The Bangladesh national budget for the Fiscal Year 2020-21 has just been placed in the Parliament. It was not easy for the Finance Minister to prepare a budget which would be both realistic and at the same time inspiring. The global pandemic has already put Bangladesh and most countries into a situation where it is not easy to ‘cut the coat according to your available cloth’. There have been uncertainties on both counts. You really don’t know how much cloth you could procure to make the coat whose size is also unknown. Nobody can tell you how prolonged will be this pandemic. When will the effective vaccine against it will be available and how effectively rolled out. Even if the vaccines are available can the resource-poor countries procure these for the entire population unless they are available as global public goods mediated by WHO and reputed charities? The economists can hardly answer all these questions. Since there was nothing like this disaster reaching every nook and corner of the earth, the economists can hardly make a credible prediction of what could be scenario like in the short, medium and long term. So one has to take any projection of post-COVID-19 economic outcome with a grain of salt. I am not, therefore, surprised when reputed economist Branco Milanovic (see ‘promarket.org’/ 2020/06/04) says that economic predictions can be useless if they cannot take into account the unpredictable social and political shocks that we face.
It is in this context the projection of the growth rate of 8.2 percent for the next fiscal year has raised so many eyebrows by the commentators. This is possible only if the pandemic is wished away completely and there is complete absence of fear factor so that economy can reopen with fullest force. Certainly, the reality is far away from this. So it would have been wiser for the Finance Minister to keep the growth rate only at a reasonable level without being so upbeat. At the same time, given the inherent strength of our rural economy and deeper adoption of digital technology by the domestic trade and finance in addition to gradual opening up of the overall economy the ‘rock-bottom’ projection of growth rate by the World Bank is also not acceptable. There was certainly a room for finding a middle ground in the prediction landscape without being so bold. The Finance Minister may have been carried away by the earlier projection of IMF of a V-shape recovery of the economy which remains elusive in the middle of the rising infections and deaths in Bangladesh. In fact the UK based ‘The Telegraph’ quoting a research find of the joint research carried out by the University of Dhaka, Directorate of Health Services and the University of Toronto the total cases of infection may double at the end of June. And there is no indication of when the curve can be permanently flattened. This ongoing pandemic onslaught will certainly have a long lasting impact on the economy even if there is substantial progress in suppressing the virus. One can certainly say that it will not be so easy to restore the business confidence of all the stakeholders involved in the supply chains of goods and services and, of course, the domestic and international investors linked to the production and trading activities in Bangladesh in the current situation.Not only the growth, the target for revenue mobilization in the next fiscal year also looks over-ambitious in the context of current subdued economic and trade related activities and the low morale of the concerned officials in the absence of well-developed digitalization of our tax collection system. The hefty target of Taka 3, 78,000crore for the next fiscal year as against revised target of Taka 3,48,091 crore when the actual revenue collection up to February 20 was only Taka 1,37,400 crore looks mind-boggling. Most revenue collection takes place during April-June. And given the extra-ordinary situation prevailing this year the final tax collection figure may not have gone above Taka 2,20,000 crore or at best Taka 2,40,000 core by end June. If this is so it may actually demoralize the tax officials to give a try at the target which is definitely flying much above their heads. I thought pandemic would bring some sanity in the mindset of the policymakers which could facilitate in bringing realism in various target settings. The more you are nearer to the grounds and share the realistic objectives with the citizens the more credible will be your economic strategy to them. It will then be easier to take them onboard in facing the challenges of the pandemic together. In that sense, budget is not only a statistical exercise. It is also a dream document which tends to inspire people to share the aspirations of the leadership for the inclusive sustainable development.
The finance Minister has rightly proposed four strategic directions in the budget, namely, discouraging luxury expenditures and encouraging government spending which can create jobs; providing incentives to industries and businesses thru low-cost loans for quicker recovery of their activities and gain more competitiveness; protecting the extreme poor and new poor from the informal sector created due to sudden loss of their income and finally adopt expansionary monetary policy keeping in view that the inflationary pressure is also well contained. These strategies have been placed to maintain the macro-economic stability attained during the last decade or so and as well as contain the challenges of hunger and deprivation arising out of the pandemic.
Given the realities of lower revenue earnings and the need for meeting the above challenges I am not surprised to see the proposed budget deficit around 6 percent of GDP in the next fiscal year. This has been estimated to be 5.3 per cent in this year’s revised budget. The most part of this deficit will be financed domestically from the banking sector (about Taka 85000 crore) and the rest from non-banking sources and loans from international finance partners. Given the subdued inflationary situation and our current low Debt-GDP ratio (34%) Bangladesh could even go further to add one more percent of budget deficit. We could be more aggressive in our economic diplomacy and get more fund from our international financing partners. In addition we could ask Bangladesh Bank to take some more hit and expand its balance sheet and provide more refinances to financial institutions and MFIs to give loans to farmers and cottage and micro enterprises. The stimulus packages have been created exactly for this purpose. Now the challenge is to implement these packages seamlessly with adequate supervision of the central bank and cooperation of the financial sector. We could also encourage central bank to activate its Matijheel office to attract more professional and wealthier NRBs to buy more Treasury and other bonds on line to further improve our external economy. This is even more necessary in the context of falling export of RMGs and remittance incomes.
Let me now through some light on the public expenditures. Education and technology has got the highest allocation of 15.1% followed by transport and communication with allocation of 11.4%. Education, in fact, deserved more for spending more money on digitization of the educational institutions and skilling and reskilling of the teachers. Also the vocational and technical education sub-sector deserved more money for providing skill enhancing education tour youths. The higher allocation for transport and communication may have been given with a hope that there will be a greater emphasis on this sub-sector to rejuvenate supply chains and greater connectivity once the trade and economy reopen in full scale.
I am not surprised that the health sector got the biggest boost (23% growth) in terms of allocation. It received 5.1% which was 4.9 % of the budget last fiscal year. Given the gravity of the situation health sector could get even more if it had demonstrated capacity to spend the money. The management and the transparency of spending the public money of this sector has been historically awful. I am sure the government will not hesitate to give the sector more money if required from the special block allocation of Taka 10,000 crore created for COVID-19 response. But then it has to come out of its shell and demonstrate its capacity. In addition there has been a smart move of creating another special fund of Taka 100 crore for innovation, research and development in the health sector. In addition, there is need for special focus on urban primary health to serve the urban poor who are indeed in a precarious situation both in terms of health and economic shocks.
The budget for social safety net has also been rightly enhanced to 5.6% from 4.9% of the revised budget. Again this could go even up to 10% as the poverty and hunger are on the increase. There is a special need for providing more cash support to the urban poor who have been facing sudden loss of income.Agriculture has got a better deal in this budget. Its budget share has increased to 5.3% from 4% of revised budget. Hopefully this additional money will be spent in further modernization of the agriculture and developing better supply chain, processing plants and as well as bringing more innovations The non-crop agriculture including poultry, fisheries, livestock and horticulture. The additional money must be spent for both innovation and marketing including e-commerce. The export of vegetables and fruits in addition to conventional agricultural produces should also get all the needed support.
The forestry, water bodies, ground recharge and other related infrastructure of the nature deserve to be supported from the additional agricultural budget for enhancing bio-diversity and expanding the base of the green economy which may face pressure once the post-corona economy reopens. We must remain grateful to the Sundarbans for once again protecting us from the onslaught of Amphan. It needs nourishment and care. I am sure policy makers will take care of this natural shield against cyclones. Also the Amphan victims deserve more social safety net and support. The nature is experiencing the benefit of lower emission of greenhouse gas due to lockdown. This must continue even in the coming days as we are striving for a sustainable green growth. The budget has to reorient its strategy towards sustainable development by not only spending more on green economy but also investing more on renewable energy and raising consciousness for climate-friendly development. Unfortunately, this budget does not tell much about this new demand. However, Bangladesh Bank has already created new Sustainable Finance Department and created a number of refinance lines for green transformation of the industries including MSMEs.
I am not going into the details of the well placed incentives for entrepreneurship development of migrant workers, domestic industries and raising of the minimum tax-ceiling for the lower-middle class and as well as women and senior citizens. These are desired moves towards creating more inclusive and humane society.
Finally the quality of execution of the budget, particularly in the prioritized sectors led by health sector will testify how desirable has been this budget. Only time will tell how far the implementers on the ground were able to rise up to the expectations of the citizens for which this budget has been prepared. There are certainly fault-lines in our health sector. We, therefore, must be extra vigilant against any shortfall in governance and management of this sector. A lot will depend on this sector on the success or failure of the next budget given at this trying time of our nation and the world.
The writer is the Bangabandhu Chair Professor, University of Dhaka and former Governor, Bangladesh Bank.