[🇧🇩] Monitoring Bangladesh's Economy

[Saif]

Tk 580b revenue shortfall in first half of FY25

Experts blamed disruptions in business and trade due to the student-people movement in July and August and subsequent unrest in the political sphere.

en.prothomalo.com

Tk 580b revenue shortfall in first half of FY25
Special Correspondent
Dhaka
Published: 23 Jan 2025, 20: 44

Photo shows the National Board of Revenue (NBR) building. File photo

Revenue collection has fallen short by around Tk 580 billion compared to the target in the first six months (July-December) of the current fiscal year 2024-25, while the figure is less by Tk 100 billion in comparison to the collection in the previous fiscal’s corresponding period.

According to the National Board of Revenue (NBR), a total of Tk 1,560 billion was collected in revenue during the July-December period, down by 6 per cent or Tk 100 billion from Tk 1,656 billion collected in the previous fiscal’s first half.

The NBR officials attributed the shortfall to disruptions in business and trade due to the student-people movement in July and August and subsequent unrest in the political sphere.

The current trend of revenue collection indicates that the NBR is likely to fail in achieving the annual target in the current fiscal year. In the first half, the revenue board managed to collect only one-third, or 32.5 per cent, of the Tk 4,800 billion revenue target.

The deficit in duty and VAT collection against the target during the July-December period amounted to Tk 577.24 billion. The revenue collection target for the July-December period was Tk 2,140 billion, while actual collection stood at Tk 1,562.76 billion.

None of the three major revenue sources – import duties, VAT, and income tax – met their six-month targets, with the income tax collection experiencing the largest shortfall. For income tax, there was a collection target of Tk 766.7 billion, while the actual collection stood at only Tk 521.62 billion.

In the import sector, Tk 498 billion was collected against the target of Tk 619.52 billion during the same period. VAT collection reached Tk 551.77 billion, falling short of the Tk 663.17 billion target.

Mohammad Abdul Majid, former NBR chairman and a member of the advisory committee on revenue sector reform, cited political unrest as the reason behind the poor revenue collection.

While talking to Prothom Alo, he said political unrest during the opening two months of the current fiscal year disrupted business and trade. This, in turn, affected import duty and VAT collection, while income tax collection also remained low.​

 

[Krishna with Flute]

IMF asks to raise tax-GDP ratio by 0.6 percentage points

The International Monetary Fund (IMF) has asked to increase the tax to GDP ratio by 0.6 percentage points by the end of this fiscal year to make up for last fiscal year’s revenue collection shortfall.

www.thedailystar.net

IMF asks to raise tax-GDP ratio by 0.6 percentage points

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The International Monetary Fund (IMF) has asked to increase the tax to GDP ratio by 0.6 percentage points by the end of this fiscal year to make up for last fiscal year's revenue collection shortfall.

Last fiscal year, the ratio stood at 7.3 percent.

As per conditions of an existing loan of the Washington-based lender, the ratio was supposed to be increased by 0.5 percentage points every year.

"But the IMF asked to raise the ratio…for the current fiscal year to mitigate last year's shortfall… It will definitely create an extra burden on us," said a top official of the National Board of Revenue (NBR) yesterday.

The issue was raised during a scheduled closed-door meeting between an IMF delegation and NBR officials at the tax authority's Agargaon headquarters in Dhaka.

This is the third IMF delegation arriving with the primary task of assessing the country's progress in meeting the criteria for the release of a fourth tranche of the $4.7 billion loan.

The multilateral lender approved the $4.7 billion loan in January 2023. Bangladesh has already received $2.3 billion in three tranches.

The IMF mission's discussions with the interim government of Bangladesh began on Tuesday, incorporating potential conditions for a fresh $3 billion loan. The discussions are to continue until December 17.

The delegation asked why the NBR failed to meet the IMF's revenue collection target for the previous fiscal year and sought to know about the measures taken to increase revenue collections, according to the official.

The tax authority logged overall receipts of Tk 382,562 crore in fiscal year 2023-24, falling short of its revised target by Tk 27,438 crore.

"We explained our real situation to them and informed of what we have done in recent times, including measures to increase tax return submissions," said the official.

The multilateral lender laid emphasis on revenue mobilisation, especially for the fact that Bangladesh witnessed a one percent year-on-year drop in revenue collection in the first four months of this fiscal year.

The tax authority collected Tk 101,281 crore in the July-October period, falling short of the target by Tk 30,831 crore.

The target for the entirety of fiscal year 2024-25 has been set at Tk 480,000 crore.

The NBR official further said the mission had enquired about the tax expenditures and various reform measures, including automation of the taxation system and e-return filing.

"We have been asked to reduce tax exemptions in a rational way," the official added.

The IMF team also agreed to extend their assistance for automation.

Besides, the mission also discussed the status of medium and long-term revenue collection strategies, measures to strengthen tax administration governance and plans to separate the tax administration from the tax policymaking department.​

IMF has started advising BD. Great Development. In some time, they will dictate everything like what WB and IMF do in Pakistan.

 

[Krishna with Flute]

Revised budget may be Tk 50,000cr smaller

Bangladesh’s national budget for fiscal year 2024-25 is likely to be reduced by more than Tk 50,000 crore, with the entire cut expected to be made in funds meant for the annual development programme (ADP).

www.thedailystar.net

Revised budget may be Tk 50,000cr smaller

View attachment 11465

Bangladesh's national budget for fiscal year 2024-25 is likely to be reduced by more than Tk 50,000 crore, with the entire cut expected to be made in funds meant for the annual development programme (ADP).

However, this budgetary revision will depend on several factors, including conditions that the International Monetary Fund (IMF) may set for a fresh loan, the availability of budgetary support and the government's ability to generate revenue through tax collections.

A Fiscal Coordination Council held a meeting chaired by the finance adviser on Monday and discussed the reduction, according to officials from the Ministry of Finance.

In June, the government had passed a national budget of Tk 797,000 crore for fiscal year 2024-25, which included an allocation of Tk 265,000 crore for the ADP.

After the expected revision, the overall size of the budget may be reduced to Tk 747,000 crore, with the ADP allocation likely falling to Tk 216,000 crore, a senior official of the ministry said.

These figures are only preliminary estimates, and the final size of the revised budget will be determined during a meeting set for March or April next year, he said.

A significant portion of the cuts is expected to come from the ADP as the implementation of development projects has slowed due to political instability and the change in government.

Besides, the interim government has also decided to adopt a more cautious approach to spending.

In the first four months of fiscal year 2024-25, ADP implementation fell by 31 percent year-on-year.

Officials of the Implementation Monitoring and Evaluation Division (IMED) point out that many ADP projects were currently on hold due to contractors fleeing following the ousting of the previous government, and few had returned.

Additionally, the government is reevaluating projects that may not be deemed essential or were initiated based on political decisions, further contributing to the delays in project implementation.

As a result, the government has decided to reduce the ADP allocation by a big margin.

However, changes could come about in the revenue as the allocation for interest payments and subsidies is expected to rise.

But this has not been decided yet because a big portion of the revenue budget is spent on interest payments, a financial ministry official said, adding that increasing interest payments were exceeding previous projections.

In the budget for the current fiscal year, Tk 113,500 crore was allocated for interest payments and Tk 42,388 crore had already been spent in the first quarter.

This is a 92 percent increase compared to the same period last year.

That is why the allocation for interest payments may increase further in the revised budget.

Besides, subsidy spending has also been rising in recent years, with the government initially allocating Tk 88,015 crore for it.

By the end of the first three months of the current fiscal year, Tk 4,514 crore had been spent on subsidies, which is nearly half of what was spent during the same period last year.

The finance ministry official said the payments for subsidies have not been cleared due to the political unrest. Besides, there are arears on bills of the fertiliser, energy and power sectors, he said.

Meanwhile, the IMF may impose a condition for the government to settle a substantial portion of these arrears to be eligible for a fresh loan, the finance ministry official said.

This could increase the allocation for subsidies in the revised budget.

As of June, arrears for bills of the power, energy, and fertiliser sectors had accumulated to about Tk 60,000 crore, and these arrears continue to grow.

The interim government, after taking charge, sought budgetary support from multilateral and development partners. The government is expecting to get commitments for $6 billion in loan support by next June.

However, a confirmation on the amount of money will be available by next March or April. And the size of the revenue budget is depending on it.

Selim Raihan, executive director of the South Asian Network on Economic Modeling (SANEM), suggested that the government's decision to revise the budget could be linked to efforts to control inflation by reducing expenditure.

He noted that government revenues were under pressure, and there were challenges involving the development projects initiated by the previous government.

To stabilise the economy, Raihan recommended that the government prioritise key projects while addressing irregularities and mismanagement from past administrations.

However, he emphasised that there is no room to reduce the operating budget as interest payments on loans continue to rise.

Raihan, also a professor of economics at the University of Dhaka, said the fiscal year would unfold with these constraints in place, but stressed the importance of developing a mid-term plan for the future.

The potential loan from the development partners would provide some relief to the government, but it is crucial to align this funding with the country's development priorities, he said.​

50000 Cr Taka reduction budget and unfortunately, all this from Development budget. RIP BD economy.

 

[Bilal9]

Policy consistency critical for attracting foreign investment

Commerce Adviser Sk Bashir Uddin questioned why foreign investors would be interested in investing in Bangladesh if even local entrepreneurs do not find the country’s business environment conducive.

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Policy consistency critical for attracting foreign investment
Commerce Adviser Sk Bashir Uddin says

View attachment 13336
Sk Bashir Uddin

Commerce Adviser Sk Bashir Uddin questioned why foreign investors would be interested in investing in Bangladesh if even local entrepreneurs do not find the country's business environment conducive.

He stated that attracting local or foreign investment requires relevant policy support, adding that policy consistency is critical.

However, he opined that there is no alternative to increasing the private sector's capacity to meet the challenges of trade and investment in the future.

The commerce adviser made these comments during a meeting with Dhaka Chamber of Commerce & Industry (DCCI) President Taskeen Ahmed at the former's office at the secretariat yesterday.

Uddin noted that the student-led mass uprising in July, its subsequent impacts on the overall law and order situation, and floods across the country had caused supply chain interruptions and disrupted local business activities last year.

However, he added that the overall situation is already improving and that the government is working relentlessly to enhance the environment further.

He also expressed hope that prices of essential commodities would stabilise during the holy month of Ramadan, set to begin at the end of February.

He said the recent rise in rice prices had come to the government's attention and assured that efforts are being made to keep prices tolerable.

He emphasised that containing inflation and ensuring the continuation of overall economic development requires expanding tax collection and widening the tax net.

Mentioning that the private sector will face numerous challenges after Bangladesh graduates from the list of least developed countries (LDCs), the commerce adviser stressed that reforms in trade- and investment-related policies, along with collective efforts from all stakeholders, would be indispensable for the economy's betterment.

DCCI President Ahmed stated that radical reforms and modernisation of existing frameworks related to trade and investment -- including import-export policy, revenue structure, financial management, logistics policy, national budget, and monetary policy -- are essential to addressing the challenges of LDC graduation.

He noted that Bangladesh could not adequately prepare for the challenges of the post-LDC era due to the Covid-19 pandemic, the Russia-Ukraine war, unrest in the Middle East, and political instability in the country in 2024.

Ahmed suggested that the government consider deferring the process to allow sufficient time for preparation since the country will lose significant preferential trade benefits on the international market upon graduation.

He also criticised recent initiatives by the National Board of Revenue (NBR) to increase VAT, supplementary duty, excise duty, and taxes on over a hundred products, saying these measures have already caused concern among the general public and businesses.

Ahmed cautioned that if these measures are implemented in the current economic context, the impacts would include increasing inflation, raising the cost of doing business, and potentially hindering both local and foreign investment.

Although the government announced it would reconsider the proposed tariff hikes for several sectors, the DCCI president remarked that the timing of such moves, especially with Ramadan on the horizon, is unacceptable.

He also called for strengthening market monitoring activities to address existing irregularities in supply chain management and to control inflation effectively.​

I like this guy Sheikh Bashir Uddin.

He is a successful business person with a bevy of superb investments (and products) to make Bangladesh proud.

More props to him on his suggestions and plans to improve. Though I am afraid surmounting years of neglect and mismanagement in the financial policies area will be a monumental task no doubt.

 

[Bilal9]

50000 Cr Taka reduction budget and unfortunately, all this from Development budget. RIP BD economy.

You have no clue. Most of the excessive spending was to prop up the chori and looting by Awami idiots.

However the infra did improve, and is on par with your country (some would say better in terms of road infra).