The Centre for Policy Dialogue (CPD) has said the proposed budget for fiscal year 2019-20 will further widen the financial and social inequality in Bangladesh.
“The incumbent government had made promises to alleviate poverty and inequality in its election manifesto. However, there are no directives on countering the rising social and financial inequality in the proposed budget,” said Prof Rehman Sobhan, chairman of the think-tank’s trusty board, on Sunday.
Recommending the implementation of a more transparent tax exemption process, the CPD chairman said: “The government is expanding the tax net, but is also lowering the tax rate. It is offering tax exemptions to many sectors.
“The government should be more transparent in declaring why some are getting tax exemptions, how much tax is being exempted, and how it is impacting the economy. The budget should also contain clear directives regarding the struggling banking sector, and what action will be taken against loan defaulters.”
‘Let some banks fail’
Attending the event, several noted economists, politicians and businessmen discussed the proposed budget and its perceived inconsistencies.
“There is no participation of the people in the proposed budget. Liquefied Natural Gas (LNG) is being imported for around 30 percent more markup price compared to the international market rate,” said former commerce minister Amir Khasru Mahmud Chowdhury.
“Expenses for many projects, such as the Rooppur Nuclear Power Plant, have been noted as being several time more compared to similar projects in India,” he added, terming the mega projects “mega white elephants,” a phrase used to describe impracticality and extravagance.
Claiming that some banks are being pushed towards the brink of bankruptcy, Khasru recommended letting some banks fail instead of refinancing them with taxpayers’ money.
Present at the discussion, BNP lawmaker barrister Rumeen Farhana said: “Defaulted loans have become a pandemic in the country, presently standing at Tk110,000 crore, and reaching Tk155,000 crore with the write-off factored in.
“If we consider hidden loans as well, many economists believe the amount of bad loans will exceed Tk300,000 crore – a very dangerous situation indeed.”
Farhana also mentioned that Bangladesh has the fastest growing ultra-rich population, but it also has the third fastest growth of poor population.
Adding that the rate of poverty alleviation has slowed down, she said the proposed budget has no mention of tackling the rising inequality between the rich and the poor.
BNP Executive Committee member and businessman Tabith Awal said: “The proposed budget has no directive on boosting the private investment sector. However, a proposal was made to borrow Tk47,000 crore from the banking sector to cover deficit.
“What would happen to the investment sector if such large amount of loan is taken out amid the ongoing liquidity crisis in banks?”
Discussing the ongoing defaulted loans and liquidity crisis situation, former chairman of the Association of Bankers, Bangladesh (ABB) Nurul Amin said: “The people have turned away from deposit schemes because of 15 percent source tax, high excise duty and different types of currency taxes.
“Emergency measures should be taken to cut down the amount of defaulted loans.”
‘Friendly to businessmen, not businesses’
Former finance minister M Saiduzzaman has termed the proposed budget friendly only to businessmen, and not to businesses.
“Bangladesh is the only country in South Asia which has comparatively low budget allocation in education, health and social safety net sectors. Each year, more than 66 lakh people fall below the poverty line after bearing the high healthcare costs,” Saiduzzaman said.
“With the implementation of the new VAT law, the burden of tax on general people has been increased further, but the surcharge limit has been dropped for the benefit of the businessmen and wealthy,” he added.
Meanwhile, former lawmaker Fazlul Azim opined that the devaluation of taka is necessary.
“All competitor countries have devaluated their currencies, but in Bangladesh the value of taka’s exchange rate with US dollar is higher than its actual value. Importers are facing problems due to this issue,” Azim said at the event.
Criticising the decision to increase source tax on cash incentives, Federation of Bangladesh Chambers of Commerce and Industries (FBCCI) Adviser Manjur Ahmed said: “The cash incentive offered to businessmen is very minimal.
“Moreover, a 10 percent tax has been imposed on the incentive this year. The newly imposed tax is discouraging many businessmen from taking the facility.”
CPD’s Distinguished Fellow Dr Mostafizur Rahman coordinated the discussion, while Executive Director Dr Fahmida Khatun presented the keynote speech. Planning Minister MA Mannan was present as the chief guest.
Pointing out that there is still room for discussion regarding the proposed budget, the minister replied to criticisms at the dialogue, saying: “During the first stages of development, it is natural for some inequality to form in a country.
“The primary objective of the government is to bring down the rate of poverty. The market is controlled by the market lords, and the budget is a reflection of it.”
Kazi Nabil Ahmed, lawmaker and a member of the Parliamentary Standing Committee on the Ministry of Finance, was present at the event.