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Editorial

Proposed national budget

A touch of realism but more of promise
10 June 2010, 18:00 PM
EDITORIAL
As a first impression on the budget for fiscal 2010-11 placed in parliament by finance minister AMA Muhith, we have the following words to say in broad outlines. Firstly, the budget has singled out power and energy as the thrust sector and has accordingly increased allocation for it. However, to expedite the pace of power generation, the present stress on the establishment of rental power plants implies that the government's subsidy on it will have to be increased to keep power within the purchasing capacity of the consumers. The finance minister, however, justified this step in the greater interest of the economy. At the same time, the policy to diversify the source of power through reducing dependency on gas and switching to power plants based on coal, furnace oil and even nuclear energy promises good dividends in the future in terms of enhancing generation capacity as well as broadening the base for energy security provided the government spells out its policies on coal, nuclear and renewable sources of energy in clearer terms. The government's focus on enhancing mobilisation of domestic revenues aimed to attain a 6.7 per cent Gross Domestic Product (GDP) growth is a bold step towards achieving self-sufficiency and reducing dependency on foreign assistance. But since this ambitious expenditure plans for the next budget involves a deficit, which is 5 per cent of the GDP, some dependency on foreign source will still remain, though the rest of it will be met from domestic sources such as banks and non-ban sectors. That calls for increasing the tax base further to increase the quantity of revenue and mobilising other internal resources more efficiently to reduce this deficit gradually. Against the backdrop of worldwide economic downturn, the export sector witnessed a sluggish growth in the last few months. However, the sector seems to have turned around and has been showing positive trends recently. Similarly, the import, especially of capital machinery has been registering an affirmative trend as evidenced from the increase in the number of Letters of Credit (L/Cs) opened in recent months. However, so far as the settlement of those L/Cs are concerned the developments are yet to be positive. Increase in term loans by banks is a good sign towards increasing activity in the economy, which remained more or less in a stable condition in the wake of the global financial crunch and the uncertainties in years preceding the assumption of office by the incumbent elected government. These positive trends visible in the economy promise to encourage investment, which is yet to take off. However, the challenge before the government will be to raise the present level of GDP-investment ratio significantly from the aimed 24 per cent in order to achieve a GDP growth of 8 per cent in the future. But to meet this challenge, the government will need to bolster investment in the private and public sectors and expedite the process of providing an institutional shape to the Public-Private Partnership (PPP) agenda. On this score, formation of the Bangladesh Infrastructure Financing Fund (BIFF) as announced by the finance minister in his budget speech should be given the go in earnest. Most importantly, to meet the challenges of growth, more dynamism needs to be infused into budgetary implementation in terms of Annual Development Programme (ADP) as well as the revenue head, which albeit recorded a slight improvement in the current fiscal over the past ones. However, much more is needed to meet the projections of the proposed national budget.

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