THE national budget for the 2025 financial year, which the finance minister proposed in the parliament on June 6, is high-deficit, with an aim to make up for the shortfall with resources coming from domestic borrowing, 20.2 per cent of the total outlay of Tk 7,970 billion, and foreign loans, 11.4 per cent, along with expected foreign grants of 0.5 per cent. The budget proposal officially described as a 鈥楳arch towards Smart Bangladesh following the Path of Sustainable Development鈥�, does not appear to be a march on the path of sustainable development, especially considering the huge resource deficit. Whilst this has been the way resources are expected to come from, the way resources are planned for spending or used betrays the awkward nature of the financial planning and the economy. The highest resource allocation, 14.2 per cent of the outlay, is meant for interest payment. Interest payment for domestic and foreign borrowing would account for 22 per cent of the government鈥檚 operating budget of Tk 5,150 billion. The government would need to pay back Tk 205 billion in foreign currency, putting an additional pressure on the foreign exchange reserve, which has already come down to $18 billion from $48 billion in August 2021. But the allocation for the priority agriculture sector has remained almost unchanged at 3.8 per cent of the outlay.
The budget proposal offers the immoral scope for legalising undisclosed property and assets by paying tax at a flat rate of 15 per cent while others would need to pay taxes by up to 30 per cent, which is not only unethical but also both discriminatory and counterproductive for the real economy. This appears a clear moral government support for holders of undisclosed money. Similar measures in the past, introduced amidst criticism, fell almost flat. The allocation for education, which was 11.5 per cent of the outlay of the current budget, has been proposed at 11.88 per cent of the outlay for the forthcoming budget. The allocation comes down to 1.69 per cent of gross domestic product in the coming financial year as opposed to 1.76 per cent of gross domestic product in the outgoing financial year. Corporate tax has also been reduced by 2.5 per cent on conditions. The budget has proposed to source 38.1 per cent of its tax revenue of Tk 4,800 billion from value-added tax, which would constrain the poor, the middle- and fixed-income groups, while income tax is expected to generate 36.6 per cent of the tax revenue, showing a high dependence on the indirect tax.
The budget proposal has sought to contain inflation down to 6.5 per cent in the forthcoming financial year. But this raises question whether the government would be able to do this as the government sought to keep inflation at 6 per cent in the outgoing financial year but ended up reaching a near double-digit figure, which well-meaning experts believe is even higher. The government has given no guideline in the budget proposal on how to bring down inflation. Unless there are other measures put in place and they are stringently followed, only a monetary policy of contraction and an increase in interest rates are highly unlikely to do wonders. In such a situation of high inflation, no increase in the tax-free income threshold, which was increased to Tk 350,000 from Tk 300,000 in the outgoing financial year, is unacceptable. The way the government seeks to increase its revenue would very well constrain ordinary people, especially the poor and fixed-income group, as the burden would fall on them in various indirect manners. Besides, the expansion of value-added tax and less reliance on income tax to generate higher revenue and to keep the budget deficit within a tolerable level is reflective of the prescription of the International Monetary Fund given for a $4.7 billion loan that the government started taking out from the international lender in the outgoing financial year.
The government must, in view of all the unrealistic propositions and constraining factors, review all that needs changes for a meaningful impact before the passage of the budget.
