The government of Bangladesh proposed its budget for the financial year 2023-24 in the national parliament on June 1, 2023. This budget — the highest ever budget in the history of Bangladesh — amounts to BDT 7.61 trillion. But its revenue target (BDT 5 trillion) and deficit (more than BDT 2.5 trillion) are also the highest in the country. The budget delineates a target of BDT 155,395 crore to be borrowed from domestic sources and BDT 106,390 crore from foreign sources. Definitely, there are unsurprisingly mixed reactions to the budget proposed at a time when there is a burden of high inflation, a decline in foreign reserves, fluctuation in foreign exchange rates and several other economic concerns in Bangladesh.
It is pertinently notable that the 2023-24 budget, formulated under the slogan ”Across the long journey of development, towards Smart Bangladesh,” has some good aspects. The consistent increase in the amount of budget, an increase in the development expenditure (a 15 percent jump from the revised budget of 2022-23), increased spending on infrastructures and increased allocations in some other sectors including social services are some positive aspects. But the latest budget has several negative aspects. A high budget deficit, a lack of roadmap on how to curb the ongoing inflation, the proposed difficult means of meeting the budget deficit, the unrealizable means of revenue collection and a low allocation for smart Bangladesh, which is often used recently but remains undefined, are some negative aspects.
A high deficit and high revenue target and its collection are definitely major challenges. Notably, a budget deficit — which leads to downward economic pressure including increased inflation and pressure on forex reserves — is a regular phenomenon in Bangladesh. But the budget deficit is mostly not met. A large gap also remains between the actual revenue collection and the proposed target each year. According to multiple sources, there was a deficit of more than BDT 34,500 crore in the last budget compared to the target in the first 10 months (July-April). In the last six fiscal years, the actual increase in tax revenue was only 10 percent per year. Consequently, it remains difficult to collect the proposed revenue for the current fiscal year too.
Notably, the government of Bangladesh fails to collect the targeted amount of revenue every year because of institutional and other challenges including the inadequate capacity of the National Board of Revenue, a lack of plans to increase the scope of tax with new sources and tax evasion. Despite repeated failure and mounting criticism, challenges to revenue collection have mostly not been addressed in the country. But given that the NBR fails to collect the targeted revenue for the current fiscal year, the government is likely to take loans from local sources as it did in the past several years. Increased loans from local banks may consequently reduce their loans to private organizations and bring other negative economic consequences.
The implementation of the annual development program —the budgetary allocation of which increases almost every year in Bangladesh — remains another crucial challenge, although it is vital for planned development. According to multiple sources, no budget in the last decade was implemented fully in Bangladesh. In the last budget, according to multiple sources, the implementation of development expenditure was only 37.6 percent for the first eight months. The low/slow implementation of the ADP is driven by a range of factors including a lack of feasible department/ministry-wise ADP expenditure plans, a lack of institutional capacity, delays in preparing project designs, releasing funds and procurement of materials, and the negligence of authorities to suggestions given for improving the ADP implementation.
An increased amount of budget is definitely crucial for Bangladesh but concerns with the budget need to be addressed for its desirable outcomes. The emphasis needs to be given to the improvement of the capacity of the NBR to collect more revenues. Increasing the scope of tax by expanding the tax net and exploring new sources of tax may be helpful for Bangladesh. The reduction of tax evasion, the modernization of the NBR and the implementation of e-governance can also be helpful. The timely implementation of the ADP also needs to be given emphasis. For this, the public expenditure capacity needs to be improved in a planned manner.
