Budget appears similar to previous ones, lacks necessary guidance to overcome transitional crisis: CPD

The proposed budget for the upcoming fiscal year 2024-25 (FY25) appears to be a repetition of previous ones, lacking the necessary guidance to overcome the transitional crisis we currently face, the Center for Policy Dialogue (CPD) said in a statement today (6 June).

"We had high hopes for this budget to be innovative, creative, and to include bold steps. In times as challenging as these, traditional approaches to budgeting may fall short in solving complex problems," the civil society organisation said shortly after the budget was placed in the parliament.

Congratulating the finance minister and the deputy finance minister on their first budget, CPD said the budget is very important for it is the last budget of the 8th Five-Year Plan.

"We are going through an economic crisis, and the budget is a powerful tool to brave the crisis. Because, allocations to various sectors, distribution of wealth, and various financial policies such as tax impose, tax rebate, rejuvenating the economy and relieving pressure from citizens — all are conducted through the budget."

Referring to its budget proposal calling for changes to the tiers of tax structure, CPD said the National Board of Revenue (NBR) has kept the tax-free income threshold at Tk3.5 lakh. 

"Afterwards, the tax rate has been fixed as 5% for the next Tk1 lakh, 10% for the next Tk4 lakh, 15% for the next Tk5 lakh, 20% for the Tk5 lakh, 25% for the next Tk20 lakh.

"During Covid-19, the tax on the ultra-rich was reduced to 25% from 30%. We proposed to raise the rate to its previous position. We can see that provision in the budget," said CPD.

The change in the tax structure and the new tax rate as a positive sign, it stated

However, CPD said it is disheartening to see the provision to allow black money whitening by paying 15% tax. "We can not support this provision." 

From the perspective of social justice and social equality, it is not expected at all, CPD said, adding that the government can not gain much tax from it either. 

Speaking about the proposed price reduction on a few commodities, CPD said, "It is indeed a good proposal, but the question arises how to implement the steps. We see that many times, the price reductions do not reflect in the market. Market regulation is important here. 

"Often, commodities are sold at a higher price citing the budget. It has to be monitored as well. As we have said before, no one policy can solve a crisis." 

Thirdly, CPD said the lower-income people are suffering greatly from the price hike of daily necessities and have to cut their livelihood costs to cope up.

Saying that the social safety net plays an important role here, CPD noted that the size of social safety budget has increased. "It was 17.0% in the previous fiscal year, it is 17.1% in this fiscal year. It was 2.4% of the GDP in the previous fiscal year, it is 2.43% in this fiscal year. "

However, analysing the social safety allocations, it noted that pensions for government employees and their families, interest payment of savings certificates, agriculture subsidy, budget for freedom fighters are included. 

"If you take these sectors out of the welfare budget, you would find that the absolute amount for actual welfare has decreased, let alone increased," CPD said. 

If these three sectors are removed from the social safety budget, namely pension for government employees and their families, interest payment of savings certificates, and agriculture subsidy, then the welfare budget becomes only 9.2% of the budget and 1.32% of the GDP, stated CPD.

"We think that ballooning the welfare budget, which should have been dedicated towards the extreme poor and the destitute, who are dependent on government support, is not right. The increased budget should be used for them only." 

Speaking about debt repayment, CPD said the amount of debt, whether foreign or domestic, is increasing every year. A significant portion of the deficit will be financed through bank loans.

Recently, the government has taken substantial bank loans, and in this financial year, 5% of the deficit will come from local banks, CPD said, adding that these loans also incur interest, contributing to the debt burden.

"If the government borrows extensively from local banks, it might limit the availability of loans for the private sector, hindering their investments. The same concern applies to foreign loans. We have previously demonstrated from the CPD, how this debt burden is gradually increasing, and this budget further clarifies this issue," said the civil society organisation.