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Private sector investment will be under pressure due to higher government loan dependency to cover huge deficit

The Centre for Policy Dialogue (CPD) said, “If the government does not lend money to private sector, it will not be able to create employment generation. The government lacked political will to solve the problems of the banking sector and bring necessary reforms in the sector.”
Private sector investment

Figure: CPD distinguished fellow Debapriya Bhattacharya speaking at the press conference

The CPD came up with the observation at a press briefing on national budget for fiscal year 2017-18 on 10 July, 2017 at the BRAC Centre Inn in the city. CPD distinguished fellow Debapriya Bhattacharya made a presentation at the briefing on post-approval observations on national budget.

He said, “The new VAT law crash-landed and failed to take-off as the government suspended its scheduled implementation from July this year.” The independent think-tank also suggested the government to continue automation process in VAT system as part of preparation to implement the new VAT and Supplementary Duty Act-2012 from 2019.

“The government may also face a shortfall ranging from Tk 43,000 crore to Tk 55,000 crore in revenue collection target in the new FY 2017-18 because of suspension of the new value-added tax law and other reasons including ambitious projection”, he added.

Revenue shortfall

Figure 2: Revenue shortfall (Revenue target less real collection) based on original budget figures (Tk in crore)


Figure 3: Possible revenue shortfall in FY 2018 (Tk in crore)

Debapriya said that, “Banks from all generations were being victims one after another. Untamed loan scams, rising defaulted loans, corruptions and other irregularities like lack of good governance and weakness in oversight activities by regulators have wrecked the country’s banking sector in recent years and research organizations like CPD and economists have been demanding necessary reforms to ensure discipline in the sector.”

The CPD recommended the government for formulating a work plan for implementing the budget in the wake of suspension of 2012 VAT law, and reverse the situation of slower exports and negative remittance earnings, and stagnation in private investment and job creation.

Work Plan for implementing the budget for FY18 which needs to consider:

Work Plan for implementing the budget

The government should also emphasize on successful completion of 4G auctions at the possible highest price through resolving disputes, if any, and preventing corruption as it may bring Tk 7,700 crore in non-NBR tax in the year.



Table 1 shows the picture of the budget deficit and budget implementation anticipation. As an election budget, it is most likely that government will make sure as much as possible spending in this fiscal year. That means to cover the deficit of Tk. 112,276 crore government will have to heavily dependent on the banking and nonbanking loans. These loans will create enormous pressure on loans available for private sector. Hence private sector investment will not get enough boost. And that will mean less employment, less disposable income, less economic activities. And so the revenue target will be very difficult to achieve for government.


Table 2 shows that government’s current revenue source heavily depend on NBR taxes. These taxes are mostly directly given by people and then the companies. And so if employment generation is not enough, people don’t have enough disposable income, tax income of government will be less. And so it is most likely to have huge shortage in NBR tax collection as shown in figure 2 and figure 3.


CPD Executive Director Fahmida Khatun said the organization supports a revenue system that ensures accountability and transparency in tax collection and expand the tax base.

CPD distinguished fellow Mustafizur Rahman said that the government should stress on attaining productivity-driven economic growth in the year to ensure investment and job creation. Growth should not be jobless.

CPD Executive Director Professor Mustafizur Rahman; Director Anisul Fatima Yousuf; Acting Director Khondoker Golam Moazzem and Researcher Towfiqul Islam Khan were present at the press-briefing.

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