Dhaka, June 07: Finance Minister AMA Muhith on Thursday placed 2018-19 fiscal’s proposed national budget with a financial outlay of Tk. 4,64,573 crore and a 7.8 percent GDP growth projection. In his budget speech themed as ‘Bangladesh on a Pathway to Prosperity’ – the finance minister laid out plans on how to finance the deficit in an election-year budget.
Muhith, who placed his 10th consecutive budget for the AL-led government, well projected the economic developments achieved over the past one decade with the present AL-led alliance in power. At the same time he also proposed to enhance allocation to much-touted mega projects, expanding the social safety net purview and shared his thoughts on introducing universal pension scheme.
While the proposed budget is over 16 percent higher in amount comparing to the last FY’s one, Muhith proposed slashing down last FY’s Tk 4,00,266 crore national budget to Tk 3,71,495 crore in the revised budget of 2017-18.
The budget proposal shows government’s revenue earnings would largely depend on NBR-generated (National Board of Revenue) tax (Tk. 2,96,201 crore) followed by other sources like non-tax revenues (Tk. 33,352 crore) and non-NBR tax (Tk. 9,727 crore). Still there will be an income-expenditure mismatch of Tk. 1,25, 293 crore.
Though economists and analysts voiced concern over deficit financing in budget, the government said it would bank on baking sector, saving schemes and other sources in bridging the gap between budget expenditure and revenue generation. The overall budget deficit (Tk.1,25,293 crore) is 4.9 per cent of GDP.
As per finance minister’s proposal, an amount of Tk.54,067 crore (2.1 per cent of GDP) will be financed from external sources while an amount of Tk.71,226 crore (2.8 per cent of GDP) will be financed from domestic sources.
Of the domestic sources, Tk.42,029 crore (1.7 percent of GDP) will be borrowed from the banking system while Tk.29,197 crore (1.2 percent of GDP) from National Savings Schemes and other non-bank sources. Muhith said, “I believe that if we can use the huge external resources in the pipeline, we will be able to largely reduce our dependence on domestic sources and we shall, therefore, persistently make efforts to scale up the use of foreign assistance.”
Muhith sought to give relief to certain company tax by reducing it down to 37.5 percent from existing 40 percent but belying public expectation he preferred keeping the tax-exempt ceiling intact at Tk. 2.5 lakh. He said in his budget speech that government plans to see the number of income tax return submission rise from 35 lakh now to one crore in five years’ time.
In sector-wise budget allocation plan Muhith proposed keeping aside the biggest chunk of 14.6 percent for education and technology, followed by 12 percent for transport and communication, 11.1 percent for interest payment, 7.1 percent for subsidies and incentives, 7 percent for local government and rural development, 6.3 percent for miscellaneous expenditure, 5.6 percent each for three sectors – defence, public order and security and pension, 5.4 percent for energy and power, 5.1 percent for social security and welfare, 5 percent for health, 3.7 percent for agriculture and 3.1 percent for public administration.
In his budget speech the finance minister said, “In the past 10 years starting from 2009, we remained steadfast in taking forward our people-centric agenda mainly for the benefit of the poor and the disadvantaged.”
Muhith gave an overview that how over the past one decade Bangladesh achieved the average GDP growth rate of 6.6 per cent, much higher than the developing economies’ average GDP growth of 5.1 per cent. Besides, during the period public investment rose to 8.2 per cent from 4.3 per cent, per capita income increased from US$759 to US$1,752, inflation declined from 12.3 per cent to 5.8 per cent, revenue-GDP ratio rose to 10.3 per cent from a low of 9.2 per cent, the size of budget grew from Tk. 89,000 crore to Tk. 4,64,573 crore, annual export registered an increase from US$15.6 billion to US$34.8 billion while annual import stood at US$47.0 billion increasing from US$22.5 billion. The rate of poverty declined to 24.3 per cent from 31.5 per cent and extreme poverty rate reduced to 12.9 per cent from 17.6 per cent. The forex reserve increased from US$7.5 billion to US$32.2 billion.
In his proposed Tk. 1, 79, 669 crore development budget, finance minister attached most importance to transport and communication by proposing to allocate 26.6 percent of development budget followed by 16.3 percent for education and technology, 15.7 percent for local government and rural development and 13.8 percent for energy and power.
It is important on an election year to bring some visibilities in the big infrastructure development projects. Finance minister did not shy away from keeping a sizeable amount for expediting the 10 growth-generating large projects, identified as ‘Mega Projects’, which are: (1) Padma
Multi-purpose Bridge Project (2) Padma Rail Bridge Project (3) Ruppur Nuclear Power Project (4) Rampal Coal Based Power Project (5) Chattogram-Dohajari to Ramu-Coxes Bazar and Ramu-Gundum Railway Construction Project (6) Dhaka Mass Rapid Transit Development Project (7) Construction of Payra Sea port (First Phase) Project (8) Sonadia Deep Sea port (9) Matarbari Ultra Super Critical Coal Fired Power Project and (10) Construction of Maheshkhali Floating LNG Terminal Project.
The country’s power generation capacity will go up to 20,000 MW in September next, said Finance Minister AMA Muhith. When the government took office in 2009, the power generation capacity was 4,942 MW, he said. Muhith said the government’s target is to scale up power generation to 24,000 MW by 2021 and ensure electricity supply to all at an affordable price.
Following a bad crop year government in 2017 slashed down duty on rice import and eventually cheaper rice from India flooded the market raising alarm over local paddy growers not getting just price for their produce. In this backdrop, Finance Minister AMA Muhith in his budget speech sought to re-impose 25 per cent customs duty and 3 per cent regulatory duty on rice imports to protect the farmers as the country got a bumper paddy production in the Boro season.
The finance minister also said to protect farmers and agro-based industry, duty on locally produced starches, wheat, maize, potato and cassava, have been rationalised to 15 per cent for customs duty and 10 per cent for regulatory duty.
Because of some changes that the finance minister proposed to bring in existing tax incidents, certain items and services would get pricey while certain others are expected to get cheaper. Consumers may have to count more for e-commerce, online shopping, energy drinks, cosmetics and beauty product items like lipstick, nail polish, body lotion, toiletries, perfumes (except attar), body sprays and similar items, cigarette and bidi, bathtubs, jacuzzis and shower trays, polythene and plastic bags, small size flat, furniture garment products.
On the other hand, people can expect to pay less in the coming fiscal for the following items: the raw material of active pharmaceutical ingredient, refrigerator, air-conditioner and compressor, locally assembled cellular phone, hybrid motor car, raw material of motorcycle, tyre and tube, software, ball point pen and filled milk powder, school bus, medium sized flat, loaf, bread, buns, handmade biscuits and handmade cakes, medical treatment required for cancer and kidney diseases, sandals and slippers.
In his budget speech Muhith took pride as his days as finance minister saw Bangladesh making rapid economic progress. “While reflecting on the past when I used to be ignominiously labelled as ‘world beggar’ in the early 1970s and 1980s, I personally take pride when I receive accolades as a successful Finance Minister,” said Muhith.
He said, “Our government’s enviable capacity for rapid implementation of socio-economic development plans has already been proved. It is not merely our claim; it is an internationally recognised fact. The country which once was disregarded as ‘bottomless basket’ is now globally considered as a ‘development-miracle’; Bangladesh’s socio-economic achievement is a global role-model.”
Referring to the International Monetary Fund, Muhith said Bangladesh is now the 43rd largest economy in the world in terms of nominal GDP while “our position is 32nd in terms of purchasing power parity. Bangladesh was also included in the list of top-ten fastest-growing economies in 2017. A projection by PriceWaterhouseCoopers tells that Bangladesh will be the 28th largest economy by 2030 and 23rd largest by 2050.”
In his budget speech the finance minister also shed light on government’s plan of establishing 100 economic zones in 30,000 hectares of land by 2030. He said establishment of 76 economic zones has been approved so far with 10 already been inaugurated by the Prime Minister.
“Foreign and local investors have started setting up industries in these zones. Development works of additional 26 economic zones are under way”, said Muhith adding that “I hope, after the establishment of the economic zones, export earnings will increase by additional US$40 billion and 10 million more jobs will be created.”