Budget fails to address key economic challenges: CPD

Staff Reporter :
The Centre for Policy Dialogue (CPD) said that the budget failed to address the most difficult challenge in the current reality including containing inflation, ensuring the growth of revenue generation, export earnings, and private sector credit growth.

The proposed budget of FY24 offered inadequate remedial measures to reduce income and wealth inequality, over-dependence on bank borrowing, and forex crunch, said Fahmida Khatun, executive director of the CPD.

The shadow of IMF conditionalities, although not explicitly mentioned in the budget speech, is visible, she expressed.

At a press briefing organized to give the think-tank’s formal reactions on the FY 2023-24 budget on Friday, Fahmida Khatun also said that the current distresses in macroeconomic scenario are skyrocketing prices of daily necessities, reduced revenue collection, stagnant public expenditure, lower export growth, inability to import, severe shortage of power and energy, disruption of domestic production, sliding exchange rate etc.

“The fiscal framework appeared surreal, as the targets for the current fiscal year were not grounded in reality,” she argued.

Fahmida Khatun expressed doubt about achieving the goals of reducing inflation to 6% and increasing GDP growth to 7.5% given the current situation.
Regarding the allocation of the Annual Development Programme (ADP), she said that, only five sectors have received 74.6% of the total ADP allocation, where the transportation and communications sector and power and energy sectors have allocated most.

On the other hand, ADP allocation for education and health sector has dropped because of poor implementation.

Mentioning the time-overrun of projects, CPD informed that the number of projects with time extension increased from 369 in FY23 to 429 in FY24.

Addressing Tk 2,000 minimum tax, the Executive Director of the CPD said that the government’s plan to impose a minimum tax of Tk 2,000 even on those without taxable income is both discriminatory and contradictory with the concept of a tax-free threshold.
“The move is not logically or morally correct,” she expressed.

Fahmida Khatun also said that the plan of wealth surcharge threshold rising is equal to a concession for rich people.

She welcomed the move of VAT exemption for some locally manufactured home appliances extended till June 30, 2025 which will support import substituting industries.

Senior research fellow of the CPD, Towfiqul Islam Khan, said at the same program that the government formed the budget on assumption of nine basic indicators.

The government’s revenue target is around 39 per cent higher than the actual collection of the current year, so the government would need to borrow from banks to meet the deficit, he said.

“As the banking sector remains in a liquidity crisis so the central bank will be the lender and it may rise the present inflationary pressure.” he alarmed.

On top of that, the government assumes that export, remittances and reserve will be boosted thus the taka will not depreciate further, Khan said.

As these assumptions are also not realistic so the further depreciation of the currency would create more pressure on the economy, he added.

Meanwhile, Mustafizur Rahman, a distinguished fellow of the CPD, and Khondaker Golam Moazzem, research director, along with other researchers from the think tank were present during the event.