The New Nation - Internet Edition

Staff Reporter

Economists of the country hailed the proposed budget of fiscal year 2008-09 for allocating incentives and tax holiday, which will help boost industrialisation in the country.

Eminent economist Prof Wahiduddin Mahmud Monday said the proposed budget for FY09 sought short-term solutions to the economic malaise arising out from adverse developments on many fronts.

"It represents the expected response of an interim Government to a situation of widespread food insecurity and an environment of political and economic uncertainty," he told newsmen in an instant analysis of the budget, expected to be implemented by a political government during the second half of 2008-09.

Besides, he said, many issues of the budgetary policy remain unaddressed or were only tentatively addressed, in the context of uncertainty regarding international fuel and food prices and domestic inflation and food supply situation.

Even though the proposed budget is very large in size, the emphasis has been on making provisions for continued increase in subsidies on food, fuel and fertilizer and for planned expansion of social safety net programmes, he added.

"As a result, the size of the Annual Development Plan (ADP) has got squeezed. Moreover, the Government plans to borrow heavily from the banking system to meet the increasing budgetary deficit," said the economics professor of Dhaka University.

While such a budgetary stance seems to have been forced by compelling circumstances, he said the Finance Adviser must be well aware that none of these are sustainable solutions to the problems facing the economy.

"The prevailing rates of subsidies are already putting an unbearable pressure on the budgetary balance," he said, adding that if the current rate of growth in the Government's domestic borrowing continues unabated, it will jeopardise macroeconomic stability.

Executive Director of the Centre for Policy Dialogue (CPD) Dr Mustafizur Rahman said the new budget will be helpful for investment and poverty elevation.

He lauded the measures for eliminating income and regional disparities in the proposed budget.

However, the ADP in the new budget should be more expansionary to attain the expected growth rate, he opined.

Prof Abu Ahmed of the University of Dhaka in his instance reaction said the proposed budget has allocated incentives, tax holiday and tax reduction for raw material import.

He said the budget has favoured industrialisation in the country subject to response from the private sector. The economist said businessmen should be kept free from fear factors for positive response.

Abu Ahmed said income tax ceiling should have risen to Tk 2 lakh as purchasing power of people decreased due to high inflation.

Unnayan Samannyan Chairman Dr Atiur Rahman termed the proposed national budget populist and reckless as there is no consistency between income and expenditure in it.

"This populist budget is presented to make the people happy although

it'll not be materialized in reality," he told reporters Monday afternoon at his office.

Describing money inflation as the biggest challenge for the government, Atiur said the Finance Adviser didn't mention how the inflation would be tackled although the budget will require loan of Tk 30,000 crores.

"The Government will have to take this huge amount of loan from banks and foreign donors creating severe inflation," he said.

He said the proposed budget has total deficit some 4.9 per cent of the GDP, saying that the fuel price will increase that will further fuel up inflation if there is no subsidy and necessary adjustment in this sector.

However, Atiur said the increasing budget allocations for employee guarantee scheme, climate change adaptability, social security, old aged allowance, monga-char areas and agriculture sector are the positive sides of the budget.

He said imposition of tax on cigarette and jorda products show good sign.

President of National Tax Lawyers Association Zakir Hossain and Secretary General Aziz Sarker hailed the budget for keeping allocation to face the challenge arisen due to climate change, food and fuel oil price increase.