In the face of a tight resource situation, Finance and Planning Minister M Saifur Rahman yesterday sat with his predecessors, former central bank governors and finance secretaries to discuss the issues vital for the next budget.

With foreign assistance drying up, domestic debt creeping up and revenue earning not showing any significant improvement, the finance minister sought suggestions from them about how to manage resources to formulate development budget and accelerate economic growth.

Downsizing the government, improving law and order, making public expenditure prudent, restoring private sector's confidence and widening tax net were the suggestions that came from the former finance ministers.

The first such meeting was attended by former finance ministers Professor Rehman Sobhan, AMA Muhit, M Syeeduzzaman, Professor Wahiduddin

Mahmud, former adviser to caretaker government Hafizuddin Ahmed, foremr foreign secretary Motiul Islam, former governors Dr Mohamad Farashuddin and Khorshed Alam. Bangladesh Bank Governor Dr Fakhruddin Ahmed, Finance Secretary Zakir Ahmed Khan and National Board of Revenue (NBR) Chairman Dr Shoaib Ahmed were also present.

However, immediate past finance minister SAMS Kibria did not turn up at the meeting.

Venting his frustration over the resource situation, Saifur Rahman said, "It seems that the whole country is enjoying tax holiday. The readymade garment sector does not pay any tax, agriculture is also out of the net and there are many other sectors enjoying tax holiday facility. In this context, where do I get tax from?"

Saifur said the tax holiday scheme would be discontinued and a new tax scheme might be in place for the corporate sector on an accelerated depreciation formula.

"I am totally against tax holiday. I am ready to lower

corporate tax to 10 per cent from the existing 40 per cent, but I won't allow tax holiday anymore," the finance minister said.

Suggestions were also made for empowering the local governments and giving them financial power.

However, Saifur said corruption in the local bodies is rampant. "be it the city corporations or the union parishad, all types of corruption take place there. But it does not mean that I am against the local bodies," he added.

Highlighting the fall in aid disbursement and commitment, Saifur said about US$ 1400 million in aid was disbursed in the last fiscal. But till February of this fiscal, the total aid disbursement was only US$ 500 million.

During the meeting Saifur had a debate with former finance minister AMA Muhit on the overall macroeconomic stability, budget deficit and the expansionary monetary policy.

Saifur said the macroeconomic imbalance has reached such a critical point due to deficit financing and expansionary monetary policy followed during the last five years that it would not be possible to manage the situation in the next five years.

But Muhit, who joined the Awami League before the last general elections, differed with Saifur and said deficit financing is not going to cause any harm and can be corrected in a year or two.

"With the current strong economic fundamentals, it should not be a problem to correct the deficit financing situation," Muhit said.

"You (Saifur) are now blaming these things on the Awami League because you have lost your credibility with the international donors," Muhit told Saifur.

In reply, Saifur said, "My credibility with the donors is still very high."

He also mentioned that domestic debt has ballooned to about Tk 40,000 crore due to expansionary monetary policy followed during the last five years.

Dr Wahiduddin Mahmud mentioned that the big challenge for the next year's budget was to frame it in a tight resource situation.

"This year's ADP has been slashed down and it is not possible to frame a big ADP for the next year. The challenge is to maintain economic growth, create jobs and reduce poverty," Mahmud said.

Mentioning that the government

does not have the capacity to finance huge number of projects, he said, "It is a challenge for the finance minister to formulate the ADP in a tight resource situation and pacify the demands of his party lawmakers and different ministries."

Professor Rehman Sobhan suggested reviewing the already privatised sate-owned enterprises and placing the report before the parliament.

"We are talking of privatisation, but nobody has taken any initiative to review how the privatised SOEs are faring," Prof Sobhan said.

M Syeeduzzaman said restoring the private sector's confidence and addressing the SOE privatisation would be very vital for the new budget.

Another crucial issue, Syeduzzaman mentioned, would be to arrange payment to the independent power producers and international oil companies for power and gas purchase.

Syeeduzzaman also suggested floating bonds for industrialisation and tapping idle fund of the commercial banks and insurance companies for this purpose.

However, Saifur said this is an issue to be discussed at a different forum since the next budget cannot address it.

Hafizuddin Ahmed said improving the law and order is very vital for the economy.

He also suggested checking wastage in the public sector and stressed prudence in resource mobilisation.

He said lowering interest rate on savings instruments would hurt the honest low-income people.

Former Bangladesh Bank governor Dr M Farashuddin said the rural economy was revamped in the 1990s and it would be wise to provide collateral-free fund for the small and medium agro-based industries.

Saifur agreed with his proposition and said he is contemplating the idea.

Former finance secretary Motiul Islam said the private sector can participate in the Annual Development Programme with commercial capital if scopes were created.

"If the government agrees, then the private sector can scan the ADP and inject commercial capital," Islam said.