Govt urged to tackle budget deficit

The March 6 workshop was organised by ActionAid at the Republic of the Union of Myanmar Federation of Chambers of Commerce and Industry.
Myanmar has run budget deficits for years.
In the 2014-15 fiscal year, total government revenue was estimated at Ks19.17 trillion (about US$19.16 billion) against the expenditure of Ks21.92 trillion (about $ 21.91 billion), leaving a budget deficit of Ks2.75 trillion or 4.16 per cent of the country's gross domestic product (GDP). The deficit was 17.3 per cent of total public expenditures.
 The budget deficit was Ks1.63 trillion in the 2012-13 fiscal year and Ks2.88 trillion for the 2013-14 fiscal year.
“It seems we are making a policy that accepts that a budget deficit is normal. And ministries know that if they request a big part of the budget, the parliament will cut the number. So they request budgets before estimating, then later when the parliament cuts them, they try to ask again with a properly estimated amount. We call it “Before Estimate and After Estimate,” which is nowhere to be found in other countries. Yesterday, ministries explained their budget requests in parliament. If deficit is not more than 5 per cent, that good for a country’s GDP. A minister told parliament they are working for the deficit not to be more than 5 per cent for our country,” said MP Sandar Min.
Panellists at the workshop said that budget deficit is a factor driving inflation.
Governments normally deal with budget deficits through a hike in taxes or borrowing. However, Myanmar’s tax base is said to be small. It thus borrows to deal with the deficit. Its overspending would then inject money into the system, which in turn increase workers’ income and consumer spending and hence inflation.
“It is true that revenue from tax collecting is still small in our country. Revenue is about 8.11 per cent of GDP, compared with above 10 per cent in other Asean countries. We need to work on elimination of tax evasion. For example, restaurants are charging for tax but the receipt doesn’t even have a tax stamp. So tax paid by the consumer doesn’t go to the government. We need to enforce the taxation system,” said MP Phyo Min Thein for Hlegu constituency.
An official from Asian Development Bank noted that budget deficits in least developed countries in Asia is about 5 per cent of GDP. He noted that it is not good if a budget deficit continues for years and that the governments should consider cutting their spending.
 “We understand that tax collecting is important. But the taxation system should be accurate. Some small businesses that are trying to survive should not be taxed too much. If they are, they will not be able to survive. So management in taxation is also important,” said Hnin Oo, vice chairman of the Myanmar Fishery Federation.
During the interview on the sidelines of the workshop, Shihab Uddin Ahamad, ActionAid Myanmar’s country director, underscored the importance of income management and proper banking system.
“Budget is also income. The government needs to ensure that everyone and each company pays taxes. The government’s income from taxes and exports play a vital role in the budgeting process. At the same time, the government needs to encourage more exports,” he said.
Zaw Pe Win, principal of Human Development Institute, said the government should reduce the  budgetary  shortfall  by cutting expenditures and increase revenues.
 “If the government decides to ease inflationary pressures, it should draft a surplus budget so that aggregate demand in the country will decrease. However, this can hold back economic expansion as the aggregate price level may drop. On the other hand, if the government wishes to encourage firms to expand so as to avoid a recession, it should resort to a deficit budget policy. However, this could create public debt and will prove to be harmful if the deficit persists,” he said.
 “The government should draft a balanced budget to maintain economic stability. The budget policies should be made after a thorough investigation and careful consideration. Persistent deficit in the Union budget is undesirable as it is inflationary. If the budget deficit is a customary practice, it should be reconsidered,” he added.
According to Zaw Pe Win, the government needs to reduce reliance on public sector enterprises as a source of revenue; improve efficiency of tax collection and expand the tax base and structure; reduce undesirable expenses by effective monitoring; make budgetary procedures to be more efficient by restructuring the budget departments at different levels of the government; and improve statistical system to obtain more reliable and accurate statistical information.
“In the budgeting process, transparency seems weak under four years of this government administration. It shows weak check and balance system. Tax payments should be scrutinised. Research and study to promote the taxation system shall be carried out based on varying income levels,” he added.