation to reduce reliance on high-cost domestic borrowings to fund the budget deficit.

The CPD identified tapping more foreign assistance, sluggish exports and accelerating private investment as some more challenges for the government in the new fiscal year.

The think tank believes that sufficient initiatives have not been taken in the budget to boost private investment in the country which has remained sluggish over the past two years.

To reap the benefit of fiscal measures, the CPD stressed the need for reform of government institutions.

And to have the status of a middle-income country (MIC), Debapriya said, the country also needs political stability, consensus on national issues as well as more investment.

"But without reform nothing will be achieved," said the CPD distinguished fellow.  

Asked about achieving the status of a lower middle-income country (LMIC), Debapriya said it's a matter of time. But it will take some more years to graduate from the league of least-developed countries (LDCs), as the country still lags behind with economic vulnerability and human assets index despite faring well in some socioeconomic indicators.

"But even then it is not impossible to achieve the status of a developed country if we stride hard to achieve the macroeconomic performance as prescribed by the mid-term fiscal frameworks," said executive director of the CPD, Dr Mustafizur Rahman.

Held at the Brac Inn Centre at Mahakhali, the programme was also addressed, among others, by CPD Additional Research Director Dr Khandaker Golam Moazzem and research fellow Towfiqul Islam Khan. The programme was aired live on Channel-i.

Asked about the assessment of last fiscal's performance, the CPD's distinguished fellow said it is not up to the mark, but the real picture will be clear after 3-4 months when the actual figures will be available.  

He also mentioned that the overall macroeconomic indicators also failed to be commensurate with mid-term fiscal policies.

Regarding black money, the CPD proposed to formulate a legal framework to help bring undisclosed or black money into the mainstream economy.

In the absence of an effective mechanism to address the relevant issues, the volume of black money has only grown bigger and bigger, a large part of which has even been transferred abroad.

The National Board of Revenue (NBR) could do little to stop it. The anti-money laundering act has also not been effective either to stop transfer of illegal funds or bring the money back into the country.

Asked about Indian Prime Minister Narendra Modi's visit to Bangladesh and settlement of various trade issues, CPD's executive director Dr Mustafizur Rahman said it's a great opportunity for Bangladesh to link connectivity with India and China, world's two giant economies that import goods worth billions of dollar every year.

To have linked with their economies he also stressed the need for increasing the country's efficiency in all relevant areas.   

Regarding the second line of credit (LoC) from India, CPD distinguished fellow Mr Debapriya, however, expressed his scepticism. This should be free from conditionalities, he said.

Regarding the first LoC, he said there was only progress in the cases of import of railway wagons and buses from India but no progress made in other areas like infrastructure development.

"If US$2 billion more comes from India under LoC, these should be free from import-based conditionalities," he said. "I am more concerned about import-based loan rather than high-cost domestic borrowing."



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