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The government appears to have become desperate to increase revenue to meet ever-increasing expenditures. This desperation is evident in Finance Minister Abul Hassan Mahmood Ali's instructions to prioritise three key aspects in achieving this goal, as conveyed during a recently-held meeting reviewing the overall economic situation.
In this regard, he emphasised increasing revenue collection to meet IMF targets. Additionally, the Ministry of Expatriate Welfare and Foreign Employment, Ministry of Finance, and National Skill Development Authority have been urged to collectively work towards increasing remittances. Furthermore, initiatives to secure foreign loans at low interest rates and grants by continuing discussions with donors have been instructed.
The finance minister also stressed strengthening non-economic activities such as market monitoring and increasing food supply to control inflation. Sources from the meeting disclosed that the finance minister sought information on currency exchange rates, foreign exchange reserves, foreign debt, revenue collection, and expatriate income to maintain economic stability.
The country's economy has yet to fully recover from the ongoing crisis, grappling with rising inflation, a dollar shortage, sluggish revenue, and external debt repayments. In such a fragile situation, the new finance minister is attempting to instill hope.
To understand the depth of the economic crisis, the finance minister conducted a meeting attended by the Bangladesh Bank Governor, Finance Secretary, National Board of Revenue (NBR) Chairman, Senior Secretary of the Commerce Ministry, Secretary of the Financial Institutions Division, Secretary of the Economic Relations Division, and Secretary of the Expatriate Welfare and Foreign Employment Ministry.
The meeting highlighted various economic indicators, particularly recent data indicating an increase in dollar supply and a decrease in LC opening rates. While LCs worth $9,500 crore were opened in the last financial year, only $6,900 crore has been opened so far in the current financial year, with $2,600 crore reported as under-opened.
The discussion also addressed the pressure to repay foreign debt and the lack of statistics on returning expatriates. To curb product price manipulation, authorities were urged to scrutinize the difference between the lending cost (actual import price) and the selling price of imported products. Additionally, the installation of Electronic Fiscal Device (EFD) machines in Dhaka city businesses reportedly led to increased tax revenue.
At this time, NBR Chairman Abu Hena Rahmatul Munim said that revenue collection will be possible in accordance with the conditions set by the IMF. It is expected that income tax returns will increase by five lakhs this year, with an additional three lakhs anticipated.
He also mentioned that VAT growth has reached 17 percent, primarily attributed to the installation of EFD machines in Dhaka city. During the meeting, there was discussion about revenue collection, with reference to the conditions imposed by the IMF for revenue collection against loans. According to these conditions, initiatives must be taken to enhance revenue collection.
Meanwhile, the burden of foreign debt and debt interest payments has intensified on the economy. It was reported in the meeting that the external debt position as of December 2022 was $6,240 crore, with loan commitments for the financial year 2018-19 totalling $9,900 crore, of which $650 crore has been disbursed. Furthermore, pledges of $700 to 1000 crore were received until February in the fiscal year 2023-24, with $406 crore disbursed against this promise. It is projected to reach $900 crore by the end of the fiscal year.
Regarding debt repayment, the Secretary of the Economic Relations Division, Shahriar Kader Siddiqui, said that the amount of debt repayment will increase in the financial year 2026-27 as loans received from Russia and mega projects are scheduled for repayment. This trend of growth is expected to continue until 2030, after which the amount of debt repayment will decrease post-2034.
He further mentioned that the government has not defaulted on repayment of loans obtained from donor agencies. In the 2018-19 financial year, $159 crore of debt was repaid, increasing to $356 crore in FY 2022-23, and projected to reach $536 crore in the current fiscal year. The Economic Relations Division has been directed in the meeting to persist in efforts to secure flexible (low-interest) loans by continuing discussions with donors.
In that meeting, emphasis was placed on increasing expatriate income to repay foreign loans. Expatriate Welfare and Foreign Employment Secretary Md Ruhul Amin said that from December 2022 to December 2023, more than 160,000 workers, representing 28 percent of the total, went abroad. However, it is imperative to maintain statistics of returning workers, and efforts are underway to develop a method for this purpose.
During the meeting, instructions were conveyed to cultivate skilled workers to boost expatriate income. To achieve this, the Ministry of Expatriate Welfare and Foreign Employment, the Ministry of Finance, and the National Skill Development Authority will collaborate and undertake necessary measures.
It is worth noting that in the first eight months of the current (2023-24) financial year, the government's revenue collection has grown by 16 percent, exceeding the average growth rate of 10 percent observed over the last five years. Despite this growth, the deficit has not been bridged. The NBR is currently facing a revenue deficit of Tk 18,221 crore in these eight months after revising and lowering the earlier set revenue collection target.
Messenger/Disha
