The government will introduce a new law to prevent capital flights and automation will be emphasised along with the upgradation of the law, says AHM Mustafa Kamal
The budget for fiscal year 2020-21 has been prepared based on a high stake bet, that the Covid-19 pandemic will not last long, a guess that even experts are scared to bet on.
At the post-budget briefing on Friday, Finance Minister AHM Mustafa Kamal said targets in the budget have been set based on experience and achievements Bangladesh has made in the past one decade.
He referred to the International Monetary Fund's (IMF) earlier projection that Bangladesh's GDP would grow at 9.5 percent next fiscal year, but he overlooked the IMF's latest forecast of just 5.7 percent.
Only three days ago, the World Bank forecast that Bangladesh may witness a drastic decline in the GDP to a mere 1 percent in the upcoming fiscal year.
But nothing could stop the finance minister to project an unusually high GDP growth – 8.2 percent – for the next fiscal year.
"If the coronavirus does not last long, we will be able to make up the losses after taking care of negative impacts and will go back to the previous growth trajectory," said Kamal.
Borrowing: The Plan B
He has a plan B too.
If the virus does not go away soon, he knows that all his budget plans and projections, especially with the income sides, will be badly affected and that he will be in a tight position to meet the demands for money to fight the pandemic.
"We will borrow, if necessary. But we are committed to supporting the people."
The finance minister said Bangladesh has a lot of space to borrow as its debt-GDP ratio is around 33 percent, much lower than other South Asian countries.
Kamal also seemed very upbeat about the revenue target proposed in the new budget, which local think-tanks and economists said was not possible at this critical time.
"Automation in the tax system can enhance revenue-GDP ratio to at least 15 percent from present 10 percent. It will be a big sum of money," he said.
The finance minister has proposed a Tk3,78,000 crore revenue target for the next fiscal year, up from Tk3,48,069 crore for the outgoing year.
But analysts and revenue officials said the target is "too lofty" to achieve, given the present situation and an uncertain future.
NBR Chairman Abu Hena Md Rahmatul Muneem said it will be very challenging to achieve the target if the coronavirus persists longer.
Muneem said there was a practice to increase tax collection from the existing taxpayers in order to meet the increasing target, but this time the focus is on expanding the network.
On the estimate to set private investment at 25.3 percent of GDP next year, the finance minister said he expected lots of investments, both from low-cost domestic sources and foreign ones.
According to an estimate of local think tank Centre for Policy Dialogue, the country needs a staggering Tk4,46,000 crore additionally to take the private investment to the targeted level.
"We know how to get foreign investments. We will ease laws," said the minister. He said Bangladesh got $3 billion foreign direct investment last year, which was less than a billion a few years ago.
There will be no discrimination between local and foreign investors, he stressed.
He was also hoping for an investment boom from local companies.
"High lending rate was a major obstacle for entrepreneurs. After long efforts, the rate has been capped at 9 percent," Kamal said, expecting people will not take their money out of the country.
Funding to be made for quality health services
The finance minister emphasised improving the quality of public health services and committed necessary finance for it.
He also focused on the much-talked about health sector.
"There is no instance of providing TK10,000 crore as a block allocation for a single sector. We have done it to ensure quality health services. The government will provide money to the sector as much as needed," said Kamal.
However, the Finance Secretary Abdur Rouf Talukder, also participating in the briefing, said allocation to a ministry depends on its ability of fund utilisation, but the health sector failed to utilise their allocation in the last five years.
The sector requires more money but it is not easy to increase or decrease allocation for a ministry sharply without increasing its implementing capacity, he said.
The secretary also said the health sector will be funded from the block allocation when it will present more projects or programmes.
'Added mobile service charges to not affect users'
Commenting on the additional 5 percent of supplementary duty on mobile services, the NBR chairman said, it will not be a burden on users.
"A lot of people talk unnecessarily over mobile phones. Many even die in train accidents while speaking over mobile phones."
He said that mobile phone call rates are very low in Bangladesh and that people are comfortable with it.
'New law coming to prevent capital flight'
Lawsuits have been filed against people involved in the capital outflow from the country, said Finance Minister Mustafa Kamal.
He declared the government will introduce a new law to prevent it. Automation will be emphasised along with the upgradation of the law.
Replying to another question, the minister said the capital market is enjoying more facilities compared to those of other countries. Moreover, the government is keen to enlist more public companies to the capital market.
Planning Minister MA Mannan, Agriculture Minister Abdur Razzaque, Advisor to the prime minister Tawfiq-e-Elahi Chowdhury, member of the Planning Commission Dr Shansul Alam, secretary of Finance Division, NBR Chairman, secretary of banking division, and the central bank governor also attended the virtual briefing on the proposed budget.