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Recent Political Unrest and the Revenue Collection

Positive political change or better political situation improves the  fiscal  balance  of  the  economy  (Wahid  &Weis,  1995). There is a positive relationship between the revenue and a stable  political  situation.  Political  violence  hampers  the economic activities which shrinks the revenue collection. The last five parliamentary elections were held in February 27, 1991, February 15, 1996, June 12, 1996, October 01, 2001, December29, 2008 and January 05, 2014.

Statistical data on revenue collection from FY 1990-91 to FY 2014-15 shows a common feature of the politics that the previous year of the election is characterised by violence like hartal, vendalisation and terrorism. Economic activities are hampered because of this political unrest, but when the election is over and a new government is formed the business scenario gets better and the  rate  of  growth  in  revenue  collection  improves.  In  FY 1990-91, the rate of growth in revenue fell from 16.42 to 15.4 percent and in the next year, the rate of growth rose to 21.67 percent when a new government was formed.

In FY 1995-96, another year of election, the rate of growth fell from 15.71 percent to 9.52 percent and then increased to 10.52 percent in the    following    year    due    to    better    political    situation. Considering the historical track of revenue collection after the year of election where the political stability prevails it can be said that the revenue collection might be Tk.156569 crore, that  is  a  shortfall  of  Tk.26775  crore  .  Under  the  present political  crisis  the  shortfall  may widen.  The  economy has already started to  experience the influence  of the political unrest on the economic activities.

Cancellations of the import- related letter of credit increased by 24.94 percent (The New Age, 2015), Bank credit falls by 0.98 percent or Tk.5197 crore in January, 2015 compared to December, 2014(The Daily star, 2015) in the first half of the current fiscal year because of disagreement between importers and exporters and dull business situation in the country amid political uncertainty and unrest, and decrease of the export of readymade garments. The economy has almost come to a standstill. If the current situation prevails, the revenue shortfall might be as high as Tk.40055 crore at the end of the FY 2014-15.

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