Budget devoid of reality: CPD
Staff Reporter :
The proposed budget for the upcoming fiscal year 2024-25 fails to provide concrete measures to address ongoing economic concerns, particularly in curbing inflation and providing relief to the poor and fixed-income groups, said the Center for Policy Dialogue (CPD) yesterday. The think tank described the budget as “devoid of reality.”
The independent think tank highlighted various macroeconomic challenges currently facing the country, including high inflation, sharp depletion of foreign exchange reserves, a weak currency, reduced imports, a liquidity crunch in the banking sector, high borrowing from banks, low growth of export earnings, and issues in power and fuel supply.
Due to the inability to acknowledge the nature of these ongoing economic challenges, the proposed budgetary measures are inadequate and weak, the CPD said in its formal reaction on Friday to the national budget for FY2024–25 at a media briefing at the Bangabandhu International Conference Centre.
The think tank described this budget as “ordinary” given the extraordinary challenges faced, and criticized the new government for presenting a repetitive budget despite having a new finance minister and state minister.
In its post-budget analysis, the CPD said that allowing the whitening of black money for a 15 percent tax, irrespective of the country’s current legislation, is not only unethical but also promotes corruption.
Fahmida Khatun, research director and head of research at CPD, stated in her keynote presentation that the provision for whitening black money by paying only a 15 percent tax without question will discourage regular taxpayers.
“We have seen in the last few years that revenue collection does not increase significantly with black money whitening schemes. Instead, it discourages people who routinely pay taxes and rewards those with black money.”
“It is not fair for taxpayers to pay a 30% tax on legal income while only being asked
to pay 15% on illegal earnings,” she added.
Additionally, Dr. Fahmida noted that, as per the budget proposal, the private investment-GDP ratio is projected to improve dramatically to 27.3 percent in FY25 from 23.5 percent in FY24, but there is no clear indication of where the investment will come from.
According to the CPD analysis, the private-sector investment projection for FY25 differed from earlier estimates.
Noting the estimated exchange rate for FY25 at Tk 114 per dollar in the proposed budget, CPD said it was an indication of the government’s plan to appreciate the taka. If the government appreciates the taka against the dollar, foreign reserves would not grow, she added.
Speaking at the question-answer session at the press briefing, CPD Distinguished Fellow Mustafizur Rahman said that the provision for legalizing undisclosed money contradicts the spirit of the Awami League’s election manifesto, as the ruling party had promised zero tolerance for corruption in its manifesto.
“The new government and its new finance minister have failed to show proficiency in formulating budgets. Rather, the new government presented an old budget,” he said.
The CPD’s research director, Khondaker Golam Moazzem, said that the government had been shifting the responsibility of adopting austerity measures to the people and increasing public expenditures.
He said that the proposed budget would fuel non-food inflation further as VAT was imposed on many goods and services.
Moazzem claimed that, in most cases, Bangladesh’s tax policy was formulated to serve the interests of vested groups and influential individuals.
Regarding mega projects, Moazzem said that it was time to question whether these projects had truly created opportunities for a mega economy in the country.
Meanwhile, with an eye towards battling inflation, Finance Minister Abul Hassan Mahmood Ali unveiled the Tk7.97 lakh crore proposed national budget on Thursday for the fiscal year 2024-25.
He announced the largest-ever budget for Bangladesh before Parliament on June 6, a long way from the first budget of Tk786 crore presented by Tajuddin Ahmad for FY1972-73.
Earlier in May, Prime Minister Sheikh Hasina had approved the budget size. This is the country’s 54th budget and the 25th of the Awami League (AL) government in six terms. This budget is the 21st under the rule of Prime Minister Sheikh Hasina in different terms.
The theme of the budget for the next fiscal year is “Pledge towards building a happy, prosperous, developed and smart Bangladesh,” in pursuit of restoring the country’s economy to its previous sound state.
Usually, the size of a new budget increases by 10 percent to 12 percent compared to the current year’s budget, but this time it will increase by less than 8 percent.
