Terming the proposed budget for 2008-09 fiscal as populist, the country's apex trade body FBCCI yesterday said its successful implementation is highly dependent on peaceful political situation.
Annisul Huq, president of Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), said the government may announce a budget of billions of taka, but in the presence of political impasse this has no usage.
Proposing popular budgetary measures in the context of an unstable political scenario would fail to attract local and foreign investment, said Huq while speaking at a press conference in Dhaka.
Finance and Planning Adviser Mirza Azizul Islam proposed a budget of Tk 99,962 crore with a deficit of Tk 30,000 crore for 2008-09 fiscal on Monday.
“I hope the proposed budget will be implemented by the next elected government as the political impasse is likely to be over soon paving the way to a credible general election,” Huq said.
However, there is a risk of liquidity crisis and higher interest rates on bank loans as the government starts to borrow from banks to fill in the budgetary deficits, he said, adding that the government proposes to borrow Tk13,000 crore from the banking sector to meet the deficit, he said.
“Through its borrowing from the banking sector, government will cause cash constrain in the banking system, resulting in higher interest rates on bank loans. As a result, investment will be hampered and the rate of unemployment will rise,” Huq said.
The FBCCI chief urged the government to provide the untaxed money holders an opportunity to invest their untaxed money in mainstream economic activities by way of setting up new factories.
He said at present the total amount of untaxed money in the country amounts to 30 percent of GDP.
However, the proposed budget is business and industry friendly as the government has proposed to reduce duty on import of both capital machinery and industrial raw materials.
The finance adviser on his budget speech proposed to reduce duty on the import of capital machinery and spare parts from 5 percent to 3 percent and reduction of duty on basic raw materials from 10 percent to 7 percent.
He also proposed to reduce duty on intermediate raw materials from 15 percent to 12 percent, but the duty on finished products is to remain at its highest slab of 25 percent.
Huq urged the government to withdraw 1 percent indemnity duty on import of capital machinery and spare parts.
Finance Adviser proposed for a 1 percent indemnity duty on import of machinery and spare parts for textile industries.
At a meeting with Annisul Huq yesterday, Finance Adviser assured him of possible changes of the proposed budget.