Friday, 29 September, 2023

Budget to adapt to new realities

Govt unveils Tk 7.61trn national budget today

Finance Minister AHM Mustafa Kamal is set to present the Awami League government's 15th budget, amounting to Tk 7.61 trillion for FY24, before the national parliament today.

This budget, larger by 12.34 percent than the current fiscal's $6.78 trillion budget, will be Kamal's fifth in his tenure.   

The present budget is being delivered at a critical juncture. As the government braces for national polls, the fallout from the Russia-Ukraine war and the strict conditions tied to the IMF's $4.7 billion loan have restricted the policymakers from incorporating the populist measures that marked previous budgets.

Under the IMF loan terms, the government is required to increase the Tax-GDP ratio by 0.5 percent in the next fiscal, necessitating revenue boosts and subsidy cuts.

Consequently, the National Board of Revenue (NBR) is widening the tax net and hiking certain existing taxes to raise an additional Tk 480 billion to meet the loan conditions.

The proposed budget is designed to mitigate inflation, currently a key concern, expand the social safety net, spur job creation, and foster notable growth, all geared towards advancing ongoing development and reducing poverty.

The majority of the increased spending will be allocated to loan interest payments. However, development expenditure will also see an uptick in the coming fiscal.

A Tk 2.63 trillion Annual Development Programme (ADP), prioritising the transport and power sectors, has been selected for FY24. Despite this increase, the government will maintain austerity in ADP spending, a continuation of the current fiscal's practice, in light of the prevailing economic crisis.

The budget provides for substantial expenditures, including Tk 4,842.03 billion for operating costs. Of this amount, Tk 943.78 billion is earmarked for interest payments, Tk 800 billion for public servant salaries and expenses, Tk 1.10 trillion for subsidies, and Tk 1,262.72 billion for social safety nets.

The government has set a more ambitious growth target for the upcoming fiscal at 7.5 percent, compared to the current fiscal's provisional estimate of 6.03 percent. Efforts will be made to limit inflation to 6.5 percent, which stood at 8.4 percent in April.

The total investment target for the next year is set at 33.8 percent of the GDP. The government aims to garner a potential revenue of Tk 5 trillion, approximately Tk 670 billion more than FY23. The NBR is expected to collect Tk 4.30 trillion in taxes, and non-NBR revenue is projected at Tk 200 billion, with an additional Tk 500 billion targeted as non-tax revenue.

The ADP allocation of Tk 2.63 trillion will be sourced as follows: Tk 1.69 trillion from local sources and Tk 940 billion from foreign sources. The net foreign loan is projected at Tk 1,270.19 billion, with Tk 30 billion in grants. The overall deficit in the budget is likely to be Tk 2,617.85 billion, or 5.2 percent of the GDP, financed through Tk 1,323.95 billion in local banking sector borrowing.

The government will focus on the ICT sector and power sector to foster 'Smart Bangladesh', and also prioritise the education sector to offset the learning loss from the COVID-19 pandemic.

Special initiatives, including recruiting private agents nationwide, will be launched to widen the taxpayer base, aiming to enhance revenue collection.

These agents will raise awareness about tax obligations, assist in opening tax files and submitting returns, but will not collect taxes. The minimum tax for individuals with Tax Identification Numbers (TINs) earning below the taxable income threshold will remain at Tk 2,000, with the threshold likely to be increased to Tk 3.50 lakh from the current Tk 3 lakh.

A Finance Ministry official revealed plans to install more electronic fiscal devices (EFDs) to ramp up revenue collection, with the aim of deploying three lakh EFDs over the next three years. At present, 9,000 EFDs are operational.