Finance Minister AMA Muhith yesterday termed "foolish" the single VAT rate prescribed by International Monetary Fund, rowing back on his promise of putting in place a uniform 15 percent rate.

"I can tell you right now that there will not be one 15 percent rate, which was an IMF recommendation. And I think it was foolish," he told reporters at his secretariat office.

As a condition of the IMF's $1 billion loan under the extended credit facility, the government formulated the new VAT law.

The law was scheduled to come into effect from this fiscal year. A main provision of the law is that it would introduce the uniform rate to replace multiple ones.

In the face of opposition from the business community, the implementation of the law has been deferred by two years.

Muhith was always in favour of a single VAT rate. But yesterday he explained the absurdity of introducing a single rate.

He said the majority of VAT comes from the products and services that are charged 4 percent, 5 percent, and 7.5 percent rates, whereas a very small amount comes from the products and services carrying 15 percent rate.

Muhith said he would prepare an amended law and leave it for the next government to put into practice.

The amended law will comprise two rates: 15 percent and about 8 percent, he said.

The minister also said the new VAT law might be implemented in 2020-21, instead of the planned 2019-20.

Muhith also said the economy fared well by and large in 2017-18 as there were no strikes or burning of vehicles.

The gross domestic product may grow by 7.5 percent in the current fiscal year from the budgetary target of 7.2 percent. 

"2018 will be a good year for the economy. No tax burden will be imposed in the budget and it will not be an ambitious budget either."

"Eyeing the election there will be some populist measures in the budget to please the people."