Budget Doesn't Meet Expectations -Bangladesh
Proposed Budget Lacks Adequate Measures for Economic Challenges
The proposed budget includes some positive aspects but overall falls short of addressing the immediate and medium-term economic challenges.
Key Issues:
1. Need for Tightened Budget:
- The macroeconomic necessity was to tighten the budget, especially regarding the domestic financing component of the budget deficit.
2. Domestic Borrowing Concerns:
- The domestic borrowing target of Tk 160,900 crore is likely to increase pressure on the liquidity of both the taka and the dollar in the banking system, complicating the achievement of the ambitious 6.75% GDP growth target and failing to mitigate inflation.
3. Structural Reforms:
- Expectations for substantial structural reforms from this first post-election budget were unmet, with the government avoiding politically sensitive but economically crucial changes.
4. Recognition vs. Commitment:
- While the challenges are acknowledged and change is promised, there is little commitment to actionable steps.
5. LDC Graduation:
- The budget repeats past successes, such as the preferential trade agreement with Bhutan, but provides little direction for future actions, like securing GSP+ in Europe or better market access in China and India.
6. Tariff Rationalization:
- Some steps towards tariff rationalization are welcome, though insufficient.
7. Anti-Corruption Measures:
- Measures like "Anti-Corruption Committees" and "Public Hearing" sessions appear trivial.
8. State-Owned Banks:
- There is a lack of concrete direction on reforming state-owned banks.
Positive Aspects:
- Taxation Reforms:
- Notable improvements include reducing tax exemptions for several domestic manufacturers, which will aid in revenue mobilization and reduce the anti-export bias in trade policy.
This evaluation reflects the insights of a former lead economist of the World Bank's Dhaka office.