The New Nation - Internet Edition

Staff Reporter

Finance Adviser Dr Mirza Azizul Islam yesterday ruled out the possibility of fiscal miss-management while covering a huge deficit to implement the expansionary budget to the tune of Tk 1 trillion.

He was not even ready to recognize the deficit estimated at Tk 30580 crore, or almost 30.80 per cent of the budget as huge one as the ratio is only 5 per cent of the country's gross domestic product (GDP).

The Finance Adviser was addressing a press conference at the NEC conference room arranged by his ministry to respond criticisms of various quarters over the proposed 2008-09 fiscal's budget aired on Monday.

"I believe, as percentage of GDP, the deficit is not increasing too much," he said while facing a volley of questions in the crowded press conference, which was live telecast by a private TV channel.

Dr Aziz dismissed apprehensions of crowding out private sector credit, lending rate hike and inflation expectation due to increased dependence on bank borrowing to finance deficit.

He was also confident about proper delivery of services in widely appreciated social safety-net programmes, though most of the analysts were doubtful about it. He, however, admitted that his success depends on political and natural stability.

The Budget will bring relief to people facing volatile markets, the Adviser said dding, "It aims at combating poverty by creating employment and expansion of safety net coverage to the poor to ensure food security in the first place to the nation."

Outlining the major features of the budget, the finance adviser said in view of the current global and domestic market situation with soaring prices of food and fuel items, the budget has placed top priority to bring relief to the people.

Responding to the criticism of ignoring the politicians in the budget speech, the Adviser said, "I did not mention politicians, but it does not mean they were ignored."

"I have mentioned the contribution of intellectuals and intellectuals cover the politicians," he added.

He faced a volley of questions on general election and the new budget at post-budget press conference at NEC. The Finance Adviser parried questions when asked if the government by seemingly a pro-election budget intends to continue in power. "I can assure you, personally I have no intention to contest any election."

He said he has explained the kinds of challenges the government is likely to face in implementing the budgetary measures.

Replying to another question, he said there are some misconceptions that the budget created room for whitening black money.

"There is no measure in the budget to whiten the black money," the Finance Adviser said, adding that the budget did not exempt anyone from declaring income earned through legal means.

The Adviser said when the Truth Commission will be operational they will unearth if anybody avail of the opportunity to legalise his unholy income by paying tax.

Bangladesh Bank Governor Dr Salehuddin Ahmed, Finance secretary Dr Muhammed Tareque and NBR chairman Muhammed Abdul Mazid also supplemented to some of the answers of the adviser.

Cabinet secretary Ali Imam Majumder, ERD secretary Aminul Islam Bhuiyan and Planning secretary Jafar Ahmed Chowdhury and a huge number of officials were present at the press conference.

Dr Aziz said the interest payment on bank borrowing would be increased, but it would not incur losses to the economy, as the interest on the domestic borrowing would be circulated within the economy through investment by other means.

In contrast, external borrowing is only 10 percent of the domestic borrowing, he said, adding that the interest repayment would put burden on the national exchequer.

The Finance Adviser said the lending rate is unlikely to increase due to the increased bank borrowing to finance the deficit, as the interest rate spread is already on the high side.

Moreover, there are initiatives from the Bangladesh Bank to reduce the spread and there are signs of improvement in this regard, he added.

Asked about the possibility of the crowding out of private sector, he said the borrowing was also high during the outgoing fiscal year. "Even then, the private sector credit increased by 23 percent."

Bangladesh Bank Governor Dr Salehuddin supplemented that the bank borrowing estimate is not too much and the private sector would not crowd out.

"The central bank will monitor the monetary situation and take necessary measures, if necessary," he said, adding that Bangladesh Bank would see the consistency of the monetary policy so that the essential expenditure is not hampered.

The Finance Adviser also dismissed the criticism that the budget is an ambitious one, saying that the revenue estimate remained the same at 11.3 as percentage of GDP as compared to the estimate of the outgoing fiscal year.

However, NBR revenue estimate as percentage of GDP increased a little to 8.9 percent for the next fiscal year as compared to 8.6 percent in the outgoing fiscal year.

He further explained that revenue collection is estimated to grow by 18.5 percent over the outgoing fiscal year, which is only 3 percent more than the estimated money in GDP to grow by 15.5 percent, including 9 percent inflation.

"It's not unrealistic at all considering the measures proposed to increase revenue," he said.

Replying to a question, Dr Aziz said: "It's my crisis, your crisis and the crisis of the people and the country… it's a global crisis. The biggest crisis is food crisis followed by petroleum price."

Asked about the predictability of the foreign aid, he expected that the projection would be achieved, as the target was set considering the trend for last 7-8 years. "It's reasonably certain that we'll get the expected external assistance."

Replying to a question whether the pay hike for the government employees would put extra burden on the other group of fixed income people, he said: "It's still my hope that the private sector will come forward to increase employees' income."

About apprehension of service delivery mechanism, Dr Aziz said the local government institutions and the administrative mechanism would be able to deliver the services of the social safety-net programmes.