Budget reflects no economic reality: Experts07 June 2014 Kazi Zahidul Hasan
Terming the proposed budget for the fiscal 2014-15 as 'over ambitious', the country's leading economists on Friday expressed their doubt about achieving most of the key budgetary goals.They also said that government might face daunting challenge in attaining the revenue collection target and GDP growth set for the next fiscal. Furthermore, implementation of a big ADP and financing the deficit budget would remain challenging for the government. "The proposed budget is as usual and the government's economic policy remains same in the budget," former Bangladesh Bank (BB) governor Dr Salehuddin Ahmed told The New Nation yesterday.He observed that many of the budgetary targets, including income, expenditure and GDP growth were set 'unrealistically' without considering macroeconomic reality of the country."Our expectation was that the budget would be driven by economic reality but we did not see its refection in the proposed budget. So, most of the budgetary goals of next fiscal may not be achieved due to uncertain economic scenario that is prevailing in the country," Dr Ahmed observed.The former BB governor also said that the government has set a higher GDP growth target for the upcoming which might not be achieved due to persistent slowdown in the private sector investment and political uncertainly. Terming the deficit budget 'unrealistic', he said that meeting the fiscal deficit target would be a key challenge for the government as there are apprehensions of a significant fall in revenue earnings and flow of foreign funds due to prevailing uncertainty in the country's political arena. In the proposed budget for FY 15, the budget deficit has been projected at Tk 67,552 crore which is 5.0 per cent of the GDP. To finance the deficit budget, the government has set a borrowing target of Tk 43,277 crore from internal sources and Tk 24,275 crore from external sources."In my mind, the government may not receive the expected foreign fund in the next fiscal and to finance the deficit budget the government will have to rely more on domestic borrowing especially on the banking system which may, in turn, shrink the private sector credit growth," Dr Ahmed said, adding that this will have a negative impact on economic growth and fuel inflation.Expressing concern over the swelling budget deficit, he said it is the red line of the budget and deficit financing would be a key challenge for the government in the next fiscal. He noted that steps should be taken to cut the government's ever rising administrative expenditure in order to contain the fiscal deficit.Terming the proposed budget as 'highly ambitious', the former finance adviser of caretaker government Dr AB Mirza Azizul Islam said, "The key challenge would be for the government in implementation of the budget."He said, " There are uncertainly in the country's political arena and if the political situation deteriorates it will jeopardize project implementation, revenue mobilization and overall business climate and at the end of the day it will affect the economic growth."Besides, falling investment, capital machinery and industrial raw material import, power crisis, infrastructure bottleneck could fade the government's budgetary expectation and economic growth set at 7.3 per cent for the upcoming fiscal, he said. "To achieve the growth target the government has to stimulate domestic investment which remained stagnant for the last couple of years. The investment-GDP ratio now stands at 24 per cent and it has to accelerate to 28 per cent to achieve the path of a high growth trajectory," Dr Aziz opined.He added, "The projected revenue collection target set for the next fiscal is also highly ambitious in context of the present economic situation."Raising the question about the capacity of budget implementation, he said, the government machinery has limited capacity to implement such a big budget, which will in turn may not help the government its budgetary goal for next fiscal.