Pro-rich, pro-corporate, says CPD in budget analysis

The Centre for Policy Dialogue (CPD) was critical of the proposed budget as it has more for the rich to cheer up than what the poor and low-income groups are supposed to get amid inflationary pain that many consumers did not see before.

“Rich class of people has won in the budget, also money launderers, but not the poor who were supposed to get extra government support at this difficult time,” said Toufiqul; Islam Khan, senior research fellow of CPD.

“Middle-income group was too ignored in the budget,” Khan said.

Finance Minister AHM Mustafa Kamal proposed a Tk 678,064 crore budget in parliament for approval. Analysts and economists were expecting that the government will come up with measures to tackle inflation and widen coverage and allocation for the poor. But that was not the case. Indeed, many of the proposals would benefit moneyed men and corporates, which even many of them did not expect.

After a brief reaction to the budget for FY23 a few hours after the budget presentation on Thursday, CPD on Friday came up with 120 pages analysis, detailing sector-wise allocations, their impacts and what the finance minister has failed to incorporate into the proposed budget at a very tough time.

Dr Fahmida Khatun, executive director of CPD, made a keynote presentation of the analysis, while Prof Mustafizur Rahman, distinguished fellow, Khandker Golam Moazzem, research director, Toufiqul Islam Khan, senior research fellow and Syed Yusuf Sadat, research fellow, spoke on behalf of the civil society think tank at Lake Shore hotel in Gulshan.

Channel i, a private satellite TV, broadcasted the programme and it was live on CPD’s Facebook page. Two of the Business Insider Bangladesh reporters covered the event – one physically and another virtually – to get details of the analysis for the readers. Details of the analysis are given below:

Inflation:

Probably, inflation was the most used word in the finance minister AHM Mustafa Kamal’s budget speech for FY23. He did it right considering the time when people are struggling to survive amid the soaring prices of essential commodities. During the budget preparation days, analysts, economists and professionals advised the government to take measures in the budget to shield poor people from the rising inflation pain.

“As if, the finance minister has a magic stick to tame inflation,” said Dr Fahmida Khatun on the finance minister’s inflation forecast at 5.6 percent for the next fiscal year.

“This forecast has no connection with reality,” she said.

State-owned TCB’s data shows prices of some items have increased 40-45 percent. April’s inflation of 6.29 percent was also the highest in 18 months. Amid this trend, how can the finance minister project inflation at 5.6 percent for the next fiscal year, which is quite uncertain, she questioned.

“The ongoing global crisis may not end anytime soon, so will inflation,” she commented.

CPD also questioned the government’s inflation calculation as it is being done taking into account 2005-06 as the base year. CPD researchers said after 16-17 years, the food basket has changed with changing consumer behaviour.

Opportunity to back laundered money is unethical:

Fahmida Khatun said that those who have taken money out of the country by taking bank loans and corruption are being invited again with tax benefits.

“It is extremely immoral to give such opportunities to the corrupt. Moreover, no money will be returned even after this opportunity,” she said.

“Such initiatives are against ethics. In doing so, honest taxpayers will be discouraged and demoralised. It also goes against tax justice.”

Prof Mustafizur Rahman, a distinguished fellow of CPD, said this facility may also encourage others who did not launder money yet.

“We have seen that this facility was given many times for (resident) Bangladeshis. Now, this has been offered for those who smuggled out money,” he said.

“This facility is unacceptable from three aspects - moral, political and economic,” Commented Prof Rahman.

He said they (launderers) breached laws by taking money out of the country illegally and now they have been given benefits to bring back the money.

Without mentioning the name of PK Halder, Prof Rahman said he can now avail the chance saying that he wants to bring back the money he laundered.

Tax-free income limit unchanged while rich offers benefits:

Despite the rise in inflation, the tax-free income limit for individuals has not been increased in this year’s proposed budget. The CPD considers this is one of the weakest aspects of the budget.

Fahmida Khatun said the proposed budget did not provide any tax exemptions for the poor and middle class. A reduction in corporate benefits the upper class.

An increase of tax rebates on the deposits will also favour moneyed persons, she said, adding that the tax-free limit for income from allowances and other non-salary income has been increased from Tk 5.5 lakh to Tk 10 lakh, a move she said would benefit the rich.

“If the tax-free income ceiling was increased, the common man could be given some relief. The proposed budget did not provide any benefits to low-income people,” she said.

Subsidies not enough:

Although the subsidy has been increased – 1.9 percent of GDP - in the proposed budget, the finance minister has hinted at adjusting the price of electricity and fuel in the near future. CPD thinks that in the current economic context, this should not be done.

According to the think tank, due to the rise in commodity prices, people are suffering hard. In this situation, if the prices of electricity and fuel increase, the real income of the people will decrease further.

Social Safety-net:

CPD feels that allocations to the social safety-net sector are insufficient in the proposed budget. Coverage and allocations should be increased considering the tough time. In particular, no well-planned allocations were made for women and children.

Besides, the price of rice sold in the open market through TCB has also been increased from Tk 10 per kg to Tk 15. As a result, low-income people and marginalised people will suffer more.

Exchange rate:

Fahmida Khatun said that macroeconomic indicators show revenue collection, private sector credit growth and exports are in a good position.

However, on the downside, there are some indicators in the negative territory. The forex reserve is going down and the value of the US dollar against the Taka has shot up from Tk 86 to Tk 92 in two months.

Amid this situation, the CPD thinks that the finance minister’s forecast of the exchange rate at Tk 86 next year is done without any factual analysis.

CPD also shed light on deficit financing, revenue income and target and making tax return copy mandatory for getting 38 public services, which the CPD has appreciated.