Striking an appropriate balance between economic realities and political necessities perhaps would be a great challenge for the

upcoming budget of fiscal 2013-14. This budget would be distinctive because it is the last budget of this government and two governments will share its implementation. There is every likelihood that political elements will dominate and the Annual Development Programme (ADP) expenditures will be prioritised by election pledges. Macro-economic context: Swelling risks stemming from recent political unrest and slowdown in domestic economic activity have already manifested in key economic indicators in the current fiscal. It is already realised by all quarters that the current fiscal growth target of 7.2 per cent will not be materialised by any means. Growth projection of the World Bank (WB) below 6.0 per cent, the International Monetary Fund (IMF) 5.8 per cent, the Asian Development Bank (ADB) 5.7 per cent, the Bangladesh Bank (BB) in between 6.1-6.4 per cent and most recently by the Bureau of Bangladesh Statistics (BBS) of 6.03 per cent on May 16, 2013 allow us to estimate a figure around 6.0 per cent. Financial sector scams like Hall-Mark, Destiny and Bismillah Group have aggravated the situation further. Bad debt in banking sector has climbed from 6.0 per cent to 10 per cent. Banks have got extra cautious especially in local letter of credit (LC) and inland bill purchase while poor investment outlook drags the demand for private sector credit down. The private sector credit growth has fallen further to 12.72 per cent in March despite the fact that short-term and inter-bank call money rates are falling. Recent incident of Rana Plaza and its probable spillover effects on exports of readymade garments (RMG) have added fuel to the fire. Budgetary figures: The size of the upcoming budget no doubt will exceed Tk 2 trillion. But setting the size of overall budget and other figures should be objective and realistic as opposed to ambitious which is usually the case. The National Board of Revenue (NBR) is up to now short of its revenue target, and slowdown in import has taken a heavy toll on import duty and supplementary import duty (actual growth of 2.8 per cent and 0.76 per cent against the target of 16.06 per cent and 25.46 per cent). Slowdown in private sector credit and poor investment outlook stemming from current political unrest have manifested in slowdown in economic activities. This implies lower expected corporate and individual profit, hence lower tax. Moreover, the government has remained largely ineffective in mobilising funds from sale of Savings Certificates against its target (up to April, the government mobilised less than Tk 6.0 billion against the target of Tk 72 billion). All this suggests that internal resource mobilisation to finance the budget will be a big challenge. However, government is maintaining its fiscal discipline by keeping its borrowing from the banking system within target up to now. This will give some room in mobilising funds from the banking system going forward. ADP and Padma Bridge issue: Implementation of the ADP (Annual Development Programme) during the current fiscal has improved over the last fiscal. But ADP projects in the upcoming budget might be influenced by politically motivated projects. The government has seemed to have decided that some Tk 50 billion will be allocated to the Padma Bridge project from the upcoming ADP. This would leave significant negative implications for the priority projects in the field of health, education and physical infrastructures. Power and energy sector: Though the government has attached its priority to improve power and energy situation in the successive budgets, short-term measures have brought curse to fixed income consumers though upward revisions of energy price. The power and energy sector will get the highest priority in the upcoming budget without any upward adjustment of price. Social safety net and agriculture: In tandem with resource allocation for social safety net programmes to the tune of 3.0 per cent of the GDP (gross domestic product) by 2015, allocation to these sectors will be increased. Input subsidy and price support of essential agricultural products like rice will continue. Cold storage under government ownership or public-private partnership (PPP) will be built

and coverage of crops insurance can be expanded through budgetary allocation. Synchronising with the Sixth Plan: Budgetary priorities and targets should be synchronised with the Sixth Five-Year Plan targets. In this respect, investment to GDP ratio which has been stagnant around 25 per cent, with private investment to GDP hovering around 19 per cent over the last 4-5 years, should be promoted by way of budgetary incentives. Cash credit currency being offered to some export sectors may be continued and expanded to some more thrust sectors under priority basis. Import duty on capital machinery and intermediate industrial goods and raw materials can be slashed down. In order to incorporate grassroots level local participation in budgetary process, district level budget can be introduced on an experimental basis.

THE finance minister AMA Muhith has recently placed the budget for the fiscal year 2013-14 in parliament. The volume of the budget is Tk 222,491 crore and this years budget is 17 per cent higher than that of the previous fiscal year. Total deficit of this years budget is almost Tk 55,032 crore which is 4.6 per cent of our GDP. A big chunk of the deficit money would be collected from both internal and external sources. According to the budget, more than Tk 30,000 crore will be materialised from foreign sources and Tk 25,000 crore from internal sources. The big portion of this money will be collected from banking channels. For the past couple of years, the government has been borrowing excessively from the banking sector. Consequently, the private sector has seen its access to bank loans increasingly restricted, leading to less investment. It is observed that lack of investment means lack of employment and lack of GDP growth. Excessive borrowings by the government have made our banking sector volatile. For the past two years, the government took more money than it projected from banking sector, even earlier than the time stipulated. In this budget, the target for GDP growth is projected to be 7.2 per cent which seems to be rather ambitious taking into account the present political and economic scenarios. This budget will have to be implemented by the incumbent government as well as the upcoming one. And between these two elected governments, there will be another temporary government. I strongly feel that the continuation of this fiscal plan will be in a big trouble for this. We do remember that last fiscal years GDP growth rate was targeted at 7.2 per cent in the budget but only 6.03 per cent could be attained. However, the growth is praiseworthy considering the global scenario. Inflation for 2013-14 is targeted to be kept within 7 per cent which seems to be quite difficult. At present, the inflation rate is above 8.5 per cent. High borrowing from internal sources may raise the inflation rate further. This year the government has given priority to the communication sector having earmarked Tk 20,000 crore and the much-discussed Padma Bridge got more than Tk 6,500 crore. The Centre for Policy Dialogue observed that it would be risky for the government to build the Padma Bridge with domestic resources and leave negative impact on budget implementation. But it seems that the incumbents are to set the project rolling regardless of whatever the costs might be. Tk 167,000 crore revenue target has been set and Tk 136,000 crore has to be collected by the National Board of Revenue, which the NBR itself says would be very difficult. Last year, the NBR revenue target was Tk 128,000 crore but it could realise Tk 81,000 crore only. Finally it could be said that implementation of the budget for 2013-14 is very tough as well as

challenging as the government has to deal with a huge deficit which may push up inflation and tax burden for people at large.

That there is many a slip between the cup and the lip is a reality in many cases in the practical domain of public expenditures. This is particularly found to be the case when it comes to the government's avowed development priorities and sectoral allocation of public resources under the national budgets. The all-important communication-related physical infrastructure sector, to cite an example, is the one that has been the subject of a similar situation. The road and rail communications sector does play a very important role in the economy, in terms of transportation of goods and passengers across the country. Both the transportation systems continue to be underdeveloped and problem-ridden. The present government, soon after assuming power, took up a number of important projects in areas of both road and railway communications. The Dhaka-Chittagong highway four-lane, JoydevpurMymensingh four-lane, Bus Rapid Transit (BRT) and Dhaka Mass Transit (MRT) projects as well as the Padma Multi-purpose Bridge (PMB), are among the few important ones that have a strong bearing on the easy transportation of passengers and goods. Among those projects, the implementation of BRT, MRT and PMB is yet to start full-scale though the deadline for starting physical execution of each of those projects expired long ago. The much-hyped PMB project was scheduled to be completed during the current tenure of the government. But bids for the construction of the main bridge are yet to be floated. Similarly, implementation of two four-lane highway projects, considered very important in terms of their role in transportation of goods and passengers, has been slow due to inadequate allocation of resources. The Dhaka-Chittagong four-lane project, initiated in 2006, is scheduled to be completed in December next. But until now only 35 per cent of its work has been done. Though the project-life has been extended by another year, nobody knows for sure when it would be completed. The delay in implementation has resulted in its cost escalation to a substantial extent. The project has received an allocation of Tk. 5.0 billion against the demand for a fund of Tk.6.0 billion. The Joydevpur-Mymensingh four-lane highway project has got Tk.1.3 billion against the demand for a fund of Tk.4.0 billion. The BRT has got half of its demand (Tk.2.0 billion), metro rail, one-third and other road sector projects combined, less than half. An overpass at Banani rail crossing and the Mirpur-Airport Road flyover have been completed on schedule under supervision of the Bangladesh Army. But despite extension of its life on a number of occasions, none is certain about the exact time for completion of the all-important Gulistan-Jatrabari flyover. The airport-Kuril flyover has also gone beyond its scheduled time for completion. The authorities made promises about completing the under-construction flyovers as early as possible but uncertainty continues. It does appear from the allocation of resources in the development budget for the next fiscal (201314) that the PMB project has forced the government to 'crowd out' many important communication sector projects by way of depriving them of their required amount of allocations of financial resources. The resources received jointly by road and railways are equivalent to that allocated to the PMB project, the implementation of which with the country's own resources has already aroused a strong controversy. Then again the government has allocated a fund of Tk. 12.29 billion for repair and maintenance of existing roads and highways, in line with its more emphasis on such roads than on the construction of new ones. However, proper use of this allocation is important since a large part of such

allocations are allegedly misappropriated by a section of dishonest road sector officials and so-called contractors.

There should be a balance between economic reality and political necessity in the upcoming budget, the Centre for Policy Dialogues (CPD) distinguished fellow Debapriya Bhattacharya said yesterday. The public policy analyst made the observation at a media briefing on the 2013-14 budget at the CPD office in the capital. Emphasising caution and balance, he said that fiscal and external matters, plus governance are the three major challenges to implementing the next budget. All the three risks will be underpinned through unfolding political hostilities, he said, adding, If such animosities persist, they are going to seriously jeopardise the successful implementation of the upcoming budget. The economist said the gap between the targets of the 6th five-year plan indicators and the present index is huge and the country does not have enough resources to fill the vacuum. The economic reality is we dont have enough resources to achieve the targets envisioned in the five-year plan, added the CPD expert. He observed that domestic demand is declining. Banking Sector Focusing on the banking sector, Debapriya said the financial sector is in a deep crisis. Bad debts increased from 6% to 10%, while high interest rates and spread, and subsequent excessive liquidity within banks were putting pressure on the financial system, he maintained. In addition, corrupt loans that Hallmark and Bismillah Group obtained made the scenario worse, he continued. The private sector was also not taking loans from banks, as there is no quantitative change to the investment climate, he pointed out. High growth will not be possible without necessary investment, he observed. Padma Bridge Viewing domestic funding for the Padma Bridge, Debapriya said such financing would have a negative impact on allocation for important social sectors like education and health.

In the current fiscal year, expenses in the annual development programme (ADP) increased to Tk90bn while it is announced that ADP expenses would be set at Tk100bn in the next budget, he said. In budget discussions, the government decided to allocate Tk60bn for the troubled bridge project leaving only Tk40bn for allocation to all other sectors in the upcoming fiscal year, he added. The government allocated Tk90bn for the current ADP while it had Tk40bn for allocation to all sectors, he pointed out. CPD Executive Director Mostafizur Rahman conducted the programme while its Research Director Fahmida Khatun made a comprehensive presentation.

Bangladesh real estate sector has been in a slump lately. Consumer demand for new flats and apartments have been low as unsold flats are increasingly forming a bottleneck in the sector. However, there is nothing unusual about this. As election approaches and political turmoil increases, probable investors in the sector will hold back their capital to see through the uncertainty. Consumer confidence is low in this industry as has always been the case during past elections and increasing political turmoil. In the current budget for the fiscal year 2013-14, Honorable Finance Minister Abul Maal Abdul Muhith has kept a provision for legalizing undocumented income through purchase of flats and plots of land. He hinted that such an action was a compromise to stimulate the real estate sector besides increasing revenue collection to meet the ambitious Budget 2013-14. Will this provision really serve its purpose? Since 1971, such provisions in the budget has generated a total of Tk 1407.21 crore. To put this number into perspective, this is only about 0.6 % of the latest Tk 220 thousand crore budget. Therefore, it is highly unlikely that this provision will generate even 0.1 % of the fund required to meet the latest budget. Will this provision really bring the real estate sector out of its recent slump? To answer this question, we need to understand how our real estate sector has been functioning lately. Land and flat prices have been rising for several years now. Real estate prices in many regions of the country has increased by as much as 5-10 times in the past decade. As such, affordability of land and flats, typically in urban centers, are fast going out reach of even the upper middle class households in Bangladesh. This implies that this growing property bubble was mainly fueled from investments of the upper wealthy class, an extremely small proportion of the total population. This small segment holds almost all of the black money that the government is aiming to bring under documentation. Hence, such a policy is bound to produce some growth for the real estate sector. However, as stated before, investor confidence in this sector is still very low due to the approaching political uncertainty. We may have to wait till the next democratic government comes to power before we see a significant growth in this sector. Thus, compromising the governments stance on ethics and morality may not turn out to be a sound move for the Finance Minister unless he is giving in to the interest of a special privileged group. More importantly, this provision is unhealthy for the country from a broad economic perspective. The anticipated impact of this policy will be an increase in demand of real estate property which will in turn translate to higher real estate prices. This will have some negative impacts on the economy.

An increase in the proportion of population owning some form of real estate property is commonly seen as an example of increasing socioeconomic well-being. With rising prices propped up by black money, real estate properties will go out of the reach of more people in the country. Moreover, the real estate sector may become dependent on black money holders for growth which can never be healthy for any economy. Besides, rise in real-estate prices will certainly increase the cost of setting up newer factories as pointed out by CPD in its post-budget analysis. This is bound to have a negative impact on the countrys growing manufacturing sector in terms of rising cost of set-up and production. Lastly, further inflating the property bubble is only likely to increase the fear of a possible burst in the near future which may have a very bad impact on the country. Even though there is very little institutional capital tied in our real estate sector compared to many other developing and developed countries, a dramatic fall in consumer confidence is bound to happen if fear of such a burst really materialize. So, is this compromise in the governments stance on corruption and illegal activities really worth the socioeconomic payoff? Only time will tell but past statistics and sound understanding of the countrys economy tells us to be wary and expect very little out of this provision.
The country's realtors are expecting a rise in sales of flat and plot following inclusion of the provision of allowing undisclosed money in real estate sector in the proposed budget for fiscal year 2013-14. They also said flat and land prices will not go up for allowing undisclosed money in the sector. Real Estate and Housing Association of Bangladesh (REHAB) officials said the proposed budget is beneficial for real estate sector. Some people termed the budget ambitious, but realtors think it is achievable if political stability can be ensured. The REHAB leaders said these at a press conference on the proposed budget at a city hotel. REHAB general secretary (in-charge) Md Wahiduzzaman said: "Registration is a big sector for revenue earning. We urge the government to rethink about reducing the registration cost to 6.5 per cent from the present 12 per cent. The cost should be 5.0 per cent for those who sell their flats three or four years later." He also demanded Tk 15.00 billion refinancing housing loan for the sake of the middle-income group people as well as for boosting up the country's real estate sector. REHAB media standing committee chairman Liakat Ali Bhuiyan said: "Around Tk 1,120 billion has been invested in the real estate sector abroad from 2010 to 2013. Most of the money was spent in Malaysia, as undisclosed money was not allowed in the local real estate sector." He said the proposed provision of allowing undisclosed money will help the sector to come out of the existing stagnant situation, created due to lack of gas connection, high bank interest rate and capital market debacle. At this moment 1,183 members of REHAB has around 25,000 unsold flats, he added. REHAB vice president Md Abdur Rashid, treasurer Mizanur Rahman Dewan, organising secretary Sydul Islam Badal and joint treasurer Md Ansar Ali, among others, were also present at the press conference.

President of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) Kazi Akramuddin Ahmed on Wednesday stressed the need for plugging up the sources of black money or undisclosed money and squeezing their sources.

The apex trade body president, however, demanded the government create a scope for investing black money in the proposed budget for FY 14 in the capital market and other productive sectors like industries, infrastructural sector and economic zones apart from the proposed facility in the real estate sector.

If black money is allowed in these sectors, then therell be betterment of the country as well as the nation, he said while addressing a post-budget meeting on the proposed national budget for fiscal 2013-14 held at the Officers Club in the city.

Earlier on June 6, Finance Minister AMA Muhith tabled a Tk 2,22,491 crore budget for the fiscal year FY 14 in Parliament where he proposed to allow investment of undisclosed yet legally earned money in the real estate and housing sector.

Finance Minister AMA Muhith spoke on the occasion as the chief guest at the programme while NBR chairman Md Ghulam Hossain as a special guest. The FBCCI organised the meeting.

FBCCI first vice president Monowara Hakim Ali gave the vote of thanks while its vice president Md Helaluddin made the introductory remarks.

The FBCCI president in his speech placed a 19-point post-budget recommendation before the government for its consideration prior to final approval.

About the recent Cabinet decision to approve the possible signing of the Trade and Investment Cooperation Forum Agreement (Ticfa) between Bangladesh and the USA, the FBCCI president said once Ticfa is signed it would create a duty-free access of the Bangladeshi products, especially that of RMG, as well as strengthen the bilateral relations in trade and investment.

Kazi Akramuddin Ahmed said around Tk 14,000 crore outstanding revenues could be achieved through making the Alternate Dispute Resolution (ADR) activities more effective, practical and widened.

The other suggestions and recommendations on the proposed national budget for FY 14 include amending the VAT Act, 2012 in light with the VAT Act practiced in other developed countries like China, Japan, in Europe and other developing countries, retaining the previous rate of package VAT, phasing out the mandatory Pre-Shipment Inspection (PSI) system, reducing the import duty on capital machinery to 1 percent from the proposed 2 percent, extending the tax holiday facility to SME sectors and women entrepreneur sectors apart from the proposed 17 sectors up to 2015 and keeping the non-profit trade bodies out of the purview of the income tax through withdrawing the SRO concerned.

Taking part in the open discussion, former FBCCI president Akram Hossain proposed opening up a research cell at the NBR on how to utilise black money in the economic activities.

Immediate past FBCCI first-vice president M Jasim Uddin demanded the government give special allocations for industrial parks, special economic zones and giving tax holiday facility to the plastic sector.

Real Estate and Housing Association of Bangladesh (REHAB) Tuesday hailed the proposed budget for the 2013-14 fiscal and termed it as a pro-people one and favorable for the housing industry, reports BSS.

We see the ray of hope for the housing industry as the measures taken in the proposed budget including decision of giving new gas connection are positive for the prospective industry, REHAB acting general secretary M Wahiduzzaman REHAB president told Nasrul reporters Hamid and at a press officials conference were present at at the a city press hotel.

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Wahiduzzaman said the scope of investing undisclosed money in the proposed budget and the proposal of reducing tax in source will help increase the amount of investment in the country.

Expatriate Bangladeshis would also be encouraged to invest in the real estate sector, increasing Bangladeshs revenue income.

Wahiduzzaman demanded a refinancing scheme involving Taka 1,500 crore as housing loan for accommodation of middle class families to bring dynamism in the industry.

He also sought banks loans at lower interest rates for the middle-class families.

The realtors welcomed the governments decision to allow black money to be invested in the countrys housing sector. According to the Rehab, the realtors group, use of undisclosed money in the housing sector will help the local investment become vibrant.

The Real Estate and Housing Association of Bangladesh (REHAB) said the investment of black money to build houses will also prevent money being laundered. In the proposed national budget for the next fiscal, finance minister said the black money will be allowed to invest in the countrys housing sector. Through the investment, the money will be whitened, though the provision already proved unsuccessful in the previous fiscals. The black money owners were seen not interested in investment. To implement a large budget, stability must be restored to politics, tax net needs to be widened, bank interest rates should be lowered and above all, the implementing agencies will have to prove effective, said the Rehab. Although it is an ambitious one, such large budget is can be implemented if politics is ensured stable, M Wahiduzzaman, REHABs acting general secretary, said yesterday. He was addressing a press conference in Dhaka. M Wahiduzzaman said the proposed budget is intended at development of the country, which will help the housing sector too. The budget proposed that the undisclosed money can be invested in the housing sector while lowering tax at source will help boost domestic investment, he said. Bangladeshi expatriates money are also invited for investment in the country. The more investment from the expatriates will help balloon the foreign exchange reserve, said the REHAB leader. Housing sector will be vibrant again and more employments will be generated through linkage industries. It (investment of black money in the housing sector) will also stop money laundering, viewed Wahiduzzaman. REHAB Press and Media Standing Committee chairman Liyakat Ali Bhuiyan, vice president Maj Gen (retd) M Abdur Rashid and organising secretary M Saidul Islam Badal, among others, also attended the event.

The proposed budget for the fiscal year (FY) 2013-2014 is ambitious and populist but implementable, Finance Minister AMA Muhith said Saturday at a post-budget news conference. I am incorrigibly optimistic, asserted the finance minister about implementing the budget and achieving the revenue target for the next fiscal.

The proposed budget would serve the purposes of masses as the new tax measures proposed in the budget would have no impact on their everyday life and expenses, he added. He said the countrys large volume of black money cannot be tapped through any drive or action. Appropriate economic strategies alongside the fight against corruption and pervasive tax evasion in the buy-sell process of properties could only tackle the menace, he added. Mr Muhith strongly defended the budgetary offer of legalising black and untaxed money by investing it in the real estate sector. It is not that major compromise I did in the way of offering the money whitening facility in the last budget of the government, the finance minister said. He said he had to compromise on loss-making state-owned enterprises (SoEs) and also on CNG prices despite his willingness to bring CNG prices at par with that of fuel oil. Compromise is justifiable in the democracy depending on situations, he said. The press briefing was held at the Osmani Memorial Auditorium. Senior ministers of the cabinet and bureaucrats of different ministries attended the meeting. Mr Muhith responded to different other questions from reporters on the budgetary measures proposed in the new budget. Mr. Muhith said the subversive activities of war-criminals and Jamaat-Shibir will pose the only challenge for implementation of the budget, as the party cadres are unleashing chaos and vandalism in the country affecting the normal economic activities and growth prospects. The difference which lies over the form of polls-time government will be sorted out through a dialogue between the incumbents and the opposition parties. The unrest centring on the electiontime government is not a threat to budget implementation, unlike activities of Jamat-Shibir, the finance minister told the news conference. The National Board of Revenue (NBR) would be able to achieve the target of 16 per cent growth in revenue set for the next fiscal as the target was fixed in consultation with the revenue board officials, he said. He said the country could not earn in the last 30 years any amount of revenue similar to what the government realised in the last five years. The proposed budget slashed tax on SIM card to Tk 300 from Tk 600 to enable all mobile phone service operators to compete with each other efficiently. The measure would not hurt the potential of revenue earnings as the number of mobile subscribers would increase many times because of the lower rate of tax, Mr Muhith said. He lamented his failure to lower the corporate tax in the proposed budget.

Mr. Muhith expressed his despair as the opposition was not present in the Jatiya Sangsad at the time when the budget was placed. This is not a mere sorrow for me, but a tragedy, the finance minister said. Responding to a question, the finance minister said while all the indicators of the economy are showing their potential growth, only the investment-GDP ratio is the exception. We will have an investment-GDP ratio of 26.8 per cent for the outgoing fiscal year, which will reach 27 per cent next fiscal, Mr Muhith said. It (investment-GDP ratio) remains below my target and expectation, he lamented. He said the government keeps on providing subsidies to the agriculture sector. He said the facility of whitening black money of payment on 10 per cent tax in addition to normal tax, in place since the previous fiscal, will continue into the next fiscal as well. The offer is valid for any of the sectors including the stock business, Mr Muhith elaborated. The planned financing from the Bangladesh Bank (BB) for the capital market would boost the ailing sector, the minister said. Bangladesh Bank Governor Dr Atiur Rahman said all the macroeconomic indicators in Bangladesh are now stable and strong. Higher inflation in 2008 was very embarrassing. However, until May this financial year, the average inflation has come down to 6.57 per cent on the basis of 2005-06 base-year and 7.75 per cent on the basis of 1995-96 base-year. This data shows that it remains stable now, he said. Inflation in both rural and urban areas has declined. So we hope the inflation will remain within 7.5 per cent in the outgoing fiscal, the central bank governor said. Besides, the point-to-point inflation in May of the current fiscal also fell to 7.78 per cent on the basis of the 1995-96 base-year, he said. If you look at the inflation data of India, you will see that its inflation has risen to 9.9 per cent. So we are still in a comfortable position, the central bank governor said. The Governor said: There is no concern about price hike of different products, including fuel oil in the international markets next year. And we hope we will not face any big crisis from the external side. So, the 7.0 per cent inflation target set for the next fiscal will also be achievable. Defending the 7.2 per cent economic growth target in the next fiscal, Dr Atiur said, I believe it is very much possible to achieve.

Since the export earnings are still growing, the capital machinery import in April last posted 27 per cent growth, and as the foreign direct investment is getting a boost, the economy will grow as per the budgetary projection, he added. If the political stability is maintained, the growth target achievement is not impossible, he maintained. About the bank borrowing target, Dr Atiur said the borrowings from the banking system were less than half the target until May of the current fiscal. We hope the borrowing ceiling will not exceed the target at the end of the current fiscal. Board of Investment (BoI) Executive Chairman Dr SA Samad said according to the sovereign credit rating result from the S&P and the Moodys, the macroeconomic indicators of the country are the strongest among the South Asian countries. We are hopeful of getting US$ 1.7 billion worth of foreign direct investment (FDI) in the outgoing fiscal, he said. If we can develop our infrastructure, ease the problems with doing business, the 7.2 per cent to 7.5 per cent GDP growth will not be a castle in the air, he added. Energy Adviser Dr Tawfiq-E-Elahi said power generation at the end of the calendar year 2013 would not only cross the 7000-megawatt (MW) production target, it would also rise to 9000 MW. Referring to a research of the Bangladesh Institute of Development Studies (BIDS), Mr Elahi said the power stations added 2.0 per cent GDP growth to the overall economy. Planning Minister AK Khandker said public investments in the development sector were boosted a lot over the last four years. We have prepared the perspective plan to become a middle-income country by 2021. We hope we are on the right track to achieve our goals, he said.

Appreciating the proposed budget as capital market-friendly, Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange in the (CSE) authorities said the proposed steps the will help expedite market.

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"We welcome the government for giving special importance to the capital market in the proposed budget. We hope it'll help expedite industrialization through expanding the market," DSE President Rakibur Rahman told the FE in his budget reaction.

On the other hand, CSE Vice President M K M Mohiuddin said the new incentives would have a positive impact on the capital market as well as the investors.

Finance Minister AMA Muhith offered a number of new benefits, including a tax rebate on the investment of private mutual funds and tax deduction at source on share premium to help revamp the country's stock markets.

The government has also raised the tax exempted dividend income threshold up to Tk 10,000, from existing Tk 5000, to help the capital market investors to recoup their huge losses to some extent.

Muhith has proposed the tax rebate to investors of private mutual funds, making a level-playing field in terms of tax benefits in case all mutual funds to offer a 15 per cent tax rebate on dividend income for all mutual funds.

In its another proposal, investment ceiling for individual has been raised up to 30 per cent of total income fixed at Tk 15 million from existing Tk 10 million.

Presently, a 10 per cent tax rebate is applicable on the individual's income by investing 20 per cent of total income fixed at Tk 10 million.

The government also proposed to withdraw the 3.0 per cent capital gain tax imposed on share premium since it has been benefiting companies, not investors.

"A special tribunal has been constituted to dispose of the capital market related cases. We expect to finalize the Financial Reporting Act," AMA Muhith said in his budget speech.

"Tax exemption on dividend income will attract new investment in the market and the tax rebate on the private mutual funds will encourage investors," said DSE president Rakibur Rahman.

Describing the incentives proposed by the Finance Minister for the 2013-14 fiscal, Mr Rahman said

they have seen reflection of the investors' desire in the proposed budget. "It shows there is no lack of sincerity for the development of the capital market," he added.

He also thanked the government for keeping intact all the incentives that had been provided in the outgoing fiscal year including the opportunity to invest undisclosed money in the capital market.

CSE vice president Mr Mohiuddin, said the foreign investors will encourage to purchase the units of private mutual funds amid a level playing field created by the government.

"We hope the foreign investors will be interested for long term investment in mutual funds," he added.

He, however, urged the government to withdraw existing 0.05 per cent tax at source from brokerage houses.

Apart from the new incentives, Muhith assured that the incentives that had been provided in the outgoing fiscal would be kept intact for the coming fiscal (2013-2014) in a bid to strengthen the capital market and maintain its stability.

Meanwhile, "We have also installed surveillance software of international standard to ensure transparency and accountability in trading through establishing state-of-the-art surveillance software."

Besides, the government has updated the Corporate Governance Guidelines. From 28 February 2013 onwards, all omnibus accounts have been converted into separate Beneficiary Owners (BO) accounts, said Mr Muhith.

In the meantime appropriate steps have been taken by Bangladesh Bank, Merchant Banks and ICB, said the finance minister in his budget speech. The refinancing fund for the capital market will be released early next month by the finance ministry as the stimulus fund will be allocated from the revenue budget of next fiscal year beginning July 1, next.

The fund meant for revamping the moribund capital market will be managed by the Investment Corporation of Bangladesh (ICB) under a yet to be evolved, guideline, in this connection The Bangladesh Bank (BB) will be kept largely outside the purview of the entire process because of the nature and objective of the proposed fund, a senior finance official said.

A committee, to be formed by the next couple of days, will finalise the nitty-gritty of spending and managing the stimulus fund, the official added.

Finance Minister AMA Muhith approved the fund worth Tk 9.0 billion on Tuesday last to revive the moribund capital market. The fund would be created from the head of 'unexpected expenditure' under the revenue budget of the upcoming 2013-2014 fiscal year.

The finance ministry officials said the proposed fund could not be released in the current month of June as it will be made available from the revenue allocations earmarked in the next fiscal year.

They, however, said BB would have no role in managing or administering the fund other than advising on preparing the guideline for managing the fund.

A high-powered committee, headed by Securities and Exchange Commission Chairman will be formed shortly by the Bank and Financial Institution Division under the MoF to prepare the guideline on the Tk 9.0 billion fund.

"We will give only a 10-day time to the committee, to be formed soon, to formulate the guideline on the investment modalities of the stimulus fund, fixing interest rates for stock investors, merchant banks and brokerage houses," a finance official told the FE on Wednesday.

"The role of ICB in managing the fund will be clearly spelled out in the committee report on the guideline."

The committee will recommend the eligibility criteria of merchant banks and brokerage houses to get the low-cost fund, interest of which could be around 5.0 to 6.0 six per cent, an official in the finance ministry said.

The fund is expected to create a momentum in the now depressed stock business, a stock broker said.

The

fund

would

be

adjusted

in

the

revised

budget

of

the

next

fiscal.

Earlier, the BB had made a proposal about the refinancing scheme stating that its funding needs would be met through adjustment of BB's profit, to be generated in the outgoing fiscal year (FY) 2012-2013. It has been proposed that the fund will be disbursed by the central bank to the ICB in three phases next fiscal.

The measures proposed in the budget for the Financial Year 2013-14 are likely to have far reaching consequences on the companies listed in the countrys stock exchanges according to senior analysts of different brokerage houses. While some sectors have reasons to cheer, others might not find relief in the measures that have been proposed in the budget, said Ashaduduzaman Riadh, research -in-charge at Lanka Bangla Securities Ltd. He said though budgetary measures are conducive to macro and capital market, political uncertainty is the single biggest systematic risk in the horizon to rattle the sentiment of investors again. The impact of the proposed budget is expected to be positive on the ceramic, cement and energy sectors but is expected to put added pressure on the telecommunications, tobacco and banking sectors. The major incentives, previously given in the current fiscal for the capital market, are to be continued for the new fiscal year with some additional incentives.

Analysts believe that the declared incentives will help the primary market, open-end mutual funds and retail investors more directly. The investment ceiling as a percentage of total income has been increased to 30% from 20%. In that case, the proposed tax rebate would be 15% against the existing 10%. It is likely to foster individual investments in the capital market in the future. The budget proposed to rescind the existing provision of charging 3% tax on premium over face value of shares of a company. This will reduce floating cost of issuers and will enhance supply side of the capital market. The current tax rate of 0.05% at source from total income on bond sales is to be repealed according to the proposed budget. This will reduce transaction costs for bond buyers and sellers. A 15% tax rebate on investment in public mutual funds has been proposed. This is likely to boost demand for mutual funds. The proposal to increase the threshold of tax exempted income from dividends to Tk10,000 from the existing Tk5,000 will encourage investment in cash dividend paying stocks. The existing provision of exemption on gain tax will continue for individual investors. However the 10% tax on capital gains for the companies and firms will continue for the next financial year. There were no clear directions about allowing black money to be whitened by investing in the capital market in the announced budget. However, in the post-budget press conference the finance minister gave a hint of allowing it at a 10% tax rate.