DHAKA, March 1 (NsNewsWire) — The Unnayan Onneshan, an independent multidisciplinary think-tank, in its current issue of the Bangladesh Economic Update reveals that fall in growth in collection of revenue, rising per capita debt burden and shrinking public sector investment may contract expansion of gross domestic product (GDP).
The think tank’s observation came in the backdrop of reduction in investment and growth for the successive three years from those of the preceding ones, it said in a statement on Saturday.
In 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 Unnayan Onneshan (UO) anticipates 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.
The UO cautions that the pressure in revenue collection is likely to add up to budget deficit, which is targeted at 4.6 per cent of GDP in FY 2013-14. In FY 2013-14, total public borrowing is targeted at Tk. 55032 crore, which is Tk. 3986 crore greater than the previous fiscal year.
The think tank points out that usually a major portion of government expenditure goes to interest payments on both the domestic and foreign sources which are non-development expenditure. In FY 2013-14, the total expenditure on interest payment assumed at Tk. 27743 crore which is 18.83 percent higher than that of FY 2012-13. Interest payment reduced the spending on social expenditure, the UO adds.
Considering the business as usual scenario, the Unnayan Onneshan estimates that the gap between total revenue and expenditure might increase to Tk. 58170 crore in FY 2014-15 from Tk. 55032 crore in FY 2013-14.
Referring to structural rigidities of the economy, the UO suggests 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,” Observes the organisation.
Pointing out that the lower revenue collection reduces expenditure in the social and physical expenditure, it adds that 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. Additionally, actual ADP implementation has seen a large fall in recent time from Tk. 31089 crore in FY 2012-13 from Tk. 38020 crore in FY 2011-12. Moreover, the actual ADP implementation up to January 2014 is Tk. 16748.4 crore against the revised allocation of Tk. 54000 crore.
The think-tank points out that the total collection of tax revenue might be Tk. 123246 crore in FY 2013-14 as against the annual target of Tk. 136090 crore. 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 notes that the rising trend over the years which might cause per capita debt burden to increase to Tk. 3582.8 in FY 2013-14 from Tk. 3389.8 in FY 2012-13. In fiscal year 2011-12, per capita debt burden was Tk. 2982.2.The ever-rising public debt has been exerting a serious pressure on the macro-economic stability in the country, the organisation observes.
The organisation projects that if the present trend of borrowing continues, the borrowing by the government from domestic sources might increase to Tk. 36636 crore in FY 2013-14 against proposed target of Tk. 33964 crore, whereas in FY 2012-13, domestic borrowing was Tk. 32473 crore.