A multilateral lender identified three concerns in the area of budget implementation, including proposed changes in the public procurement rules, which, it warned, could hamper the usual flow of external fund.
‘Some of the proposed procurement amendments may make it even more difficult to achieve the external financing target,’ said the World Bank’s report, FY10 Budget: Highlights and Assessment.
The WB said the amount of net external financing projected for the fiscal year 2009-10 (2 per cent of GDP) is highly ambitious to begin with.
A shortfall in external financing may force recourse to bank and even monetary financing of the deficit, thus fuelling the already increasing non-food inflation and/or crowding out availability of credit to the private sector, it added.
Besides, the Washington-based lender criticised the country’s policymakers for not following a ‘preferred’ way to keep the budget deficit low. It also did not endorse the rise in protection by scaling down of customs duty on raw materials while customs duty rate on finished goods has been retained.
The WB pointed out that the FY10 budget will not be as expansionary as projected because spending will likely be restrained by weak implementation capacity.
Instead, concerted efforts to raise revenues and to reduce losses from state-owned enterprises may be better ways of reining in deficits, it suggested.
The WB noted that revenue mobilization in the FY10 budget would be challenging, given the context of Bangladesh’s having one of the lowest revenue/GDP ratios in the world.
It emphasised on fundamental reforms of the tax policy and administration for achieving the annual revenue target.
About the fiscal measures on imported items, the WB said, ‘This is at best a static and partial approach, and neglects the negative impact on exporters, consumers, and longer-run competitiveness of Bangladeshi firms.’
The nominal protection rate and dispersion will increase significantly in FY10 following the new duty measures, it added.
The WB also focused on the newly-introduced Private Public Partnership scheme, saying that its implementation would require putting in place clear policy and legal frameworks.
Source: The Daily New Age, 20 July 2009