Budgeting to make a difference
While the pandemic waves on, the budget should focus on crisis management, prioritising spending on health, targeting fiscal support to distressed families and enterprises, restoring the functionality of education, and building on the resilience demonstrated by agriculture while keeping an eye on revenues. A business-as-usual budget like last year will miss the boat again.
There is a lot to learn from the implementation experience in health and social protection. We did not have the benefit last year of knowing what we know now about how the policy response to the pandemic works and where the fault lines are.
Overambitious targets every year have only produced recycled budget conversations. It is about time we recognise the futility of such targets. Subsidies for financial stimulus packages have worked better for the formal sector large enterprises than the informal and even formal sector cottage, micro, and small enterprises.
Cash and food-based social protection programmes have suffered from the usual red tape and corruption. Implementation of the emergency health project with provisions to expand vitally needed health infrastructure has been dismal. Consequently, the new variant caught our health system unprepared once again!
The pandemic has taught in no uncertain terms that there is no shortcut to public health. A state of moral decay is glaringly evident in healthcare. The private healthcare industry caters mostly to the wealthy who can purchase the best available care locally or flee to safety in rented jets.
Responding to public health emergencies is resource-intensive and not commercially attractive. It, therefore, does not resonate well with the private sector. Deterred by the expensive healthcare system and no insurance cover, many people choose not to go to the hospitals. Government hospitals have struggled with the number of patients and are burdened with shortages of ventilators, ICUs, and rooms. These need emergency attention.
Vaccination should be priority number one. The management of vaccination centres has been excellent thus far. The government has also done a good job in lining up funds for vaccines. The billion-dollar question is when we will be able to use the money to procure vaccines. The strategy to rely solely on one country and one domestic distributor has brought upon us many regrets, including a weaker bargaining power in negotiating vaccine import and production deals.
Beyond vaccination, testing, diagnosing what behaviour is causing the spread, treating the infected, and non-Covid care deserve a lot of policy and budgetary care. The health ministry and medical service providers should learn from their failures and that of India.
A health system plagued by shortages of supplies, lack of doctors and nurses, too few hospital beds, ageing facilities and underfunding is inhuman and politically suicidal.
We see little evidence of our healthcare system learning systematically from the failures in the care delivery process and health systems development.
As in India, the propagation of the second wave in Bangladesh was a result of complacency on the part of the government as well as the public. Leaders in the health care system must create a compelling vision that motivates and communicates urgency for behavioural change. They need to create an environment of psychological safety, foster open reporting and frequent sharing of insights and data, and support team learning to identify, understand, and mitigate hazards that threaten patient safety.
Social protection should rank next. The government uses an expansive definition of social protection encompassing core social assistance, social insurance, labour market interventions, livelihoods programmes, child protection, primary health services, primary and secondary stipends and credit support, pensions to retired government employees, allowances to freedom fighters, and lately interests on national savings certificates.
Excluded the non-core programmes, transfers to households and individuals aimed at addressing poverty and vulnerability in the current year budget are equivalent to 0.9 per cent of GDP across 40 programmes. This has resulted in an unenviable trade-off between coverage comprehensiveness and adequacy of benefits.
New registration undertaken by the expanded Open Market Sales, the new cash support, and the distribution of the augmented Vulnerable Group Feeding cards have been emaciated by patronage politics. The power and information asymmetry around the design and implementation of the interventions constrain opportunities for citizen engagement.
The effectiveness of quick actions at policy and operational levels was undermined by a lack of preparedness in targeting, information systems and accountability mechanisms, according to an Oxford Policy Management review.
The cottage, micro, and small enterprises (CMSEs) are having a tough time during the pandemic. Disruptions in the supply chain, weak demand, dwindling cash flows, and depletion of working capital has stressed employment. The shedding of work in the non-agricultural part of the economy has forced many to change occupation. This cannot be good even though something is better than nothing.
Support for CMSEs offers the biggest "bang for the buck" in terms of employment and social stability. Stimulus tools that put large domestic producers at a competitive advantage over their small domestic competitors benefit the few at the cost of the many without necessarily enhancing efficiency.
Policies fell short in applying objective, transparent criteria for determining firms' eligibility and in distinguishing between liquidity problems, at which assistance has been targeted, and solvency crisis due to shifts in demand and disruption in supply chains caused by the pandemic.
The social protection interventions and support for CMSEs must have a solid financing base, an agile mechanism to identify beneficiaries, an adaptive outreach system, and a robust delivery platform. The weak institutional capacity and the lack of accountability in these processes is well-documented.
Education deserves special attention. The pandemic upended almost every aspect of school at once. About two-thirds of Bangladesh's 40 million students have remained learning disconnected for over a year. The move from classrooms to television, telephone, and computer screens for the "lucky" one-third of students tested basic ideas about instruction, attendance, testing, funding, the role of technology, and the human connections that hold it all together.
There is a need for massive public intervention to ensure an alternative mode of delivering education with universal access and safety. This is not just a question of increasing public spending on education. The quantity of spending alone will not necessarily correct the disruptions caused by the pandemic. The effectiveness of education spending is now more important than ever. Could the pandemic be the crisis that triggers serious attention to accountability in education service delivery? We certainly hope so.
Agriculture has been a saviour during the pandemic. More than 84 per cent of the 15 million farm holdings are small scale farmers owning less than 2.5 acres of land. These farm households face tough competition when selling to buyers with market power.
Good harvests often turn into growers' misery. Public procurement directly from the farmers in harvest times is one solution in theory. However, its application has not lived up to the expectation of increasing the grower share in the surplus generated in production and trading of farm output. Fiscal policy support is needed to improve the capacity to store at the local level and increase productivity, agricultural diversity, and food security.
In the current state of the economy, there is hardly any potential to increase revenue by increasing tax rates. Tax revenue mobilisation will depend on rate rationalisation and administrative improvements through digitalisation. We need to move towards simpler rate structures in customs, VAT, and corporate tax regimes. Efforts should continue to focus on limiting capital flight, tax avoidance, and tax evasion. Progress on automation to reduce the cost of tax compliance has faltered despite many donor-supported initiatives.
Reforms in tax policy and administration must be guided by efficiency and equity considerations. It is not a good idea to target sectors that contribute most for even greater revenues. Trying to squeeze out more from those who are already paying sends absolutely the wrong signals. The specific reform agenda has been debated ad infinitum. The outcomes so far have defied intentions. The reason is simple. The intentions have not been backed by actions. This must change.
The author is an economist.