Work is now underway to prepare the national budget for the next financial year. First of all I would say we have to learn to live according to our ability. It is advisable to have the direction to go within the budget. The national and international context says so.
Sri Lanka, Pakistan and Nepal are in danger of going beyond capacity. The fate of these countries did not happen in one day, it happened slowly, in a few years, which they did not understand at the beginning. We need to think about whether we are slowly moving in that direction.
Bangladesh borrows from many sources. This debt is still at a tolerable level. We do not want this debt to become unbearable. This is one of the issues to be considered in preparing the budget for the next financial year. The government borrows from various sources, both internal and external. Debt from our external sources was low before. But in the last two-three years it has increased a lot. We are better than other countries, there is no need to think like this. We should rather think about the state of our foreign debt a few years ago and why it has increased so much now. In the next few years, you have to think about what percentage of the budget you have to spend to repay these loans at interest.
We are given a deficit budget. The government has been able to keep the budget deficit at 4 percent of GDP for several years. That’s right. But in the last financial year and this year, it has been seen that it is going up more than 5 percent. This growing deficit should not be taken lightly. It is better and desirable that our budget deficit should be within 4 or 4 and a half percent of GDP. Because the deficit is the bad side of the budget, it drives towards borrowing and at some point it becomes a burden.
The tax collection of any government depends on how high the economy of the country rises, how advanced the economy is and how the monetary policy works. The simple calculation is that if the economy is very good, tax collection will be good and there will be no problem in repaying the loan. But if the economy slows down, tax collections will fall and deficit budgets are identified as a problem. Then it becomes difficult to carry the burden.
Commodity prices are rising abroad. The prices of industrial raw materials are also rising. As a result, our inflation may increase here. In this situation, if the budget deficit is high and well-planned subsidies are not provided, inflation will increase in our domestic economy. For this, the issue of subsidy has to be targeted and that is definitely for the poor people. At the moment, it is good for us to keep the deficit at a tolerable level and within international standards.
There is a lot of pressure on our foreign exchange reserves now. The cost of imports is higher than the income from exports and this gap is widening day by day. So now we need to impose some restrictions on the products that should not be imported. In the meantime, Bangladesh Bank has increased LC margin on imports of non-essential products. Through this the import of luxury goods has been discouraged. Tax is a budget tool in this regard. Imports of those products should be temporarily discouraged by raising taxes in the budget.
In recent years, government spending on salaries and allowances has been on the rise. I hear that the government may also give a new salary scale. I don’t think it will be right at the moment. Because in the current situation no government will take such steps. Everyone is doing austerities now. Bangladesh also needs to tighten its belt in terms of revenue expenditure.
Another issue is to encourage the production of products that have export potential. For example, some electronics products have been given incentives this year and need to be continued in the next budget.
I think corporate income tax should be reduced overall. Many countries have reduced their corporate taxes. We should further reduce corporate taxes to make our corporate sector more competitive. And if the tax rate is reduced, the total tax collection will be less — this idea is not correct. On the contrary, if the tax rate is reduced, people from many companies and business circles will be encouraged to pay taxes.
One of the best ways to motivate the stock market is to further reduce corporate taxes on listings. It has been increased to 22.5 percent in the current budget. It should be seriously considered whether it can be reduced from a minimum of two and a half percent to 20 percent. Then maybe some good company might be keen to get listed. Keep in mind that companies pay higher taxes because they are forced to show transparency when they are listed on the stock exchange, so it makes sense to give them extra tax benefits. Therefore, such benefits should be ensured in the budget so that big companies or businesses can be brought to the stock market.
What the government is doing at the moment for the poor people must continue. The subsidy given here cannot be contracted. The big reason for this is that many people are getting poorer due to the time of Kavid and now due to inflation. We need to ensure that these people receive affordable products. This provision should be added in the budget. For the same reason, it would be better to increase the coverage of social security. Otherwise, what is there must be maintained.
Whatever we do, we have to do everything we can. Many outside companies are now interested in lending to us as our repayment capacity has increased. So when it comes to borrowing, we have to differentiate between what we borrow and what we borrow. Allocation must be continued in the current mega projects. Adequate allocation should be ensured to complete the existing projects on time before undertaking any new mega projects. The government has to spend a lot of money to get a big project and has to go to the bank for a loan.
The flow of credit to the private sector must continue. However, the interest rate should be taken into special consideration. Many interest rates are being raised, because there is a rationale for raising interest rates to curb inflation. Again, raising interest rates could reduce the flow of credit to the private sector, which could be detrimental to our economy. Therefore, as a country of emerging economy, Bangladesh has to maintain balance.
It would be a loss for us to allow the exchange rate to skyrocket at this moment. It would be suicidal for us. So we have to keep trying to keep the foreign exchange rate in our favor with our currency. If necessary, imports will have to be further cut.
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So keeping these in mind, you have to spend according to your income. When income increases, expenses also increase. If the income is low, then the expenditure should be less. This is the line we have to walk. Therefore, I would say that all measures should be taken to reduce the expenditure instead of increasing the salaries and allowances in the revenue sector for the time being. The national and international context must be taken into account in increasing the expenditure. But at the same time, it is important to keep in mind that this cost reduction will not take long. If we can do everything right, we will be in a better position in the coming financial years.