Bangladesh News

Any instability in the political climate and disturbances in transition to democracy will bring in major challenges for implementation of the proposed budget, the Centre for Policy Dialogue (CPD) observed in a post budget analysis yesterday.

The private policy research think-tank said according to its expenditure allocation the budget may be called a ‘pro-people welfare budget’, but implementation of it will be difficult with the existing poor capacities of the government.

“Budget implementation will be difficult without proper transition to democracy,” CPD Executive Director Prof Mustafizur Rahman said during a post budget analysis news briefing at Brac Inn Centre in the capital, which was telecast live on private TV Channel i.

“Maintaining macroeconomic stability for smooth transition of power to a newly elected government during the first six months of the next fiscal will be a major challenge,” he said.

CPD also suggested middle of the course review of the policies to ensure proper implementation of the budget.

The major budgetary challenges CPD identified for the next fiscal are, implementation of the electoral roadmap, implementation of a large part of the budget by an elected government, and maintaining adherence to the second phase of poverty reduction strategy.

The present caretaker government which placed national budgets for two consecutive fiscal, is likely to hand over power after the upcoming national election scheduled to be held in the third week of December this year. So the second half of the next fiscal is supposed see a newly elected government at the helm of the state.

Analysing the proposed budget, the civil society think-tank however termed it ‘investment friendly’ and also ‘populist’.

Commenting on the Tk 99,962 crore annual expenditure, announced on Monday by the finance adviser, CPD observed that the budget is not too large compared to the current budget’s spending allocation for development interventions, and increases in pays, allowances, and subsidies, specially taking inflation into account.

On expansion of the social safety net, Prof Mustafiz said the budget reflects the government’s poverty reduction strategy.

However, he said no target has been set in the budget regarding employment generation. He also questioned its implementation with the existing poor state of the local government system.

“This is public money that needs to be spent targeting the right people, no misuse will be acceptable,” Prof Mustafiz warned.

He said decreases in import duty slabs from 5 percent to 3 percent, from 10 percent to 7 percent, and from 20 percent to 15 percent will contribute to the development of local industries, and help stabilise price spiral, while increases in customs duties on some items will protect local industries.

The CPD executive director also believe that continuation of tax holidays will be helpful for employment and income generation. He hailed the government for giving tax breaks to women and elderly citizens.

“Recognition in the budget of growing inequalities is another distinguishing feature,” he added.

The think-tank also said the government proposed measures for stabilising soaring prices of essentials, like withdrawal of duties on edible oil, lowering of duties on import of food grains, enactment of consumers’ rights protection law, procurement of 32 lakh tonnes of food grains, reduction of tariff on agricultural inputs and machinery, and introduction of a climate change fund.

Responding to a query, Prof Mustafiz said there is no reason for prices of essentials to go up following the announcement of the proposed budget.

CPD also thinks the revenue target of Tk 69,382 crore is achievable considering the growth in the current fiscal. Provision for legalising undisclosed money might again contribute towards the growth, it observed.

Prof Mustafiz observed that the proposed budget aims to widen the tax net, but he also pointed to the lack of details on how that will be achieved.

Financing the huge deficit proposed in the budget will be another major challenge for the caretaker government, he said.

The deficit has been estimated at Tk 30,580 crore or 5 percent of GDP for the fiscal 2008-’09.

“Attention must be paid so that private sector financing is not hampered by the government’s increased borrowing from banks,” Prof Mustafiz added.

CPD observed that reduction in the annual development programme size is not desirable rather improvement is needed in its implementation.

“Proposed GDP growth rate of 6.5 percent is quite achievable, but for that to happen investments must increase,” Prof Mustafiz said.

He said his organisation in pre-budget discussions with the caretaker government had mentioned nine challenges, which they believe the government paid attention to in formulating the budget.

Uttam Kumar Deb, Anisatul Fatema Yousuf, Fahmida Khatun and other CPD officials were present at the briefing.