Finance Minister M Saifur Rahman has set a high-reaching target in the proposed budget, putting the government's implementation capacity to test and a failure will only create tension on the integrity of macroeconomic framework, the Centre for Policy Dialogue (CPD) said yesterday.

It also attempts to satisfy a diverse electoral constituency through symbolic allocations and fiscal breaks.

The proposed budget lacks proper guideline for implementing the allocated resources and diverting them to rural areas, observed the independent think-tank in its budget analysis, adding that the symbolic allocation targeting the election could misuse the scant resources.

"We should not say that the budget is highly ambitious, but we can say that the success of the budget depends on its implementation," said Dr Debapriya Bhattacharya, executive director of the CPD, while analysing the proposed fiscal measures, spelt out by Finance Minister Saifur Rahman on Thursday, at a post-budget press briefing at its office yesterday.

"The fiscal stance of the budget is an expansionary one and its high-reaching targets lack credibility as the delivery of the development programme has been poor in recent times," Dr Debapriya said.

Without any policy guidelines, the government's mid-term macroeconomic framework would be hampered due to lack of enthusiasm for investment and low domestic savings. On the other hand, the government is also showing its failures in utilisation of foreign aid, the CPD said.

The allocation in the budget is too high considering the capability of the government but, at the same time, it is too small in the perspective of the demand of the people, the CPD analysis observed.

"The allocation in scattered manner reminds us that a wind of general election is looming among the government policymakers," it observed.

"The budget is a high quality one, but the challenges lie on the implementation of the budgetary measures," the CPD executive director noted. He pointed out that the budget did not explain how it would be implemented.

Proper implementation of such a massive budget requires good governance and wholesale reforms in the public administration. But, in the proposed budget, there is nothing on public administration reform, local government strengthening, means to improve utilisation of foreign aid, improving the quality of public health services and education facilities, added the analysis.

During the last budget it was announced that the tariff system will be reduced from a four-tier system to a three-tier one and the tariff slabs had been proposed at 30 percent, 20 percent and 10 percent. The budget for FY 2004-05 has proposed to reform the system with three tiers; however, the highest slab has been proposed at 25 percent which raises controversy from several angles, the CPD analysis said.

Firstly, many import substituting industries will be adversely affected due to increased competition with imported products, which will be brought into the country with lower duties. Local manufacturing and backward linkage industries, particularly textile, ceramic, footwear, electronics, toiletries, agro-based and food-processing industries will suffer from the decision.

Secondly, the autonomous liberalisation through budgetary measures will reduce bargaining opportunity in the bilateral, plurilateral and multilateral negotiations of tariff reductions in which Bangladesh is involved. The average tariff in Bangladesh is 21.9 percent (2002) which is lower than India by 9.1 percent, the analysis pointed out.

The CPD praised the reporting system of the budget for bringing more transparency to government documents while reporting the budget figures, which is a constructive approach. Foreign grants have been grouped together with total revenue.

Attempts have been made to put up both non-development and development expenditures under one Demand for Grant, which is also a welcome step towards unification of the budget, the analysis added.

The fiscal deficit is declining mainly because of lower utilisation of the foreign aid, not because of investment and increase in the national savings. On the other hand, the inflation rate has gone beyond the target rate.

The main problem of the proposed budget is that it lacks any policy guideline for implementing the allocated resources. There are many ministries which failed to implement even 50 percent of their allocated amount in the previous budget. Even in this one, there is no guidance regarding how those ministries will be able to utilise the money allocated against them.

Regarding the finance minister's claim of putting emphasis on rural economy, the CPD researchers did not find any special areas where the government gave much attention other than increasing farm subsidy.

The CPD was also sceptic about whether the allocation of Tk 600 crore in agriculture subsidy would ultimately reach farmers as the budget did not spell out any mechanism to channel the allocated resources to the farmers.

It however appreciated the government's decision to increase the allocation for elderly people and destitute women.

The CPD also patted the government on the back for recognising the gravity of the law and order situation for investment and better economy. But it observed that mere allocation of Tk 2,367 crore for the home ministry and creation of a new battalion would not solve the problem.

It held the inadequate size of the police force, high level of corruption and lack of professional ethics among the police force responsible for the present state of the law and order. The civil society think-tank did not find any measures taken to increase the size of the police force, develop professional ethics and curb corruption.

The country's economy is now in a peculiar position where a lot of money remains unutilised. On the other hand, people are suffering from acute poverty. "So, the allocation is meaningless if the projects are not implemented and people's fates remain unchanged," Dr Debapriya told journalists at the briefing.

He supported the government move to expand Value Added Tax (VAT) network and rationalisation of supplementary duties.

All professionals like doctors and lawyers should also be brought under tax network and the government would have to gradually move towards direct tax system instead of an indirect one, the CPD executive director observed.

He also appreciated the government decision to declare a new pay scale for the government officials, but added that the other section of society like workers in the mills and factories should also get the benefit. The government should think of declaring a new wage commission for the workers.

With the impending external shocks such as MFA phase-out and possible escalation of internal conflict such as political confrontation, the delicate balance between development and stagnation may be broken but safeguards against such situations remained beyond the scope of a national budget, the CPD analysts concluded.

CPD research fellows Ananya Raihan, Uttam Kumar Deb, Fahmida Khatun and Head of Dialogue and Communication Anisatul Fatema Yousuf were present at the briefing.