Stop injecting funds into state banks

Half a million people would have been brought out of poverty had the government allocated Tk 2,000 crore to the poor instead of doling out money to the state banks, analysts said yesterday.

"There is no logic in subsidising the state's fragile banks or industries in this way. It's a reward for their inefficiency," Abdul Bayes, director of Brac Research and Evaluation Division, said at a discussion.

The discussion, styled "National budget 2017-18: expectations, gains, and challenges", was organised by Brac and the Institute of Informatics and Development at the capital's Brac Centre.

At the discussion, analysts urged the government to increase the allocation for the education sector to at least 4 percent of the country's gross domestic product.

In the proposed budget for fiscal 2017-18, Tk 50,432 crore has been assigned to the sector, which is 2.2 percent of GDP. The amount is an increase of about 14 percent from the current year.

Though the budgetary allocation has been increased for the education and health sectors in the proposed budget for the upcoming fiscal year, it is still proportionately lower than what they ought to be, they said.

Some Tk 20,679 crore has been proposed for the health sector in fiscal 2017-18, up 18 percent year-on-year.

"The main problem lies in implementation of the budget," said AB Mirza Azizul Islam, former adviser to a caretaker government.

On the one hand, the size of the budget increasing, while on the other hand, the level of implementation is decreasing.  

For instance, in fiscal 2012-13, 93 percent of the budget was implemented, where last fiscal year the implementation rate was 78 percent.

"It will be the same story at the end of this year," he said, adding that the incompetency of the project managers is one of the main reasons for the failure to implement the budget in full.

He went on to suggest the government to introduce an incentive system to gain momentum in implementation of the budget.

"There is no incentive system activated in country's administration. No one gets reward for their good job, while there is no punishment for corruption."

Islam also touched upon the issue of project costs.

At present, the country's incremental capital output ratio, which is the marginal amount of investment capital necessary to generate the next unit of production, stands at 4.5 percent. This means, for every Tk 4.5 spent Tk 1 of output is generated.

In most countries, the ratio is in the neighbourhood of 3. The higher the ratio, the lower the productivity of capital.

"The ratio is much less in countries like Cambodia, Laos than in Bangladesh. If we can increase capital efficiency, it is possible to increase growth by making less investment," Islam added.

At the event, Bayes and Syeed Ahmed, chief executive officer of IID, jointly presented a keynote paper.

The proposed budget has four special features from a macroeconomic perspective: expectation and growth, pre-election, compromise on education sector and dependence on middle-class, they said.

"Last year's growth has not created inspirational employment," Bayes said.

He also criticised the government move to hike the excise duty on account balances by as much as 67 percent from next fiscal year.

"I am personally against this tax. This can reduce the confidence that people have on banks."

The adult and disabled allowances were increased in the upcoming budget, which, they said, is a good sign. But the right beneficiaries of the programmes are not selected.

Recently a study has shown that 20 percent of the selection is not correct, said Shameran Abed, director of Brac's microfinance programme.

Meanwhile, Brac and IID recently surveyed 5,000 people around the country to gather the opinion of ordinary people on the impact of the proposed budget on their lives.

Some 56.4 percent of the respondents said the prices of daily commodities will increase, while 41.6 percent said the prices of some products will decrease and some products will increase.

Mohammad Ariful Islam, Brac's programme head of health, nutrition and population, also spoke.