Budget aims high

One could discern another very valid reason for setting higher financial and physical targets for the budget. The poverty reduction strategy required 7.0 per cent GDP growth per year in order that we can achieve the millennium goal of reducing poverty by half before the year 2015. The estimated GDP growth at 5.5 per cent is way short of the required annual target. Saifur Rahman has had to propose an unprecedented expansion of the tax net to add to his projected receipts in terms of foreign aids and grants and borrowing from the banking sector.

The expansion of the tax dragnet with an extensive VAT realisation programme increases the possibility of corruption among tax officials. The tendency to evade taxation in collusion with them may increase; business owners and shopkeepers have often complained of oppressive demands from petty tax officials on the one hand and the extortionist mastaans on the other. This may hold true about small and medium-size industrial houses. Big business may not be spared, too. The point we are driving at is that with the expansion of the tax net there is a greater need for supervision, monitoring and accountability within the tax administration. Otherwise, the whole purpose of encompassing the potentially tax worthy income groups will be defeated.

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As for the dependence on foreign loans of around Tk 90 billion and domestic borrowing worth Tk 60 billion to meet the 'huge' deficit we have to take into account the huge debt servicing of Tk 30 billion and the crippling effect of defaulted loans on the banking sector.

What is important about any higher target of GDP growth is whether we have an income distribution mechanism whereby the incrementals reach the lower strata of the socio-economic structure. Statistics speak for themselves. Whereas in 1995-96 the share of the very poor in the national wealth was only 10 per cent, it dropped to 1.84 per cent in 2000. At the other pole in 1995-96 fiscal, the top 10 per cent of the country's rich owned 34.68 per cent of the national wealth. This in fiscal 2000 rose 40.72 per cent. The new budget does not prescribe any recipe whilst aiming at the higher growth rate as to how the highly skewed income distribution pattern will be given a whiff of symmetry. The slender increases in old age and vulnerable group pensions, trifle helpful as these maybe, are hardly the stuff of which an egalitarian society is made.

After keeping the revenue deficit within control, the next challenge before the government will be to ensure the quality of expenditure under the Tk 20300 crore ADP and its implementation in the core sectors. The way the last ADP was slashed a few times over and messed up, leaves an impression that implementing the proposed ADP worth Tk 20300 crore would be a Herculean task. Since one-third of the ADP is dedicated to poverty alleviation projects, the stake in the implementation is that much higher.

Although the farm subsidy will lead to some job-creation, we believe local industrial productivity has not been helped adequately because of the visible thrust on imports. As a result, employment may not be generated in the manufacturing sector. We can see that an opportunity is proposed to be given to men with black money to whiten their dubious incomes through investment in the share market. In all, some of the fiscal measures as proposed may need to be pruned including interest rate adjustments to improve the ratio between saving and investment.

The middle class, let alone, the poorer segment of the people would be affected by the high prices of refrigerator, sugar, powder milk, spices, cement, fruits, fish, mobile phone et all.

The emphasis on agro-processing industry, information technology, share market, women empowerment and environment is welcome.

We wish the law and order situation had received a pointed attention in the budget as a vital component of the governance issue which is pivotal to economic management and development.