The in-house skills, expertise and capacity for doing these may be ranked moderate in Bangladesh. They have stagnated over decades. There is stiff resistance to any proposed changes in budget formulation methods and an aversion to training to improve performance.

The paradigm shifts in this area must relate to risk aversion, protectionism, transfer payments, high time preference, pro status quo mind-sets of agents, in Finance Division in particular, and creation of a realisation that times do change. Almost all agents display certain inertia. The nature of the government, particularly in terms of its durability, does not seem to matter much.

Therefore, the current budget (2007-08) has to be viewed against the backdrop of methods, strategies, objectives, institutional arrangements and the system's stochastic/probabilistic attributes in place, meaning thereby the zones of uncertainties. They will not change overnight. As a matter of fact one can observe very little change through time; only that budgets are no longer formulated within the framework of medium term (five year) development plans and can be treated as an independent short term exercise.

There is a poverty reduction strategy framework in place, but we do not see that it is being followed while making budgets. How would then we want to propose a short term prioritisation of the budgetary allocations? Two considerations might demand attention -- the immediate goals of public spending and the restrictions placed on budget making by the legal-juridical stipulations.

Public interest is, of course, supreme, as all legal experts have emphatically stressed while evolving the doctrine of state necessity (Justice Munir, Hamood-ur Rahman, et al, in different legal contexts, of course).

Given that only two-twelfths of a total budget is under discussion for now, I would like to recommend the following hierarchy of claims on the demands for grants from fiscal 2008 budget:

• Justice system.
• Law, order, public safety.
• Operation and maintenance (including depreciation/replacements) of existing assets, properties, utilities, directly productive activities.
• Direct transfers for poverty eradication to freedom fighters, disadvantaged groups, marginal and vulnerable recipients of state charities and other recipients.
• Elections and related claims.
• The sectors of priorities should be energy; health; education; defence; economic, physical and social infrastructures, and disaster management.

The public investment program (called ADP) should be kept on hold, and two-thirds of those notional allocations should be used for recurrent (revenue budget) purposes (under intelligently designed reappropriation/ overprogramming provisions) to stay within the limits of the Constitution.

ADP has been viewed as a white elephant almost universally and has bred corruption on an unprecedented scales through times. Since these are common knowledge, there is no need to belabour them . The private sector, civil society organisations, membership groups/cooperatives, etc instead should be provided with more generous credit lines (not directed credit, under-administered interest rates, but ordinary loanable funds on commercial terms).

The growth rate will not be affected if the ADP investments are replaced for a while by the private sector and the apprehension of inflation from a tax and spend budget would also be allayed. We know that all inflation is made in Dhaka! Therefore, budgetary deficits should be kept at an acceptable level (4-5 per cent of GDP) and the agreed monetary programs (money supply, interest rates, exchange rates, etc.) must be strictly followed for harmonising fiscal and monetary policies.

Fancy, longer term goals should take a back seat, for a while at least, inasmuch as we are in a state of emergency and only emergency and immediate needs are to be accorded the priorities they deserve. Fancy goals can be revived and addressed while a time opportune for debating them arrives. Now the barest minimum needs to be done, and done properly without creating any avoidable macroeconomic distortions.

The economy of Bangladesh has lots of slack (unemployed labour and unutilised production capacities) which can be taken up for productive employment and in come generation. When idle labour and idle machines are brought together to produce goods, there is very little danger of any inflationary impact. The expenditure flows under much reduced dispensations must reckon that and it is here that the creativity, ingenuity, imagination, professionalism, and vision of the budget makers would be tested.

The ability to make consistent decisions is one of the symptoms of an integrated personality. When we pass to social decisions methods involving many individuals (voting or the market), the problems of arriving at consistent decisions might analogously/likewise be referred to as that of the existence of an integrated society.

The formal existence of methods of aggregating individual choices , is certainly a necessary condition for an integrated society. But, this may not be sufficient and hence a minimum agreement on an ad interim arrangement can and should be culled out under any eventuality. The current budget should be able to do this. Any budget in its final form is a compromise of conflicting interests. How well that gets cobbled is also a test of the quality of the final outcome.

A budget thus has to be judged by its predictive power for the class of phenomena which it is intended to explain. The only legitimate test of the validity of a budgetary hypothesis would be the comparison of its predictions with reality (Friedman, 1935). We would want to see a verification of this wise statement of Friedman from the ex post (achieved) reality of Bangladesh's state of the economy in, say, July, 2008, when it would be time for another budget.

The author is a former economic adviser to the president (1982-85).