adv-06 adv-06

Critical thoughts on ideal National Budget


AKM Asaduzzaman Patwary
Sr. Research Fellow, R&D Dept. DCCI

national-budget-02National budget is the year-long economic blueprint of Bangladesh. Every country declares the estimated economic operation expenditure. Bangladesh being a Middle income country needs to follow a structured national budget outline for the consistent economic growth. The current economic time of Bangladesh is very challenging and difficult considering the geo economic context. However, The upcoming fiscal year will also look into another important element is VAT &SD act 2012 which remains pending for last 4 years. After huge discussion and debate the much talked Vat act may be in light through agreement of business community and government agencies. The new Act may be implemented with five tier rates i.e. 2, 5, 7.5, 10 and 15%. The act has been customized to give as much leverage as possible to the business community though there is no opportunity of input tax credit in import stage the vat is 15%. There is also a debate whether this upcoming national budget will be revenue friendly or not as this revised VAT rate will severely limit the revenue collection of the Government. It is noticed that Revenue of Government always earned lower than revised and actual target each year which leads to deficit budget by minimum 5% each year. In India, the interim budget has been declared where deficit budget kept lower within 3.4% and budget size is around $400 billion. The efficiency lies with keeping deficit low.

In our context, always a sizable budget is estimated but it remains pointless. The economic mapping and planning always helps to keep and make optimum. The change in budget amount later declaration should not vary more than 5% otherwise it seems irrational and lack of good planning.

Revenue collection, generation should not be centered on conventional NBR revenue and non NBR tax sources since size of economic activities are expanding and new sectors are being added to economy. As well as, Growth rate of the economy is gradually increasing, therefore, revenue shortfall should be minimum and low. Economy should keep the budget amount rational as the extreme expenditure budget creates tax burden on tax payers throughout the year.

The national budget of TK. 5.23 trillion is apparently large and substantial and we feel that for a growing economy like ours there may be some rational but expenditure escalation and revenue shortfall and overestimated revenue target lead to challenge in budget implementation and success of national budget.

We have always noticed that budget is treated as pro people, ambitious and development friendly and many big words as the legacy of the government but efficient budget implementation depends on how effectively and properly resources are allocated across all sectors ensuring proper reach out.

Revenue budget is estimated BDT. 397000 crore of which NBR will collect BDT. 341700 crore whereas it was estimated BDT. 280000 crore in last year. The extreme increment in NBR revenue collection may create new challenges for the businesses and for the government as well. Since large budget is estimated based on ambitious and optimistic revenue collection, these large targets fail to large extent. Therefore, realistic and fact based revenue target may help Government, NBR and concerned agencies to make good revenue projection and ease and supplement revenue realization having minimum impact on mass people, business and tax payers as well as pave the way for optimum resource utilization and allocation among stakeholders.

screenshot-123In a sense, austerity mindset in expenditure and identification of budget allocation need are useful in ensuring success in national budget of a particular year. There is always a correlation of expenditure and revenue and resource mobilization. The correlation is critical in mapping national budget to protect the tax payers and all stakeholders.

Government spends huge money as grant for social safety net programming aiming at supporting vulnerable people in the society. Instead of vulnerable group support funding, the fund may be used for some rehabilitation and their engagement in society which may reduce further budget expansion and encourage their permanent livelihood and social existence.

This budget is going to allocation BDT. 2.2 trillion Development budget for meeting incremental need of inclusive and equitable development across the country. However, the incremental increase in ADP allocation has no harm on the economy but the allocation of ADP fund should be more concentrated on hardcore and wide-raging physical infrastructure related works so that investment in infrastructure creates cascading impacts on people, private sector, economic operations on rural and urban communication connectivity to release more economic premium to rural economy.

ADP budget is estimated large each year but the selection and implementation of ADP projects need to be rational, need oriented and timely. In most instances, project implementation are not rated and assessed effectively which engender cost and time over run and limitless sufferings for the economy. ADP implementation rate is measured based on resource allocation but it should be based on project commissioning time and objectives set. As outlay in ADP projects has also trickle down impacts on revenue collection, generation and efficiency of fund utilisation above all on tax payers’ money. National Budget targets estimated 8.20 percent growth in next fiscal year but recent growth trend looks positive and growth may happen but with high employment rate is insignificant and pointless for the economy. Therefore, employment friendly growth initiative is be visible in national budget programme.

Taking into account the entire gamut of national budget operation and management, there are huge scopes, potentials, issues and challenges are to be addressed in future. To improve the Budget planning and implementation, the following need to be addressed:

  1. A central and independent Budget preparation, monitoring and implementation oversight office need to be made under the auspice of Prime Minister’s office supported by Ministry of Finance and other Government agencies.
  2. Parliamentary standing committee on national budget needs to be empowered and strengthened to approve and reject the public accounts and national budget adjustment.
  3. Accountability and transparency in cost estimation and expenditure in all government agencies need to be strictly monitored.
  4. Alongside revised or supplementary budget, the mid-term budget implementation and evaluation is needed for clarity
  5. Project implementation reporting is key and it needs to be reported to Cell of Principal Secretary of Prime Minister’s office.
  6. screenshot-124For effective and regular oversight of infrastructure and ADP infrastructure projects under PPP or G2G modalities, a high-powered oversight authority led by Hon’ble Prime Minister Government of Bangladesh can be introduced named as National Infrastructure Development monitoring and advisory authority (NIDMAA).
  7. Tax net needs to be expanded and small tax office outlets or wings can be set up across the country including Upazillas level to bring diverse sector and industries bring under tax network. Thus, tax burden can be rationalized across the board.
  8. New and untapped non-tax revenue sources need to be identified through focused survey by the local government agencies or district administration cross the countries.
  9. Revenue collection sources should be rational. Relentless dependence on NBR sources seems unilateral other sectors should be brought under revenue network.
  10. NBR has to take some innovative thoughts to bring more people in tax net and ease tax payment process as well as events and programme to promote and encourage awareness of people of tax payment responsibility to Government and return and contribution to national building through tax payment.
  11. All other projects need to be brought under strong monitoring likewise fast track projects monitoring.
  12. Financial sector including banking sector and capital market need to be checked and discipline needs to be ensured in this sector as this sector is the lifeline of economy and major source of financing all along.

Alongside these aforesaid recommendations, national budget components and elements are to be reasonable and every single penny expense should be very rational and careful so that an ideal budget state can be developed. Since Bangladesh is going through the socioeconomic transformation of graduation into developing economy and SDG, the budget planning and implementation strategies are very critical and important in the days to come. The 5% deficit budget legacy needs to be changed and should not be any longer later economic graduation. Considering upcoming economic milestone of 2030, 2041 and other upcoming game changing visions, national budget preparation and planning need to participatory, engaging and inclusive by all stakeholders and smooth management and implementation plan are to be formulated. An integrated and fiscal and monetary policy coordinated and result-oriented national budget is the much needed desire of the nation.