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Tuesday, 10 June 2008

Both external and internal shocks have been reflected in Monday's budget speech by finance adviser AB Mirza Azizul Islam, reports

"Various external and internal shocks have caused a negative influence on our macroeconomic performance," he said in the televised speech, the second under this caretaker government.

The adviser rolled out a national budget of Tk 99,962 crore for fiscal 2008-09 with Tk 30,580 crore or 4.99 percent of GDP in deficit.

In his budget speech, Mirza Aziz said the economy would grow by 6.5 percent in the next fiscal year.

"The growth of GDP in the current fiscal year which is estimated to be 6.2 percent is slightly lower than previous year's growth. But the deceleration in growth is still satisfactory compared to many countries in Asia," he said.

"Based on recent macroeconomic indicators, we may reasonably expect that Bangladesh will achieve 6.5 percent growth in FY 2008-09 assuming that that there would be no major natural disaster."

The target of revenue income for the next fiscal year has been set at more than Tk 69,000 crore.

Tk 54,500 crore will come in tax revenue from the National Board of Revenue, Tk 2,289 crore will come in non-NBR tax and Tk 12,593 crore in non-tax revenue.

Foreign sources will fund Tk 6,346 crore.

The adviser said Tk 29,549 crore was proposed to be allocated for development sectors, including Tk 25,600 crore for annual development programme, and Tk 66,753 crore for non-development sectors.

The adviser hoped the inflation rate would come down to 9 percent in the next fiscal year.

He said bumper harvest coupled with the forecast of increased global food grain production by the second half of 2008 would help cut the inflation rate.

The finance adviser proposed Tk 13, 498 crore to take from banks in loans to compensate for the deficit.

Mirza Aziz proposed Tk 2,171 crore for employment generation and development-oriented programmes and Tk 1,778 crore for food for work programmes.

Prices of commodities, employment generation, agricultural production, food security, power generation and widening social safety net were given priority in the proposed budget for fiscal 2008-09.

The finance adviser proposed 20 percent dearness allowance for government employees and pensioners, effective from July 2008 in the budget.

The government also decided to provide full festival allowance to pensioners.

Zero customs duty on foods, fertiliser, medicines and raw cotton will continue.

The adviser proposed to cut the concessionary rate of duty on capital machinery and spares from 5 percent to 3 percent, duty on basic raw materials from 10 percent to 7 percent in the interest of local industries.

Mirza Aziz also proposed to reduce duty on intermediate raw materials from 15 percent to 12 percent and put the highest slab, for finished products, at 25 percent.

In a bid to promote the ICT sector, the government has proposed that income generated from software development, data entry, data processing and call centers will be tax free from July 1, 2008 to June 30, 2011.

A reduction of duty on computers and its peripherals has also been proposed in the budget for FY 2008-09.

An allocation of Tk 262 crore has been proposed in total for the ministry of science and information & communication technology.

Exporters of handicrafts will also enjoy tax-free income from July 1, 2008, to June 30, 2011.

Mirza Aziz also proposed to revise the tax rate for companies listed for public trading from 30 percent to 27.5 percent.

In his budget speech for fiscal 2008-09, the adviser also proposed to cut the tax rate for the companies not listed for public trading to 37.5 percent from 40 percent.

The rate for banks, insurers, financial institutions and mobile phone operators will, however, remain unchanged at 45 percent.

The government has decided to continue its tax holiday scheme, to encourage entrepreneurs, for industries to be newly set up between July 1, 2008, and 30 June, 2011.

The budget for the upcoming fiscal year also announces new sectors to be added under the scheme.

In addition to keeping the existing sectors intact under the tax holiday incentive, the government has added agro-processing, diamond cutting, steel production from billet, jute industries, sections of the textiles sector, underground rail and monorail projects, and telecoms infrastructure excluding that for mobile phones.
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