The government will have to come up with some creative measures as the economy faces an impending shock of unprecedented scale, said economists
Tax officials find this year extraordinary.
It is an usual practice for businesses to come up with tax proposals, mainly seeking tax rebates in the subsequent national budget. But this time the National Board of Revenue (NBR) is overwhelmed with pleas for tax cuts as it starts preparing the next year's budget.
And much of the requests are not just 'opportunistic' appeals, but genuine cases of businesses being ravaged by the coronavirus pandemic.
This presents a hard choice for the NBR because it has fallen massively behind the tax collection targets over the last few years. As a result, Bangladesh's tax-GDP ratio is one of the lowest in the South Asian region.
The situation has become even more precarious as the national revenue board has lost quite a big chunk of revenue because of extensive tax rebates this fiscal year.
Therefore, the government is in a dilemma over offering large-scale tax cuts to help businesses.
At the end of the first eight months of the current fiscal year, when the pandemic was yet to hit the economy, the government was facing a revenue shortfall of around Tk50,000 crore.
This puts the government in a quandary.
Even then, the government will have to come up with some unusual measures as the economy is experiencing an unprecedented shock, said economists.
The government may increase public spending by borrowing money from the banking system, though its bank borrowing has already exceeded the entire fiscal year's target due to revenue shortfall.
The good news, however, is that the banking sector does not have a liquidity crisis.
But there is still a risk factor. Excessive borrowing by the government may shrink the space for private entrepreneurs to get loans. Private sector credit growth has already hit the lowest ebb in a decade.
Mobilisation of resources from external sources such as the World Bank, IMF and other donors may offer some solace.
Economists suggested that the government should negotiate with global financial institutions and donors to avail a big amount of assistance.
But that too may not be enough to meet the growing demands of the business sectors as the crisis is growing bigger.
"We don't know exactly how much the pandemic is going to cost our economy," economists noted, adding that Finance Minister AHM Mustafa Kamal and his team may scramble in preparing the new budget.
One thing is certain ─ the finance minister and his team will not need to spend much time searching for the nature of new extraordinary measures, they argue.
Economists across the globe and some advanced economies have already shown the way: Be prepared for big spending. As economists say, "Bring out the big artillery to fight the economic fallout of the pandemic."
Kamal will need to bring out the "big artillery". But he will find it difficult to prepare a big artillery in the current state of our economy.