In an effort to maintain economic stability and reduce inflation to 6.5%, a budget of Tk7,97,000 crore has been announced for the fiscal year 2024-25, with a target of achieving a 6.75% GDP growth. This budget is Tk35,215 crore (4.62%) higher than the Tk7,61,785 crore budget for the fiscal year 2023-24, and Tk82,582 crore (11.56%) more than the revised budget of Tk7,14,418 crore for 2023-24.
In the proposed budget, the total operating expenses are estimated at Tk4,68,983 crore, an increase of Tk32,736 crore (7.5%) from the fiscal year 2023-24. In contrast, the total development expenditure is estimated at Tk2,81,453 crore, which represents a modest increase of Tk3,871 crore (1.40%) from the fiscal year 2023-24. This indicates that the operating expenses have increased significantly both in proportional percentage and monetary terms compared to the development expenses.
In the budget, the total revenue income has been estimated to be Tk5,41,000 crore, an increase of Tk41,000 crore (8.02%) from the budget of FY2023-24 and Tk62,999 crore (13.18%) from the revised budget. Of the total revenue income, the revenue collected by the NBR is estimated to be Tk4,80,000 crore, an increase of Tk50,000 crore (11.63%) from FY2023-24 and Tk69,999 crore (17.07%) from the revised budget.
On the other hand, non-NBR tax and non-tax revenues are estimated to be Tk15,000 crore and Tk46,000 crore, respectively, a reduction of Tk5,000 crore and Tk4,000 crore from the budget of FY2023-24, which is Tk4,000 crore and Tk3,000 crore less than the revised budget.
Analysing the budget and revised budget of FY2023-24, it is seen that the increase in non-NBR tax and non-tax revenues in the proposed budget is justified, which would play an important role in reducing the budget deficit. The total deficit in the budget of FY 2023-24 was Tk2,61,785 crore, which has been reduced by Tk5,785 crore (2.20%) to an estimated Tk2,56,000 crore in FY2024-25. The budget deficit as a percentage of GDP has been estimated to decrease from 5.2% in the current fiscal year to 4.6%, which is a positive aspect of this budget.
The budget deficit of Tk256,000 crore is projected to be financed with Tk95,100 crore (37.15%) from external sources and Tk160,900 crore (62.75%) from internal sources. Despite the significant importance of external financing for the current economy, the projected external financing for the 2023-24 fiscal year budget was Tk106,390 crore, which has been revised down by approximately Tk26,597 crore (25.00%).
It is noteworthy that if external financing is not strengthened in the current economic context, internal sources, particularly the banking sector, may face a contraction in lending to the private sector. This is because excessive borrowing from the banking system for budget financing could hinder private investment, create liquidity shortages, and have adverse effects on inflation.
Therefore, if the projected revenue collection and foreign financing do not materialise in a timely manner, implementing the budget will become challenging. Hence, successfully executing the proposed budget will require more strategic and administrative measures than ever before.
An analysis of the total budget expenditure reveals that social infrastructure has been allocated Tk206,569 crore, which represents 25.92% of the total allocation. For physical infrastructure, the proposed allocation is Tk216,111 crore, constituting 27.12% of the total expenditure. General services have been allocated Tk168,701 crore, accounting for 21.17% of the total expenditure. Interest payments are proposed at Tk113,500 crore, equivalent to 14.24% of the total, while Tk83,543 crore has been earmarked for public-private partnerships (PPPs), financial assistance, subsidies, and investments, representing 10.48% of the total.
In comparison, the revised budget for 2023-24 included allocations of Tk 169,044 crore (23.66%) for social infrastructure, Tk218,303 crore (30.56%) for physical infrastructure, Tk149,876 crore (20.98%) for general services, Tk105,300 crore (14.74%) for interest payments, and Tk70,712 crore (9.90%) for PPPs, financial assistance, subsidies, and investments.
It is noteworthy that while the allocation for social infrastructure has increased in both absolute terms and percentage, the allocation for physical infrastructure has seen a slight decrease.
On the other hand, significant progress has been made in public services. In the realm of direct taxation, the maximum tax rate has been raised from 25% to 30%, while keeping the tax-free income threshold unchanged. In the fiscal year 2023-24, various steps were taken to determine tax rates. The tax rate for individuals earning over Tk16,500 was 20%, which has now been increased to 25% for earnings over Tk18,500, and a rate of 30% has been set for the remaining amount.
An analysis of individual structures reveals that while the tax burden on low and middle-income individuals has been reduced, raising the tax rate for high-income earners has balanced income inequality, which is noteworthy.
Regarding corporate tax rates, a rationalisation of economic transactions based on compliance with transparency conditions has led to a rationalisation of corporate tax rates. The tax rate for an individual company has been reduced by 2.50%, and for cooperative societies, the tax rate has been increased by 5.00% to 20%. Despite paying taxes at specified rates, the process of whitening various assets, cash, and cash equivalents has not attracted significant interest from self-regulation to date.
Therefore, it is imperative to have provisions for penalties if income or assets remain undisclosed, given the circumstances. To maintain stability in the current economy amidst ongoing global crises, this budget proposes measures to sustain economic activities, protect local industries, and keep essential commodity prices manageable. To this end, recommendations have been made to revoke supplementary duties on 19 items, reduce supplementary duties on 172 items, and propose exemptions for 91 items from regulatory duties, which will ensure a healthy standard of living and safeguard domestic industries, along with reducing travel expenses.
Furthermore, changes in direct, indirect, and overall tax arrangements will result in relief for the public, easing the burden of living expenses. Special allocations in various budgetary items for social security underscore the government's commitment to protecting the public from inflation. An example of public welfare is the proposal to double the sales of goods in open markets.
The budget proposes various incentives and tax exemptions in agriculture, industry, healthcare, and Artificial Intelligence (AI) or IT sectors to establish new industries and ensure their security. This will attract investment and create employment opportunities. For example, incentives are proposed for cashew nut processing plants, pharmaceutical industry security, reprocessing industry, textile industry, polystyrene and plastics sheet production industry, ferroalloy production industry, LRPC wire production industry, switch socket production industry, electric motor production industry, local cellular phone production industry, motorcycle production industry, etc.
The writer is a Professor at the Department of Accounting at the University of Chittagong and Chairman of Bangladesh House Building Finance Corporation.
BDST: 1434 HRS, JUNE 7, 2024
MSK
