OP-ED: Budget 2021-2022 – Questions to be resolved
As in previous years, the size of the budget has increased
The war against Covid-19 is still ongoing around the world, including in Bangladesh.
The global economy is in deep recession, losing more than 3.4 million lives so far, stagnating imports and exports, declining domestic production, lack of new jobs, loss of jobs, all in turn , worsening poverty.
Together, all of this makes budget preparation very difficult.
As in previous years, the size of the budget has increased. For fiscal year 2021-2022, the budget would probably amount to around Tk 6.05 (98.71 times higher) trillion, which was only Tk 7.86 billion in fiscal year 1972-73. .
The GDP growth target for the next fiscal year should be set at 7%. The revenue target would be lakh Tk4 crore, of which lakh Tk3.50 crore would come from the National Board of Revenue (NBR).
The size of the ADP would be estimated at approximately Tk 220,000 crore, or Tk 12,000 to 15,000 crore over the initial allocation for the current fiscal year.
The budget deficit would exceed the lakh Tk2 crore, which will be 6.2 to 6.5% of GDP.
Mobilizing resources from domestic sources would be a challenge for the government.
The revenue collection targets set by the Ministry of Finance would be a major challenge.
As in the previous year, the Covid-19 would affect revenue collection in the next fiscal year, in turn, a substantial deficit in revenue collection.
However, the large tax unit of the VAT wing of the NBR reported notable growth in VAT collection in the telecommunications, cement and tobacco sectors in the first three quarters of fiscal year 2020-2021.
The Bangladeshi government should focus on building the capacity of the Revenue Board to increase the revenue-to-GDP (gross domestic product) ratio and should be more innovative in raising an increased volume of resources by initiating inheritance tax. , wealth and property taxes, online business, etc. . to meet the government’s revenue shortage.
Spending framework during Covid-19
During the coming fiscal year, the Covid-19 incentive package could be allocated as the current fiscal year which will be devoted to employment and economic recovery, in particular to stimulate the private sector by ensuring the how it would be done.
The government expenditure allowance can be divided into two types such as (i) current expenditure (i.e. purchase of goods and services, payment of salaries and allowances of civil servants, payment of interest on foreign and domestic loans, food accounts and expenditure for coordination, etc.) and (ii) capital expenditure (i.e. development programs from the revenue budget, loans and down payments, ADP and non-ADP food-for-work programs, etc.).
The government should increase capital spending rather than purchasing goods and services leading to the creation of new productive assets.
People in general are concerned about the transparency of the health sector. However, the total budget allocation in the health sector is equivalent to only 2.34% of the total GDP of Bangladesh while the ratio is more than double (over 5%) for the whole of South Asia. .
Likewise, Bangladesh’s per capita health expenditure (PPP, current USD) is $ 110 and the amount is almost four times higher ($ 401) for South Asia as a whole.
The health budget has increased by about 5% of the total budget. Assuming that if the health budget could be increased by at least more than 7% to 7.5% in the next fiscal year, it would represent 3.5% of total GDP.
But at the same time, smart decisions must also be made to map the exact investment areas (to channel additional allocations) in order to get more production from lower costs.
Usually, only a quarter of the health sector budget is spent on primary health care. This ratio should be increased to one third as soon as possible.
Social protection budget
The 2021-2022 budget allocation to social protection could be increased, i.e. 16.83% of the total budget and 3.01% of GDP during the 2020-2021 fiscal year of this current fiscal year.
Many people need to be supported for a while to reduce poverty.
A large part of the social protection budget is devoted to the pensions of retired civil servants, which must be maintained.
To increase production, the Bangladeshi government could increase the budget allocation (fiscal year 2021-2022) by following certain strategies, including: the construction of export processing zones (EPZs) whose construction must be completed without delay, by reforming public spending by placing more emphasis on poor growth, increasing labor productivity by providing more training, increasing employment and developing human capital with better access to the poor, etc.
Measures against unemployment (local and foreign returnees)
Although unemployment has become a major problem in Bangladesh since independence, there is no meaningful and specific plan to reduce unemployment, even in the 8the Five-year plan during this pandemic situation.
The government should find alternative IGAs for local and foreign returnees by increasing government spending by taking more development projects.
There is a positive relationship between public spending and the speed of money, which leads to increased income for citizens.
It increases gross domestic demands which would strengthen the economy.
BISR proposes that the next budget give due emphasis to creative planning and implementation strategies in a more organized and systematic way to create jobs, including self-employment.
Poverty and food security
Due to the Covid-19 pandemic, an estimated 1.64 billion people have become newly poor and live below the poverty line (BIDS, 2020), adding to the 18.06% of the existing poor in the economy ( MoF, 2020).
Seasonal farmers like rice growers and the newly unemployed who migrate from cities and abroad due to Covid-19 can be employed by adopting IGA Mapping, an innovative model developed by Khurshed Alam of BISR.
This mapping allows people to identify the location-specific scope of income-generating activities in the region.
Agriculture is one of the main guarantees for ensuring food security to overcome the financial stagnation caused by Covid-19.
Besides paddy and rice, other sectors such as cattle ranching, vegetable production and poultry also need to be supported. The government of Bangladesh could increase the budget allocation to provide more training and advocacy on respective economic activities, access easy and adequate low interest credit facilities, provide agricultural subsidies (seeds, fertilizers, pesticides, etc. .) directly to poor farmers, and in addition to securing mobile banking services, amplify mobile communication using applications for agricultural marketing and the establishment of collection points for agricultural products.
Agricultural insurance can be created and made readily available to people living in disaster prone areas.
Covid-induced activity (positive)
Demand in foreign markets due to Covid-19 has been seriously reduced.
The government could increase the budget allocation on corona-induced activities (manufacture of medical equipment and devices and personal protective equipment and production of other medical supplies, etc.) and on the diversity of businesses (i.e. e-commerce, online marketing, online services, etc.) which would be the effective remedies to reduce the growing burden of an emerging economy.
Promote quality education, research and innovation
As in previous years, in fiscal year 2020-2021, the budget allocation for education and innovation was 15.1% but the research sector (0.017% only for integrated medical research) has been neglected as always.
The government of Bangladesh could increase the budget allocation to promote quality education, research and innovation.
The budget for this sector is to be increased by at least 1.0% in the next fiscal year 2021-2022, creating a separate research budget considered to be an important sector.
Bangladesh is improving in agriculture and achieved near self-sufficiency in food production in 2014 through extensive research on agriculture so far.
In this case, research can be increased by formulating research policies in other sectors such as industry, health, social sciences, etc.
Efficient use of resources
The government of Bangladesh should focus on preventing inefficient use of government project resources.
There is a negative relationship between efficient use of resources and corruption. In order to avoid inefficient use of resources, a monitoring unit / committee could be set up at the central level in each ministry to ensure good governance.
There must be a provision for better monitoring of allocations. Even the budgeting system could be changed.
It is better to follow the needs-based budget (proposed by BISR) to reduce inefficient use of resources.
In the next budget, the stagnation of imports-exports, including ready-to-wear exports, labor exports, inefficient stock market, remittances, environmental protection , the protection of the Sundarbans and the fight against natural disasters could be of increased importance.
The government of Bangladesh needs to be much more innovative and dynamic in budget preparation (ADP) to tackle the Covid-19 pandemic and ensure a healthy economy by strengthening our ability to achieve prosperity.
The author is a researcher at the Bangladesh Institute of Social Research (BISR) Trust. It can be reached at [email protected]