Finance minister unveils Tk 7.97 lakh crore budget

Finance Minister Abul Hassan Mahmood Ali has unveiled the proposed national budget of Tk 7,97,000 crore for the 2024-25 fiscal year at Jatiya Sangsad.

He placed the proposed budget on Thursday afternoon. It is his maiden budget, Independent Bangladesh's 53rd, and the first of the Awami League's sixth term.

The minister presented the budget, which is Tk 35,215 crore more compared to the current one, at a time when inflation is near 10 percent. He hopes it will decrease to 6:50 percent.

Earlier, the Cabinet at a special meeting approved the proposed budget. Prime Minister Sheikh Hasina presided over the meeting.

BSS adds: The finance minister said considering the current global political landscape and the state of the domestic macro economy, the government decided to take time-befitting fiscal sector reforms like digital transformation, tax net expansion and collection of non-tax revenue.

He, however, said administrative capacity was needed to be ensured for adequate resource mobilization.

A career diplomat by background Ali, who previously served as ministers for Disaster Management and Relief and Foreign Affairs, eyed for building a 'Smart Bangladesh' despite various obstacles and adversities.

Ali projected that under 'Smart Bangladesh', the country's per capita income would reach at least $12,500, with less than 3 percent of the population living below the poverty line, and extreme poverty eradicated.

Despite the global volatile condition and adversities, Ali eyed a 6.75 percent GDP growth while containing inflation at 6.50 percent.

The general point to point inflation is still hovering slightly below the double digit mark albeit various efforts from the government to tame it.

The country's GDP size has been estimated at Tk 55,97,414 crore.

Regarding inflation, Ali said, "Inflation is one of our main challenges at present. To control inflation, we gave highest priority on decreasing demand and increasing supply in the past two budgets."

In this context, he said to achieve macroeconomic objectives, supportive fiscal policies, such as reducing budget expenditure, discouraging less important expenditures and various austerity measures have been adopted alongside pursuing a contractionary monetary policy.

Despite these measures, inflation in the country remains persistently above 9 percent primarily due to import-induced price increases and disruptions in the domestic supply chain, he noted.

"Therefore, we will follow fiscal consolidation as well as the reduction of the budget deficit, and will continue budget belt-tightening measures, even if on a limited scale in the budget for the upcoming fiscal year," Ali added.

Given all these reforms and initiatives to augment revenue collection, a total of Tk 5,41,000 crore revenue income has been estimated for FY25, which accounts for 9.7 percent of the GDP.

Of which, it is proposed to collect Tk 4,80,000 crore through the National Board of Revenue, and Tk 61,000 crore from other sources.

Apart from the already approved Annual Development Programme (ADP) outlay of Tk 2,65,000 crore, the proposed budget saw an estimated deficit of Tk 2,56,000 crore excluding grants. If the grants are considered, the overall budget deficit stands at Tk 2,51,600 crore.

As the government wants to lower expenses, it aims to contain the budget deficit to 4.6 percent of the gross domestic product in the next fiscal year. The government usually keeps the budget deficit at around 5 percent.

In the current fiscal year (FY24), the budget deficit is Tk 2,61,785 crore.

Apart from the original ADP allocation of Taka 2,65,000 crore, Tk 5,943 crore has been allocated for schemes, Taka 7,627 crore for special projects outside the ADP and Tk 2,884 crore for the food for work program.

For the upcoming FY25, the budget size has been estimated to be Tk 7,97,000 crore, which is 14.2 percent of the GDP. A total of Tk 5,32,000 crore is proposed to be allocated for other expenditures including operating costs.

While allocating resources, emphasis has been given on the resource allocations for the ADP for investment and development of physical infrastructure.

In the proposed budget, a total allocation of Tk 2,06,569 crore has been proposed for the social infrastructure, which constitutes 25.92 percent of the total allocation. For physical infrastructure, an allocation of Tk 2,16,111 crore has been proposed, which constitutes 27.12 percent of the total allocation.

For common service sector, an allocation of Tk 1,68,701 crore has been proposed, which comprises 21.17 percent of the total allocation. It is worthy of note that since 2022, the interest rate has been gradually increased with the aim of controlling inflation in the western world.

"As a result, we also had to increase the interest rate in our country, and simultaneously, there has been a significant depreciation of the currency against the US dollar," he added.

In the budget for FY25, the expenditure on interest payments may increase significantly in this context. Therefore, a total of Tk 1,13,500 crore has been allocated for this purpose, which constitutes 14.24 percent of the total allocation.

In the proposed budget for FY25, the estimated deficit will stand at Tk 2,56,000 crore, which is 4.6 percent of GDP. The deficit was estimated to be 5.2 percent in the previous budget. "Within the total proposed budget deficit, I propose Tk 1,60,900 billion from domestic sources and Tk 95,100 billion from foreign sources for financing".

The Finance Minister said emphasis will be laid on the following activities to transform Bangladesh into a developed, prosperous and smart country by 2041.

These include maintaining economic stability; ensuring an educational environment conducive to science education, scientific research and innovation, providing necessary support to agriculture sector and ensuring food security; improving and expanding basic health services; using technology at all levels including digitizing all possible services; developing physical infrastructure; optimising utilization of marine resources; ensuring disciplines in the financial sector; eliminating extreme poverty by 2031 and lowering general poverty rate to 3 percent by 2041; taking steps to combat the effects of climate change; continuing zero tolerance policy against corruption.

While maintaining the budget deficit at a manageable level, reliance on external sources for deficit financing will be reduced.

"To control inflation, austerity measures will be maintained on a limited scale, but the scope of safety net programmes for low-income individuals from the pressure of high inflation will be expanded," he added.

In this year's budget, depending on the facilities given and withdrawn, prices of products may increase and decrease.

Prices may go up for phone and internet services; oils; cigarettes; CNG conversion kits, and cylinders; power plants; establishments at economic zones; air conditioners and refrigerators; water filters; LEED bulbs; cashew nuts.

Besides, prices may also increase for products such as ice cream, carbonated beverages, amusement parks, theme parks, and tourism services as the ministry also proposes VAT on these sectors.

Prices may go down for essential commodities as the import duty of 30 essential commodities including rice, edible oil, sugar, chickpeas, milk and wheat have been proposed to be reduced.

The prices of other products which may go down include aircraft engines & propellers; powdered milk; chocolates' laptops, motorcycles; dengue test kits; kidney treatment; cancer treatment; carpets; electric motors; and methanol.

Besides, taxpayers, including companies and firms, with black money in Bangladesh have again gained the opportunity to legalise their undeclared wealth without having to face any questions about the sources of their income next fiscal year.

According to the proposed provision, no authority can raise any question if any taxpayer, including companies, pays a 15 percent tax on cash, bank deposits, financial securities, or any other forms of wealth.

Furthermore, they will have to count a specific tax on properties -- land, buildings, flats, or commercial spaces -- to whiten their wealth.

Besides, the ceiling of tax free income of the individual taxpayers has remained the same at Tk 3.50 lakh while the government is all set to curtail corporate income tax by 2.5 percentage points in a bid to encourage compliance with a condition of promoting cashless transactions.

Ali today proposed the 25 percent corporate tax to replace the existing 27.5 percent for non-listed companies, subject to one condition.

The Finance Minister said alongside controlling inflation, the budget for this fiscal year has been formulated with an emphasis on ensuring necessary funding for government priority sectors such as poverty alleviation, job creation, social safety net programs, education, health, agriculture, and climate change impact mitigation, thereby prioritizing future development trajectories.

MAS/MSU