Budget for FY13 todayBudget braces for greater challenges
Finance Minister AMA Muhith will announce the national budget in parliament today amid daunting challenges to meet a lofty revenue target, facing huge deficit and managing subsidies to fulfill the IMF conditions against a $1 billion credit to overcome macroeconomic pressures.
The budget for 2012-13 fiscal will be placed in parliament amidst boycott by the main opposition BNP.
Opposition Leader Khaleda Zia earlier alleged that the Awami League-led government has prepared the budget on political considerations to finance the next general election.
The upcoming budget will be the fourth and last implementable budget by the grant alliance government and it would focus mainly on the ways to satisfy the voters ahead of the next general election due in 2014, experts said.
The finance minister comes under intensified pressure this time as most of the macro-economic indicators currently remain in negative territory while the country’s economy has been facing many internal and external shocks due to stock debacle, lack of infrastructure and the much-talked-about Euro-zone crisis, an official of the Finance Division said.
The finance ministry, despite repeated knocks, has not received any green signal from the Prime Minister’s Office to reduce the overall size of subsidies in the upcoming fiscal as per the conditions set by the International Monetary Fund (IMF).
The ministry wanted belt-tightening measures on subsidy to agriculture, electricity, petroleum products and loss-making state-owned enterprises to improve the country’s macro-economy situation, which remains under pressure in the outgoing fiscal.
Sources said the Prime Minister Sheikh Hasina has asked the concerned authorities to plan the budget in a manner so that it casts no negative impact on the ruling party’s vote banks for the next general election. The PM also wants to keep the budgetary measures on subsidy intact in the next budget.
As per its extended credit facility (ECF) programme, international lender IMF has tagged a number of conditions to the credit, which include automatic price adjustment of fuel oils, removal of tax concessions and enacting VAT law in the upcoming fiscal.
In the budget planning, the minister will have to maintain a balance between the government’s election pledges and satisfaction of its vote bank along with restoring macroeconomic stability and achieving more inclusive growth.
In these circumstances, Muhith may take some unpopular decisions to adjust fuel prices, raising taxes and VAT and setting a non-NBR revenue target increased to Tk 150 billion in the next fiscal from the current revised budget, economists said.
They also viewed that the main challenges in the next fiscal year would be to bring substantial local and foreign investments into the country to rein in rising inflation.
Common people expect that the budget would unveil some fresh measures to contain inflationary pressure while the business people want to see more business-friendly steps to boost trade and employment generation.
Dr Akbar Ali Khan, former adviser to a caretaker government, told daily sun that not only controlling high food inflation, but also looking after the non-food inflation like house rent and transport fares would be a major task of the finance minister in the next fiscal.
As per the IMF conditions, the government will have to increase energy prices by December this year. So, it should take measures to control inflation in the first place, he added.
The finance ministry should concentrate more on revenue earning from local sources and improve relation with the development partners to bring more foreign loans, Akbar Ali added.
Ahsan H Mansur, executive director of Policy Research Institute, told daily sun that high inflation remains a great concern as most the people are living below poverty line in the country.
Any change in subsidy volume will push up inflation rate essential prices, taking the people under poverty line to more vulnerable situation, he added.
The upcoming budget will introduce fresh Value Added Tax (VAT) policy as per IMF recommendations. As a result, the tax net would spread its wings, sources in National Board of Revenue (NBR) said.
Under the new VAT policy, NBR will impose minimum 1.5 to maximum 9 percent VAT in services and sale. At present, the rate is 6 percent.
Besides, a big reform in the income policy will be announced in the next budget with an increased tax at source at 1 percent from existing 0.70 percent, sources in NBR said.
NBR officials said the government may allow undisclosed money in only four sectors - real estate, stock market, infrastructure bond and establishment of new banks and investment by director of banks in their respective banks.
Meanwhile, the surcharge on personal wealth or assets (movable and immovable) exceeding Tk 20 million will also continue next fiscal alike the outgoing fiscal year.
But, NBR is unlikely to reduce taxes on SIM (Subscribers Identification Module) cards and mobile phone calls with a view to increasing its revenue income but 2 percent tax on talk time will be proposed, finance ministry officials said.
The Daily Sun/Bangladesh/ 7th June 2012