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Budget revision likely if revenue target missed

REJAUL KARIM BYRON
The government may revise the budget next month if it fails to achieve the revenue collection target by that time, the finance minister informed International Monetary Fund (IMF) in a letter last month.
In a Memorandum of Economic and Financial Policies (MEFP) attached with the letter, Minister for Finance and Planning M Saifur Rahman said, "We intend to track revenue performance closely and if shortfalls persist, we will take corrective actions in the context of a revised budget in February 2004."
Already, a resource committee yesterday began initial deliberations on possible revisions of the budget. The meeting, with the finance minister in chair, made a primary review of the resource and expenditure scenario, especially that of the Annual Development Programme (ADP), a finance ministry source said.
Bangladesh Bank governor, finance secretary and high officials concerned were present in the meeting.
In the MEFP, Saifur presented the IMF with an account of the revenue collection by National Board of Revenue (NBR) in the current fiscal year (FY). He said, "Total revenue rose by 15 percent year-on-year, but on account of non-tax revenue," especially the dividends earned by Bangladesh
Bank (BB).
The minister expressed concern at the meagre first quarter revenue collected by the NBR, which rose by 9.4 percent, compared with the 15 per cent annual target, largely due to shortfalls in customs duty receipts.
"We expect tax revenue to grow faster in the remainder of the year, along with an acceleration in the registration of additional Vat [value added tax] and income tax payers, and the phase in of the programmed revenue measures," Saifur noted in the MEFP. He sought the Fund's continued support for the country's economic, financial and reform programmes till December next.
For FY05, Saifur emphasised revenue mobilisation and improved efficiency of the tax system. In the memorandum, he also conveyed the government's determination to strengthen the tax administration, starting with plans to expand the Large Taxpayer Unit in early FY05 to cover withholding tax and Vat.
"We will decide the appropriate coverage of relevant taxes by the second PRGF [Poverty Reduction Growth Facility] review in consultation with the Fund staff," the memorandum read. "In addition, we intend to rationalise the tax system by reducing trade taxes, including supplemental duties in FY05 budget." The finance minister claimed the macroeconomic policies to be on track, with over-performance in key targets such as reducing budget deficit. But, "closure of NCB [nationalised commercial bank] branches and loss-making state-owned enterprises (SOEs) in the manufacturing sector has slowed, particularly owing to strong labour union opposition," he explained.
Saifur envisages phasing out of Multi-fibre Agreement (MFA) quotas at the end of 2004 and uncertain political climate as the main medium-term risks in attaining the original macroeconomic framework for the current fiscal year -- of real GDP growth of 5.5 percent and inflation of 4.5 percent.
Due to the country's high dependence on ready-made garment exports, the adverse impact of the MFA phase out could be substantial on external position, output and employment, he
warned in the memorandum.
To mitigate those risks, the government has outlined a number of programmes for creating a globally competitive investment climate, for both domestic and foreign investors, the minister informed the IMF.
Since infrastructure has been a sour-point for investors and donors alike, the minister said the government intends to continue to exercise caution in contracting suppliers' credits, and to stay below the ceiling for the contracting and guaranteeing of nonconcessional external debt.
"Funding for infrastructure will be sought first on concessional terms, especially from IDA [International Development Association, a World Bank concern]. We will also enhance upstream monitoring and coordination of new loans in the process of being contracted, " the minister affirmed in the MEFP.