The supreme irony of the moment that Finance Minister A.H.M Mustafa Kamal, failed to complete his budget speech in parliament on June 13, on account of having recently undergone a procedure to remove a cataract that had significantly reduced his ability to read out a written statement, would not have been lost on anyone. While gunning for the post - as it became clearer that the man who helmed the economy for the 10 years prior to him, A.M.A Muhith, would not be able to continue in such an important, hands on role for a 3rd consecutive term- Kamal himself had not been averse to the odd spot of ageism aimed at his predecessor, probably as a way to set himself apart from the man who acted as the architect of the Awami League's post-2008 revival.

The two had their most public standoff in 2014, when a disgruntled Kamal (as planning minister, he had requested a smaller revision to the Annual Development Program than Muhith saw fit) lashed out by saying: "He talks big. He proposes a massive budget every year. The speech is so long that he crashes out while delivering it." He went on to add that he could finish the budget proposal in 15 pages. Well, here was his chance then, as Sheikh Hasina broke the mould of choosing a finance minister based on widespread acceptance in bureaucratic and academic circles, to go with an international reputation that both Awami League and BNP governments had adopted since 1991. So you had Saifur Rahman, followed by S.A.M.S Kibria, then Saifur Rahman again, and then Muhith. Just prior to him, during the intering caretaker government regime that ruled thye country for two years, we saw the budget presented by Dr Mirza Azizul Islam. With his background in business, 'Lotus' Kamal comes from a very different world to those four names. But he had established himself as a very loyal supporter of the prime minister, served as the AL's finance secretary, and the stint leading the Planning Ministry, which once used to be part of the Finance Department, set him up nicely, after Muhith confirmed he would be retiring from active duty on the frontline of politics. In the end, it wasn't that much of a surprise.

To be fair, the two of them had put behind their differences in the intervening years. At a reception hosted by the National Board of Revenue in the wake of the last election, where both men were present, Muhith even offered to help his successor in precisely the task for which he copped criticism from him - preparing the budget. Whether or not Kamal took him up on the offer eventually is unknown, but at least on that evening, the two even hugged, and the new man went out of his way to heap praise on the man he replaced.

On the day of his budget speech though, Kamal certainly looked like he could have used some help. Having hyped up the budget he was about to present in the days leading up to it as 'smart' and 'full of surprises', what was revealed to the nation on the day may well have been taken out of the Muhith playbook: ambitious, expansionary, and leaving much to be explained by way of how it would be implemented. And of course, it missed the target of 15 pages by some margin - the version uploaded on the site, that includes annexes and tables, charts, clocked in at 134 pages. By comparison, Muhith's last one ran to 166 pages on the same format. No wonder Kamal was not up to the task of reading the whole thing. But even for the duration that he did read out bits and parts of it, the new finance minister appeared out of his depth, and twice as old as Muhith ever did during his ten years presenting the budget.

Default mode

As for the bill itself, not much or indeed almost nothing changed really, from what we covered previously in these pages (see issue dated May 31, 2019). Before turning it over to the PM, his life would have "remained unfulfilled" without his new job as the country's finance minister.

The national budget has been structured around the "spectacular achievements" of the government during the last 10 years, which "surpass even the fairy tales", he said.

But he was conspicuously silent on mounting loan defaults, one of the fault lines in the economy, despite making some positive pronouncements on addressing the issue since taking over the Finance Ministry. It appears the banking sector went from bad to worse after he took over as the finance chief in January. Defaulted loans soared to Tk 110,874 crore as of March this year, the highest ever in the country, further extending what is already a record that shows no sign of abating. The first quarter figures for this calendar year, released by the Bangladesh Bank this week, revealed that Tk 16,962 crore of classified loans were added to the tally, which was a quarterly record.

Now defaulted loans account for 11.87 percent of total outstanding loans, up from 10.30 percent in December 2018. In March 2018, the percentage was 10.78, according to the central bank. At the turn of the year, defaulted loans totalled Tk 93,911 crore. But as rumours started spreading that the central bank plans to extend a host of facilities to loan defaulters, many stopped paying instalments hoping to avail the benefits.

Kamal has been presiding over the worsening conditions of the banking sector. In his speech he vowed to punish the wilful loan defaulters and mentioned the formation of a banking commission to reform the sector. Already, in April private sector credit growth sank to a 56-month low of 12.07 percent. And private investment, which is driven by the liquidity offered by banks, has been languishing at the 22-23 percent mark for the longest time -- way lower than the requisite 28 percent as a minimum to carry on the growth momentum.

There are also misgivings over the tax policy adopted in the budget. Playing to populism, Kamal eschewed playing around with income tax for individuals, and heralded a shift towards more indirect taxation.Tax and fiscal policies framed by the government are not progressive enough, according to economists. Various exemptions and rebates, tax privileges given to different influential quarters, high dependence on indirect taxes and inadequate public investment in health, education as well as other social sectors never help the government achieve inclusive economic growth. One of the basic concepts of designing and implementing an equitable taxation system is to spread the taxes as wide as possible to minimise the individual tax burden.

And direct taxes, which are linked to the taxpayer's ability to pay, and hence are considered to be more progressive. An indirect tax, which is paid by everyone regardless of financial situation to buy goods and services, is used by the tax authorities to generate revenue.

One of the more worrying revelations to have emerged concerns the government's intention, or so it says, of implementing the VAT Act 2012 from July 1, but with certain amendments. The budget for 2019-20 proposes slapping three more VAT rates -- 5 percent, 7.5 percent and 10 percent -- along with the current 15 percent which was introduced in 1991. According to economist Ahsan H. Mansur of the Policy Research Institute, there is no precedent of VAT being applied in this way anywhere in the world.

Metropolitan Chamber of Commerce and Industry (MCCI) yesterday said it was looking forward to see the government ensure the new VAT regime didn't increase the complexities of running businesses.

The leading trade body also demanded that the government took steps so that taxpayers did not get harassed for minor lapse in the compliance of VAT provision. The Foreign Investors' Chamber of Commerce and Industry suggested government allow the companies time to adjust with the new law.

"Therefore, the chamber strongly recommends for allowing at least six months for implementation of the same which has not been considered in the proposed Finance Bill, 2019," the club of multinational companies operating in Bangladesh said in its reaction.

Similarly, Dhaka Chamber of Commerce and Industry (DCCI), Bangladesh Garment Manufacturers and Exporters Association (BGMEA), Bangladesh Chamber of Industries and Chittagong Chamber of Commerce and Industry also urged the government to ensure that no one is harassed during the implementation of the law.

However, the MCCI opined that it would be a major challenge for the National Board of Revenue to reach its revenue collection target of Tk 325,600 crore, which is 16.29 percent higher than the target of Tk 280,000 crore set in the outgoing fiscal year.

No place for consensus

The BNP, Jatiya Party and Gonoforum lawmakers, while taking part in discussions on the supplementary budget for 2018-19 in parliament, also criticised the government for their failure to implement the budget and ensure good governance. And true to form, the ruling party just ignored all criticism.

Gonoforum and Ganosamhati Andolon rejected the proposed budget, terming it "full of rhetoric" and "anti-people". Coming down heavily on the government for giving a scope for whitening black money and exemption to loan defaulters, they warned that the budget would force the country's economy into a fragile condition.

"The budget is a unique charter to fulfill the aspirations of the people," AL Secretary General Obaidul Quader said in AL's formal reaction to the budget at the party chief's Dhanmondi office.

Replying to a query on whether implementation of the budget will be challenging, Quader said implementation of a proposed budget is always a challenge. "But the new government has accepted the challenge."

"Those who are criticising the budget are doing it from a negative frame of mind. Their criticism is stemming from anti-Awami sentiment," he said. Responding to BNP's reaction that the budget was ambitious and anti-people, Quader said they have reacted the same way for the last 10 years, but every budget has helped build the country as a developing nation.

"Their criticism is clichéd and fabricated," he said.

Meanwhile in their post-budget reaction at Jatiya Press Club, Gonoforum President Dr Kamal Hossain said, "Interest of the common people has been ignored in many ways in the budget."

There is no clear indication in the budget to root out poverty, inequity and unemployment problem from the country. The budget will favour interests of the powerful business community and a vested political quarter, ignoring the overall interest of the common people, the party said.

Gonoforum General Secretary Reza Kibria said the budget will have a negative impact on the economy, as the country's financial setback has not been addressed in it appropriately.

The government has become harsh over the interest of farmers, while it has ensured interests of loan defaulters, he said.

Terming the allocation in health and education sectors inadequate, Reza Kibria called upon the government to reduce budgetary allocation in unproductive sectors.

He said the proposed budget is the outcome of shortsightedness, where there are no initiatives to overcome the financial setback.

"A group of people is making money and plundering it abroad, and the budget will favour their benefits," the Gonoforum general secretary said.

Describing the government as "unelected", he said citizen's wills and expectations are not reflected in the budget.

Ganosamhati Andolon in its formal reaction at party headquarters in Dhaka said that there is "no accountability" in the proposed budget, and it will further strengthen the stream of plundering.

They also said that government has "failed to perceive the reality" which will lead the national economy to a "fragile situation".

"As banks are unable to supply loans, the government has to depend on savings instruments... This way, the government is stepping towards a very dangerous path," said Abul Hasan Rubel, executive coordinator (acting) of the party, while reading a written statement.

The government is increasing pressure on people through imposing taxes and VAT, while huge exemption zhas been given to "looters" who have been grabbing people's money illegally, Abul Hasan Rubel added.

Ganosamhati Andolon also claimed there is no good governance in the banking sector.

Speaking at the press conference, chief coordinator of the platform Zonayed Saki said, "There is a limit to everything, including looting. The economic system, based on which the looting is happening, could be tumultuous."