Editorial: Budget 20-21 may not take us out of the woods
The finance minister on Thursday presented the 49th annual budget of Tk 5,68,000 crore, up by a slight 8.6 percent from the previous budget of Tk 5,23,190 crore. These are our initial reactions to it and more detailed analysis will follow.
Amidst an unprecedented global pandemic, it is unsurprising to see only a mild increase in the size of the budget, as concerns over government revenue continue to linger. The revenue collection target for the coming fiscal year has been set at Tk 3,78,000 crore, which is nearly the same as last year's target of Tk 3,77,810 crore. The National Board of Revenue (NBR) has been tasked to collect Tk 3,30,000 crore of the amount, leaving the non-NBR revenue collection target at Tk 15,000 crore and non-tax revenue collection target at Tk 33,000 crore.
The NBR will have its work cut out to reach this target, especially since the tax-free income limit has been increased to Tk 3,00,000 from Tk 2,50,000 in the new budget, which we wholeheartedly welcome. The budget further proposes reducing the minimum tax rate from 10 percent to 5 percent, and we again agree with this. However, the proposal to bring down the maximum tax rate from 30 percent to 25 percent is something that we find questionable, especially given the tremendous suffering the poor have been enduring during the coronavirus-induced lockdown, which has already increased inequality.
It is particularly due to this reason that we were expecting to see a substantial increase in the allocation for social safety net programmes, which has been set at Tk 95,574 crore—up from Tk 81,865 crore last year. Despite the fact that this amounts to 3.01 percent of GDP, if civil pension is excluded from the social safety net, then it would be around 1.5-1.6 percent of total GDP—which is extremely low.
Allocation for education too has remained subpar. Despite education being dealt a major setback in recent months, the government has kept the allocation to this sector almost unchanged in terms of the size and percentage of Gross Domestic Product (GDP)—at 2.09 percent of GDP—whereas UNESCO suggests it should be 6 percent.
It has been proposed that the health allocation be increased from Tk 25,732 crore in the last fiscal year to Tk 29,247 crore in the new budget. A lump sum of Tk 10,000 crore has also been proposed to fulfil emergency requirements in response to the ongoing Covid-19 outbreak. However, having witnessed the appalling shortcomings of the sector in the face of this crisis, we cannot help but feel that this increase is woefully inadequate. Our healthcare sector has proven itself to be in a shambles, and the only way to improve it by a degree that will make some difference is through massive government investment.
We call on the government to urgently recognise this, and to ensure that the quality of the expenditure in the healthcare sector in particular, but in other sectors too, is bumped up, as one of the biggest challenges we have right now with all the constraints we face is to get good value for money—something we have historically been bad at doing.
Budget allocations this year have to be more precise and there is even less room for wastage and mistakes when it comes to formulating the new budget, as we struggle to recover from this crisis. Among other matters, it is in this regard that the proposed budget falls most short.
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