A budget not of its time



Any finance minister delivering a national budget wants, ideally, to project three qualities: calm, authority and very slight dullness.

He or she wants to give the sense that underneath the aspirational abstractions of high politics is a solid grasp of numbers; that right behind the sunniness of prime-ministerial rhetoric there is a capable and hard-headed person, armed with a pocket calculator.

And AHM Mustafa Kamal seems to have failed on all three counts as he took the podium yesterday to deliver the budget for fiscal 2020-21, set against the backdrop of potentially the biggest public health emergency in generations.

He opted for salesmanship rather than expectation management. He cast himself as surgical mask-clad Santa Claus, not a reluctant mitigator of doom but a bringer of bountiful good news and dispenser of goodies for all.

He delivered a budget that — to anyone who doesn’t read the news closely — will have made it sound as if the Bangladesh economy was positively surging with animal spirits: he anchored this fiscal plan based on the irrational calculation that the GDP growth next fiscal year would be a whopping 8.2 percent.

He maintained more or less the same allocations for sectors that would have been understandable were this a regular fiscal year, like energy and power, transport and communication, public order and safety, defence, and local government and rural development.

The allocation for public services was increased by a staggering 54.70 percent.

But the sectors that were crying out for such increases in allocations got nominal raises like health, social safety net, agriculture and education.

Nothing is more important for Bangladesh right now than taming the coronavirus, and for that, the health budget needed to have been increased by leaps and bounds. And yet, that was increased by 13.63 percent from the current fiscal year’s original allocation.

Hospitals are overwhelmed with COVID-19 patients, so much so that non-COVID-19 patients are denied treatment.

Since we don’t know when the epidemic curve would flatten out, there was an acute need to ramp up the health services expenditure now. How long are people going to live under the dread of being denied treatment?

Also, perhaps, this was the occasion to right the historically abysmal attention this sector got in the budget for this sector. Alas, it wasn’t meant to be. 

The coronavirus rampage has magnified destitution and stands to unravel the brilliant progress made in poverty alleviation over the past decade. So, like health services before, there was an acute need to ramp up social protection to help poor households weather the pandemic.

But it was increased from 2.58 percent of GDP this fiscal year to 3 percent.

In a country of 160 million, about 35 percent are now living in poverty, according to a recent study of the Centre for Policy Dialogue. This begs the question, given the uncertainty over how severe the impact may become, was the increase in social safety net adequate?

Agriculture was another sector that deserved greater focus, as the nation must be fed. But it was increased by 5.75 percent from the current fiscal year.

The education budget needed to be augmented seeing that students would not be getting back to the classrooms anytime soon.

Lessons would have to move to the virtual space and for that equipment need to be bought at both ends. And even if classes start physically, there needs to be more sessions to give the same lesson to maintain the social distancing rule.

In short, massive investment is needed, but the education budget was increased about 8 percent.

There were so many areas where the expenditure could have been scaled back to make room for a bigger budget for the four overheads. When austerity was needed, he chose to be profligate.

Then comes the trivial matter of where the money would come from to fund the Tk 568,000 crore-expenditure plan, and the pocket calculator was found missing. But he did a first-rate job of sounding confident and in control.

Kamal has tasked the National Board of Revenue to collect Tk 330,000 crore, up 9.82 percent from the current fiscal year’s revised budget.

In a letter last month to Finance Secretary Abdur Rouf Talukder, NBR Chairman Abu Hena Md Rahmatul Muneem said the tax collectors would be able to manage Tk 250,000 crore next fiscal year.

And yet, Kamal chose to have his blinkers on and set the highest revenue target in the country’s history, when the economic growth would possibly amongst the worst.

While it is laudable that he has given relief to individual taxpayers by raising the tax-free threshold of income and reducing the tax rate, his move to also bring down the rate for those who earn in the highest slab is a proper head-scratching move.

The wealthy do not need any tax relief. And when all avenues of revenue collection are narrowing, why would you extend aid to a group that is not in need of it?

The increase in supplementary duty on mobile phone usage at a time when it has become an absolutely essential service was a blow.

But at the same time, the hikes in SD on chartered planes and helicopters, air-conditioned launch fares and cosmetics and cigarettes are welcome.

The value-added tax has been asked to shoulder most of the revenue collection target — at a time when most consumers would be confined to their homes or cutting back on spending given the looming threats of job losses or pay cuts. Yet another unwise move by the finance minister.

The fact that the NBR would fail to power the budget is a foregone conclusion. That means, the finance minister would be relying more on external financing, bank borrowing and printing money.

The latter two are risky propositions — one could crowd out private sector investment and the other could escalate inflation — as they can go on to pose stability risks at the faintest signs of economic recovery.

Bit of a gamble, that, but Kamal rolled the dice with verve.





Source link

Please follow and like us:

Leave a Reply

Your email address will not be published. Required fields are marked *

Wordpress Social Share Plugin powered by Ultimatelysocial
Twitter
Pinterest
LinkedIn
Share