Finance Minister AHM Mustafa Kamal on Thursday set an ambitious target of 8.2 percent GDP growth for the next fiscal with a comprehensive plan that includes four main strategies although he himself admitted that all calculations about the global economy have turned upside down under the impact of the COVID-19 global pandemic.
"The Asian Development Bank has made a forecast of 7.8 percent growth this year based on our performance in the first eight months. But unfortunately, all calculations about the global economy have turned upside down under the impact of the COVID-19 global pandemic," he said while placing his Tk 568,000 crore , which is 17.9 percent of the GDP, budget proposal in Parliament.
The revenue collection target for the coming fiscal year is Tk 378,000 crore. Of the amount the NBR has been tasked to realize a revenue collection target of Tk 330,000 crore, the Non-NBR revenue collection target is Tk 15,000 crore while the Non-tax revenue collection target is Tk 33,000 crore. Besides, Taka 4,013 crore will come from foreign grants.
The Finance Minister, in his 130-page budget speech with a slogan 'Economic Transition and Pathway to Progress' said since the beginning of the COVID-19 pandemic, the government has taken various steps to combat its fallout.
"We have taken a comprehensive plan to overcome the possible negative impacts of pandemic on our economy and people. Under this plan, we have taken measures that were necessary in the immediate term, and we are implementing some in medium term. We have also taken up a range of initiatives that will be implemented in longer term to achieve the full economic recovery," he said.
About the main four strategies, he firstly said the government will discourage luxury expenditures and prioritise government spending that creates job. Due to sound macro-fiscal operation by the government during the last 10 years, the Debt-to-GDP ratio is still as low as 34 percent. "This provides the country a cushion against any negative macroeconomic implication while we are increasing public spending to overcome the crisis."
Secondly, he said, "We are creating loan facilities through commercial banks at subsidised interest rate for the affected industries and businesses so that they can revive their economic activities and maintain competitiveness home and abroad.
Our third strategy is to expand the coverage of the government’s social safety net programmes to protect the extreme poor and lowly paid workers of informal sector from the sudden loss of their sources of earning due to the pandemic."
He finally mentioned that the government will increase money supply to the economy while making a delicate balance between increased money supply and possible inflationary pressure.
Mustafa Kamal hoped that he will be able to maintain a 5.4 percent inflation in the next fiscal year.
Allocations for different sectors
He said that the total allocation for operating and other expenditures is estimated at Tk. 3,62,855 crore, while the allocation for the annual development program (ADP) is Tk. 2,05,145 crore, where the overall budget deficit will be Tk.190,000 crore, which is 6 percent of GDP while it was 5 percent in the outgoing fiscal.
"Out of the total deficit, Tk. 80,017 crore will be financed from external sources, while Tk. 1,09,983 crore from domestic sources of which Tk. 84,983 crore will come from the banking system and Tk. 25,000 crore from savings certificates and other non-bank sources," he described.
The allocation proposed for the social infrastructure sector in the next budget is Tk. 1,55,536 crore, which is 27.38 percent of total allocation, in which the allocation for human resource sector (education, health and other related sectors) will be Tk. 1,40,222 crore.
The allocation proposed for the physical infrastructure sector will be Tk. 1,67,011 crore or 29.40 percent, in which Tk. 69,553 crore will go to overall agricultural and rural development, Tk. 61,435 crore to overall communications, and Tk. 26,758 crore to power and energy.
A total of Tk. 1,40,265 crore has been proposed for general services, which is 24.69 percent of the total allocation. An amount of Tk. 36,610 crore is proposed for public-private partnerships (PPP), financial assistance to different industries, subsidies and equity investments in nationalised corporations, banks, and financial institutions, which is 6.45 percent of the total allocation.
Another amount of Tk. 63,801 crore will be set aside for interest payment, which is 11.23 percent of total allocation while Tk. 4,777 crore for net lending and other expenses, which is 0.84 percent of the total allocation.
Minister Mustafa Kamal said the government has taken all-out measures to improve the health sector and allocated Tk 22,884 crore while to combat the COVID-19 pandemic, the government is implementing different programmes worth Tk. 5,500 crore under the Health Services Division.
"The government will do whatever is required to be done to address the pandemic. To fulfill emergency requirements, I propose to allocate Tk. 10,000 crore as lumpsum," he said.
He also proposed forming an ‘Integrated Health-Science Research and Development Fund’ of Tk. 100 crore to finance the activities for the development of research in health-education and science and technology.
A high-powered committee consisting of experienced researchers in the health sector, nutritionists, public health experts, sociologists, economists, environmentalists, civil society and other suitable representatives will be formed to manage this Fund efficiently and effectively.
Mustafa Kamal proposed allocating a total of Tk. 24,940 crore for the next 2020-21 fiscal year for the primary education sector while Tk. 33,117 crore for the secondary and higher education sector and Tk. 8,344 crore for technical and madrasa education.
He said the government has taken up a project of Tk. 3,198 crore to promote farm mechanisation while an allocation of Tk. 9,500 crore is made in the next fiscal year for agricultural subsidies.
The minister also mentioned that an allocation of Tk. 5,000 for the Agriculture Refincing Scheme will also be made through Bangladesh Bank in the next fiscal year.
"As in previous years, sales price for chemical fertilisers will be kept unchanged in the next fiscal year irrespective of their import costs, and we will continue to provide incentives to the agriculture sector."
He proposed allocating Tk. 22,489 crore for the agriculture sector in the next fiscal year.
To ensure better social safety net during and after the COVID-19, the government has allocated Tk. 95,574 crore in the social security sector, which is 16.83 percent of total budget and 3.01 percent of GDP in FY2020-21, Kamal said.
Tax, Custom Duty
AHM Mustafa Kamal proposed to reduce Advance Tax (AT) on imported raw materials for manufacturing industries from existing 5 percent to 4 percent and to encourage local textile industries, impose fixed VAT at the rate of Tk 6 per kg from the existing 5 percent ad valorem VAT on Polyester, Rayon and all other synthetic yarn, and at the rate of Tk 3 per kg from the existing Tk 4 per kg on all kinds of Cotton Yarn.
He proposed to increase supplementary duty from 10 percent to 15 percent for all kinds of services rendered by BRTA for car and jeep registration and related services, from 25 percent to 30 percent for chartered aircrafts and helicopters, from 10 percent to 15 percent on the services provided through mobile phone SIM/RIM card, and from 5 percent to 10 percent on locally manufactured cosmetics. Imposition of Supplementary duty at the rate of 10 percent has been proposed on Ceramic Sink, Basin, etc. at the manufacturing stage.
To reduce the consumption of tobacco products and maximise revenue collection from this sector, He proposed to increase various types of duties and taxes on tobacco items.
He proposed for custom duty on onion import to ensure fair market price for onion farmers, encouraging onion cultivation and reducing dependency on imports.
The Finance Minister said that at this criticial juncture in the wake of the outbreak of COVID-19 pandemic, topmost priority of the government is to save people from being infected by the virus.
"At the same time, it is incumbent on us to maintain the momentum of the economy to ensure the provision of food and clothing for the people," he said.
This budget, he said that will be the tool as the country move towards overcoming economic recession and establishing the foundation for desired economic success in the future in continuation of past development.
Meanwhile, he mentioned that the IMF has projected that Bangladesh's growth in the next year will be 9.5 percent.
"The vast darkness that has shrouded us will certainly go away one day. It is evident from the history that the Bengalis as a nation is an epitome of bravery and valour. We sailed through many crises and disasters in our national lives using our collective strength."