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Revenue, investment targets not achievable

New York-based research firm says

Star Business Report
The government is unlikely to achieve its revenue and investment targets in the upcoming fiscal year as its priority projects are stalled and major tax reforms will not be implemented before 2016-17.
In order to finance new spending, the government expects tax revenues to rise by around 27 percent year-on-year, almost triple the historical rates of revenue growth, said Eurasia Group, a research firm based in New York.
The budget has eliminated and tweaked a number of existing exemptions and raised export taxes on garments from 0.3 percent to 1 percent and taxes on cigarette firms, it said.
But a value-added tax reform, considered to be a crucial means of raising the government's revenue position, will not be implemented until the beginning of fiscal 2016-17, the firm said in an analysis.
Moreover, while the budget included plans to open tax offices in all sub-districts that do not already feature them - a policy designed to broaden the tax base - progress is likely to be slow, it said.
“With tax revenue likely to prove slower than expected, the government's fiscal deficit, already projected at 5 percent of GDP, would come under pressure if the government's spending programme is fully realised."
The analysis said the new budget relies on more rapid real GDP growth and a dramatic increase in tax collection to finance a rise in infrastructure spending.
The budget has announced a series of highly ambitious revenue and investment goals designed to make Bangladesh a middle-income country by 2021 and a
developed country by 2041.
Overall, year-on-year spending is projected to increase by about 23 percent, with real GDP growth rising to 7 percent from 6.5 percent this fiscal year and annual average inflation remaining relatively stable at 6.2 percent.
"But the risks to the government's rosy forecasts are heavily weighted to the downside. Many independent forecasters see the FY2015-16 real GDP growth at about 6.5 percent," according to the analysis.
The finance minister argues that public sector wage hikes, moderate oil prices, strong remittance inflows and careful monetary policy management will drive higher consumer spending, bolstering growth in combination with rising public and private investment
"But while the government is stepping up public investment and remittance flows are likely to remain robust, further political violence could dampen private investment," Eurasia Group said.
The removal of tax exemptions currently enjoyed by government workers will dampen the positive impact of wage increases.
The analysis said the government's planned infrastructure spending drive, 30.6 percent of total expenditure for the year, is also likely to fall short of target.
In order to implement the government's goal of providing electricity to at least 80 percent of the population by 2018-19, the power sector saw the most dramatic increases in allocations.
The next budget's annual development programme doubles the allocation for power and energy compared to the revised 2014-15 programme. The analysis said, of the eight key mega projects singled out for special monitoring by a committee led by Prime Minister Sheikh Hasina, the government expects only two - the Padma bridge and the Rooppur nuclear power plant - to be completed by the end of 2018-19.
“Hie final design and cost of the nuclear plant has yet to be finalised and reports suggest it could cost more than three times the
government's initial estimates of about $3 billion."
"Similarly, work on the slew of major coal-fired plants listed in the budget has also proved slow, bogged down by land acquisition and land infilling delays, and many remain years away from commissioning."
It also said the government's confrontational stance against the opposition underscores the high risk that further political violence will curtail investment and hamper