Budget passed amid pandemic challenge

The Jatiya Sangsad yesterday passed the Tk 568,000-crore national budget for fiscal 2020-21, which, according to experts, may prove difficult to implement amid the coronavirus pandemic.

With the theme "Economic Transition and Pathway to Progress," the budget was passed by voice vote with Speaker Shirin Sharmin Chaudhury in the chair. It comes into effect today.

Earlier on June 11, Finance Minister AHM Mustafa Kamal placed the budget in the House with an ambitious GDP growth target of 8.2 percent, focusing on health sector development and economic recovery amid Covid-19 pandemic.

Many experts, however, termed the GDP growth target impractical.

Talking to this newspaper, AB Mirza Azizul Islam, former adviser to a caretaker government, said it is impossible to achieve the GDP growth target of 8.2 percent in this fiscal year. Anything around 5 percent will be considered good given the pandemic-induced economic crisis.

Ahsan H Mansur, executive director of the Policy Research Institute, said the government passed the budget without finding "innovative ways" to implement it.

"It will surely be difficult to execute the budget …

"There is no specific indication of how the government will manage the health sector in dealing with the Covid-19 pandemic," he pointed out.

The government did not even keep in mind the "new poor" and had no job creation plans for them, he added.

Zahid Hussain, former lead economist at the World Bank's Dhaka Office, said implementation of the budget will be "subject to challenges never experienced before," in addition to the usual ones such as revenue shortfall and slow ADP implementation.

BUDGET ALLOCATIONS

The government has allocated Tk 103,117 crore for 19 stimulus packages to put the economy back on track amid daunting challenges posed by coronavirus pandemic. The combined support accounts for 3.7 percent of the country's GDP.

Of the amount, Tk 5,000 crore went to the export industry, Tk 20,000 crore to the micro, small and medium enterprises, Tk 30,000 crore to large industries and services, and Tk 5,000 crore to the agriculture sector.

The packages have been provided for food security, social safety net, special allowances and incentives, and in the form of low-cost loans to the affected micro, small, medium and large industries and services, as the pandemic-induced shutdown paralysed the economy.

The Local Government Division got the highest allocation of Tk 36,301 crore, followed by Road Transport and Highways Division (Tk 29,442 crore) and the health ministry (Tk 29,245 crore).

The overall budget deficit will be Tk 190,000 crore, which is 6 percent of the GDP.

Out of the amount, Tk 80,017 crore will be financed from external sources, and Tk 109,983 crore from domestic sources -- Tk 84,983 crore from the banking sector and Tk 25,000 crore from savings certificates and other non-bank sources.

The revenue collection target is Tk 378,000 crore, and the NBR has been tasked with collecting the bulk of it -- Tk 330,000 crore.

The government aims to collect Tk 15,000 crore from non-NBR tax and Tk 33,000 crore from non-tax revenue sources.

Besides, Tk 4,013 crore will come from foreign grants.

The development expenditure has been increased to Tk 215,043 crore in the new fiscal year, which is about 6.27 percent higher than that in the revised development budget of the outgoing fiscal year.

Of the amount, Tk 205,145 crore is for the Annual Development Program, which has already been approved by the National Economic Council.

The operating expenditure (excluding loans, advances and debt repayments, and structural adjustments) has been estimated at Tk 346,160 crore, which is 18 percent higher than that in the revised non-development budget of the outgoing fiscal year.

Salaries and allowances of government employees account for 19 percent (Tk 75,060 crore) of the total non-development expenditure.

WHAT EXPERTS SAY

About the budget deficit, Mirza Azizul said the government should not be dependent on bank borrowing to meet the deficit, rather it should manage this from the central bank.

He further said it is appreciable that the government has given priority to agriculture, health and social safety net programmes. But it has to ensure proper utilisation of funds and that there is no corruption.

About the health budget, Ahsan said the government increased the allocation for the sector but the question is how it will be utilised.

The implementation record of the health budget is very poor, he noted.

Zahid said expenditure allocations in the budget are not consonant with the priorities in a pandemic-affected economy. Health and social protection needed much larger allocations than provided in the budget. This can be corrected moving forward.

"Public service delivery has gained a new significance in the corona world. Life without water, soaps, masks and social distancing is life full of health risks, not just for an individual but also those near and around."

If these cannot be ensured, you can just forget about the macroeconomic targets and the allocations in the budget, he mentioned.

"The worsening health crisis would overwhelm the health system and the entire machinery of the government. Effective public policy attention to these is a precondition for budget implementation to proceed without disruption."

The economy cannot regain full functionality if people remain engulfed by the fear of the virus and the risk of seeking any kind of healthcare from the existing health system, he mentioned.

Fresh initiatives are needed to support the millions of new and old poor who are struggling to make ends meet day in, day out.

"Financing will be a major challenge in fiscal 2020-21. A large revenue shortfall is a near certainty. Enhanced foreign financing will help but not likely to suffice. The banking system is highly stressed with falling deposit growth and loan recovery rates.

"There are limits to deficit monetisation because of the associated macroeconomic risks. Fiscal austerity is the way out. There is considerable room for savings in both the non-development and the development budget. These need to be identified and locked in before it is too late," he added.