Implementation an uphill task | 2019-06-15 |

Mixed Reaction to Proposed Budget 2019-20

Implementation an uphill task

Economists warn

15 June, 2019 12:00 AM printer

Noted economists have warned implementation of the new budget will be the main challenge for the government as 'administrative inefficiency and legal complexity' may appear to be a major obstacle to it, reports UNB.

They said the rate of budget implementation has decreased to 75-80 percent from 93-94 percent over the last one decade following revenue shortfall, lack of institutional capacity and required reforms.

Dr Mirza Azizul Islam, who presented two budgets during the 2007-2008 period as an adviser to the caretaker government told UNB that there are many things in the budget about which there is no clear guideline. "Implementation of the budget will be the main challenge. Administrative inefficiency and legal complexity are the main obstacle to the implementation," he said.

He said there is no clear direction about the ease of doing business, proper implementation of the Annual Development Programme (ADP) projects, good governance and banking sector. "Besides, the budgetary allocation for social safety net is not enough."

Wahiduddin Mahmud who placed a budget in 1996 as a caretaker government adviser said the challenge lies with the budget implementation. "From the look of the revised budget for the outgoing financial year and its state of implementation up to the month of March reconfirms the main weakness of our financial management, namely the persistently low revenue mobilisation that routinely misses its target."

"It appears from the budget speech that the strategy for the upcoming budget will be to substantially improve revenue collection by initiating a campaign against tax evasion and not by hurting the common people through increases in the tax rates," he said.

The noted economist said that is indeed a noble goal and, even if partially successful, such a campaign can begin to make a real difference in our fiscal management. "Admittedly, a change in the culture of tax evasion will not be easy, but the campaign should have started much earlier."

He also said in spite of the visibly good intentions to allocate more funds for public social spending on health, education and the safety nets, the low rates of revenue mobilisation remain the most formidable constraint, on top of the problem of poor service delivery.

Wahiduddin said while the new VAT law will now finally be implemented, its effects on prices and business incentives remain unclear because of lack of articulation. "It's not clear what principles have been followed in applying VAT at different rates instead of the initially proposed single rate. The VAT rates may vary according to stages of the supply chains from import and production to wholesale and retail trade, which are similar to the existing truncated rates and are justified by the lack of capacity of businesses to claim credits for VAT paid at the earlier stages."