Finance Minister AMA Muhith places the proposed budget for the 2011-2012 fiscal in the Jatiya Sangsad (JS) today (Thursday). The total outlay of the proposed budget is likely to be around at Tk 1.64 trillion, up by 24.25 per cent or Tk 320 billion from that of the original budget of the outgoing fiscal.
The new budget is expected to address a few major challenges such as the rising inflation, widening budget deficit, mobilization of more domestic resources, ever-increasing subsidy component and slowdown in domestic as well as foreign investments.
The budget for fiscal 2011-12 will be Mr. Muhith's third budget as the finance minister of the incumbent government.
Though the point-to point inflation rose to 10.67 per cent in April this year, showing no sign of abating in the near future, the financing minister, according to sources, will make the inflation projection at 7.5 per cent for the upcoming fiscal.
The size of the annual development programme (ADP) for 2011-2012 has been fixed at Tk 460 billion, up by about 16 per cent or Tk 108.70 billion from the original ADP for the current fiscal year.
The target for revenue collection is likely to be set at around at Tk 1.18 trillion for 2011-2012 fiscal. Of the total, target for NBR revenue will be Tk 918.70 billion, while the rest will be mobilized from non-tax and non-NBR sources, officials said.
The proposed budget is likely to increase fees in some areas falling under non-tax and non-NBR tax revenue heads. The fees for passport, renewal of passport, driving license, land registration etc., are likely to be raised in the proposed budget.
AB Mirza Azizul Islam, former finance Adviser to the immediate past caretaker government, talking to the FE said tackling the problem of high inflation will be the first and foremost challenge for the finance minister. The second, he said, will be allocation of adequate resources for the safety-net programmes, meant for the poor and underprivileged segment of the society. And the third, according to him, will be the reversing the declining trend in both local and foreign investments with a view to generating more employment opportunities.
"High Inflation, bigger investment, declining foreign aid, pressure on balance of payments and declining remittance inflow would obviously emerge as major challenges for Muhith in the next budget," Dr. Islam said.
He said the government has to address the problem of slow implementation of the ADP and encourage the private sector investment to stimulate the economy as a whole.
According to the latest information, budget deficit in the coming fiscal has been estimated at around Tk 453 billion, which is equivalent to five per of the GDP. The deficit would be met through foreign loans of Tk. 180 billion and borrowings amounting to Tk 201 billion and Tk. 70 billion respectively from banking system and non-bank sources, reliable sources said.
The proposed budget is likely to offer tax benefit to small and medium enterprises, introduce National Insurance policy for elderly people, amalgamate Customs house (import) and Customs House (Export) in Chittagong, and raise the allowance for freedom fighters and beneficiaries of social safety net programmes.
Besides, the Value Added Tax (VAT) on mobile SIM is likely to be reduced from Tk 800 to Tk 600. The tax-free income level will be raised from Tk 165,000 to Tk 180,000. VAT on cigarettes might be increased by 2.0 to 3.0 per cent, while customs duty on LPG is likely to be reduced.
The proposed budget for 2011-2012 is likely will bring about no changes in the corporate tax slabs. The zero duty for importing food items is expected to continue. Interest rates of savings certificates are likely to be raised and the tax holiday facility is likely to continue up to 2013.
Money whitening facility in any form will not be offered in the budget, a source confirmed.
Mustafizur Rahman, executive director, Centre for Policy Dialogue (CPD) said additional resource mobilization, arresting inflation and raising the investment are three major challenges for the government.
"Additional resource mobilization using both tax and non-tax sources should get top most priority in the budget," Mustafiz told the FE.
"Addressing the challenge of combating high inflation through appropriate fiscal measures and higher production and productivity will be the next challenge," he added.
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