Pragmatic budget with structural weakness

Economists make mixed reaction

Jannatul Islam

3rd June, 2021 11:11:29 PM printer

Pragmatic budget with structural weakness

Economists have expressed mixed reaction over the proposed national budget for 2021-2022 fiscal year, saying that the budget is more pragmatic than that of the outgoing fiscal though its implementation will be challenging due to structural weakness.

Talking to the Daily Sun, leading economic analysts of the country said the government should introduce result-based monitoring of budget implementation to revive the economy amid the pandemic.  

Terming the proposed budget a cautious one, former Bangladesh Bank Governor Atiur Rahman said the fiscal planning could have been more ambitious, particularly in the health sector.

“The health budget is about 5.4 percent of the total public expenditure for the upcoming fiscal year. Maybe the budget-makers were cautious because of the limited capacity and its track record of implementation of the funding support given to this sector. The leakage too has been phenomenal in this sector,” Dr Atiur told the Daily Sun.

However, Dr Atiur appreciated the tax holiday for 10 years for entrepreneurs who would set up hospitals in upazilas and districts. “It’s a smart move from the government,’ he said.

Dr Atiur said the budget support for domestic industries, particularly SMEs is well placed. Increase in the ceiling of turnover tax for women entrepreneurs is also a positive move.

“The expansion of social safety net and increase in freedom fighters’ allowance are also a welcome move. On the whole this is a continuation of the outgoing budget in the context of C0ovid-19. Surely, it is not a ‘out of the box' budget,” he added.

Policy Research Institute (PRI) executive director Dr Ahsan H Mansur echoed Dr Atiur saying that the new budget is ‘more pragmatic and achievable’ than that of the previous fiscal.

Laying emphasis on vaccination programme for reviving economic activities, Dr Ahsan suggested that local administrations get involved in the drive to ensure inoculation with over 1.5 million doses per day to cover 120 million people within one year.

“The budgetary allocation for the health sector has increased. However, we all know about the capacity of the ministry. The government should mobilize resources to strengthen the the ministry apart from increasing facilities at public hospitals,” Dr Ahsan, also chairman at Brac Bank, told the Daily Sun.

According to Dr Ahsan, the social safety net is widen in traditional way keeping out the new poor and jobless people amid the pandemic.

“There is a lack of assessment to design the programme for social safety net,” he said.

Regarding the proposed increase in corporate tax on mobile financial service, Brac Bank chairman further said that hike in tax on MFS will create a negative impact on investment in the emerging sector.

Center for Policy Dialogue (CPD) distinguished fellow Prof Mustafizur Rahman said there is ‘structural weaknesses’ in the budget which will create challenge for its implementation.

“In previous (budget), we found that the investment scenario can’t be changed through reducing the AIT (advance income tax) or corporate tax. It increases wealth at individual level.  The government should focus on result-based monitoring for maximum implementation of ADP (annual development programme),” Dr Mustafizur told the Daily Sun.

He also said the budget could have been be ‘more inclusive’ through community-based measurement like child budget and district budget which were not mentioned (in budget speech) this year.

Dr Mustafizur appeared disappointed at the absence of ‘banking commission’ initiative in the budget which has long been advocated for ensuring ‘good governance’ in the financial sector.

Finance Minister Mustafa Kamal unveiled a Tk 6 trillion national budget with a key focus of protecting lives and livelihood.