Bangladesh finance minister to revise country’s budget
By
Wimal Perera
2 August 2017
In late June, the Bangladesh parliament passed the Awami League-led government’s 2017-18 national budget. Three weeks later, Finance Minister A.M.A. Muhith announced that the budget would probably be revised in February, five months ahead of schedule.
Muhith’s decision appears to have been taken in response to criticism from the International Monetary Fund (IMF) over the government’s decision to delay the imposition of a 15 percent uniform Value Added Tax (VAT). Currently the rate varies from 1.5 percent to 15 percent. The IMF and the World Bank have been calling for the higher rate since 2012.
Muhith originally included the 15 percent VAT proposal when he first announced the budget, a decision that the IMF and World Bank publicly welcomed.
However, Prime Minister Sheikh Hasina, fearful of the popular opposition to her already discredited government, intervened and postponed the VAT increase for another two years. Sections of big business also opposed the tax hike, concerned that the increase would undermine their competitive edge in export markets.
Hasina’s coalition faces national elections at the end of 2018 or early 2019. A July 1 New Age editorial said the government “appears to have suspended” the VAT “not because ordinary people would suffer, but because of the national elections.”
Expressing “regret” over the VAT postponement, the IMF warned that the government would face a 200 billion Takas ($US2.46 billion) shortfall in tax revenue, widening the budget deficit. Both the World Bank and the IMF claimed it would be impossible to achieve the government’s much-hyped estimate of 7.4 percent economic growth without the 15 percent VAT.
The IMF’s concern is…