Dhaka, Bangladesh (BBN) – Falling trend of revenue collection growth, rising per capita debt burden and shrinking public sector investment may contract expansion of gross domestic product (GDP), the Unnayan Onneshan (UO), an independent multidisciplinary think-tank, said Saturday.
The UO’s observation came in the backdrop of reduction in investment and growth for the successive three years from those of the preceding ones. In fiscal year (FY) 2010-11, the GDP growth rate was 6.71 percent, which declined to 6.23 percent in FY 2011-12, and further fell to 6.03 percent in FY 2012-13.
The UO anticipated that the rate of growth in GDP in the current fiscal may fall below the decadal average of six percent and may reach as low as 5.65 percent.
It also cautioned that the pressure in revenue collection is likely to add up to budget deficit, which is targeted at 4.6 percent of GDP in FY 2013-14. In FY 2013-14, total public borrowing is targeted at BDT 550.32 billion, which is BDT 39.86 billion greater than the previous fiscal year.
Considering the business as usual scenario, the UO estimated that the gap between total revenue and expenditure might increase to BDT 581.70 billion in FY 2014-15 from BDT 550.32 billion in FY 2013-14.
It also suggested that the government should revisit its tax structure (regressive tax structure) and institutional arrangements with a view to collecting as much direct tax as possible, which may set the government to reduce the burden of indirect tax incurred by the marginalised section in the country.
“In FY 2013-2014 (up to January 2014), the collection of indirect tax is as high as 69 percent vis-à-vis a direct tax of only 31 percent of total collection of tax. While direct tax causes the rich to pay tax on their income, indirect tax exerts much pressure on the meagre income of the marginalised people in the country,” the private organisation said in its latest Bangladesh Economic Update, released on Saturday.
The UO said that the lower revenue collection reduces expenditure in the social and physical expenditure. “The spending in education and health and family welfare are only 5.92 and 4.26 percent as a percentage of total budget in FY 2013-14. These are 0.12 and 0.61 percentage points lower than the last fiscal year.”
Besides, actual annual development programme (ADP) implementation has seen a large fall in recent time from Tk. BDT 310.89 billion in FY 2012-13 from BDT 380.20 billion in FY 2011-12. Moreover, the actual ADP implementation up to January 2014 is Tk. 167.484 billion against the revised allocation of Tk. 540.00 billion.
It also said that the total collection of tax revenue might be BDT 1232.46 billion in FY 2013-14 as against the annual target of BDT 1360.90 billion. “Moreover, if the present trend continues the rate of growth in collection of actual revenue might fall to 9.3 percent in FY 2013-14 from 14.2 percent in FY 2012-13.”
Referring to the per capita debt burden, the research organisation said that the rising trend over the years which might cause per capita debt burden to increase to BDT 35.828 billion FY 2013-14 from BDT 33.898 billion in FY 2012-13. In fiscal year 2011-12, per capita debt burden was BDT 29.822 billion. The ever-rising public debt has been exerting a serious pressure on the macro-economic stability in the country, it observed.
BBN/SSR/AD-01Mar14-1:30 pm (BST)