Meeting revenue target will be a daunting task

The proposed budget for fiscal 2023-24 appears to be overly ambitious, seemingly ignoring the pressing issues at hand. It paints a picture of a thriving economy, disregarding the existing crisis.

However, the reality is that the country is currently ill-equipped to meet the lofty target of generating Tk5 lakh crore in revenue, which has been earmarked for the implementation of the expenditure-heavy budget.

The National Board of Revenue (NBR) will face significant challenges in achieving the goal of collecting Tk4.5 lakh crore in taxes, particularly given the various crises plaguing the industrial sector, including the lack of investment opportunities and scarcity of electricity and gas.

Tax collection has already been on a downward trajectory due to a myriad of reasons, and any further

Given the present circumstances, it is imperative for the budget to prioritise controlling inflation. Unfortunately, no discernible initiatives in this regard are apparent throughout the entire budget document.

To meet the deficit of approximately Tk2.58 lakh crore, the government will inevitably rely on the banking sector. However, obtaining loans from the central bank will lead to the devaluation of currency due to monetisation. Moreover, seeking additional loans from an already beleaguered banking sector will invariably result in decreased private-sector investment, production, and employment. These factors, in turn, will contribute to inflationary pressures caused by reduced overall production.

While the budget sets an ambitious target of 7.5% GDP growth, it fails to outline any specific course of action to achieve this goal.

Private sector investment serves as a critical driver of GDP growth, and increasing it to 28% of GDP is necessary to meet the target. Unfortunately, private sector investment has stagnated at 21%-22% of GDP for over a decade. Raising it to 28% percent would require an unprecedented increase of more than 6 percentage points within a single year.

The budget seems to have set overly ambitious targets for various sectors like for GDP growth and inflation without providing any tangible insights into how these goals will be attained or how the necessary revenue will be generated.

Historically, our tax-to-GDP ratio has remained stagnant between 7%-8%. To reasonably increase this ratio, reforms in the tax structure are imperative. However, the problem lies in the fact that tax system reforms have been stalled for years, hampering progress.

Consequently, internal resource mobilisation becomes vital to ensure the allocation of funds to priority sectors.

Dr Ahsan H Mansur, Executive Director, Policy Research Institute.