New poor is temporary
It is universally acknowledged that the global coronavirus pandemic has widened inequalities in nations all over -- including Bangladesh.
But if one looks at the proposed budget for the 2021-22 fiscal year due to begin on July 1, one gets the impression that "new poor" does not exist in the country.
It turns out that the architect of the fiscal plan, Finance Minister AHM Mustafa Kamal, does not actually believe that many slipped into poverty after their livelihoods were upended by draconian measures enforced to slow the spread of the coronavirus.
"Look outside, everything is operating as normal. No store is closed now. Salons, sweetmeat shops, corner shops, none are closed. So why would there be new poor?" he told The Daily Star in an interview earlier this week.
About 20.5 percent of the population was already living in poverty and the pandemic raised the ratio to 30 percent, according to the World Bank.
Some 1.60 crore of new poor was created by the pandemic, according to an estimate of the Centre for Policy Dialogue in April, while another survey around the same time by the Power and Participation Research Centre and the Brac Institute of Governance and Development showed that 2.45 crore fell into poverty even before the second wave of the pandemic hit.
Kamal however does not buy these estimates.
"Those numbers are imaginary. We are looking for the new poor -- we have to find them. Poor is poor -- we have to find a solution for them. Why should we separate new from old poor?"
Which is why, he, in fact, has shrunk the allocations for social safety net schemes.
"It's temporary. I don't think we need to do anything. Those who lost jobs for the lockdown, should get them back now. The small businesses should be open by now."
Social safety net schemes got Tk 107,610 crore in the upcoming fiscal year, which is up 12 percent year-on-year but lower than the average 17.7 percent growth of allocation between fiscals 2009-10 and 2020-21.
And about 30 percent of it is attributed to pension for retired government employees and freedom fighters.
Fiscal 2021-22's safety net allocation is 3.1 percent of GDP, up from 3 percent this year.
Instead, the finance minister has designed a budget putting businesses at the front and centre of it, pinning all hopes on the "multiplier effect" they would generate from the crumbs of tax cuts he threw their way.
In economics, the multiplier effect happens when an injection of new spending (exports, government spending or investment) can lead to a larger increase in final national income (GDP).
This is because a proportion of the injection of new spending will itself be spent, creating income for other firms and individuals. These firms and individuals will also spend a proportion of their income, which itself creates income for others. This process continues until no more extra income is left to be spent.
Kamal is hoping the businesses would kick-start this phenomenon when he could have been the one to do it.
"The businesses start everything -- the multiplier effect will come through their hands."
If the budget is business-friendly, the businesses will be able to "do business".
"They will bring money to the economy, which is good for the country. They will employ people, they will create jobs, they will make a profit -- and we will get tax, which will be used in the social safety net. Being business-friendly is the most important thing."
But in the absence of any visible improvement in the ease of doing business and the cloud of the pandemic hanging over the economy, one must wonder from where businesses would get the conviction to make the level of investment Kamal is hoping for.
And it is this logic of the multiplier effect that he is drawing on to continue with the provision of legalising black money unquestioned into the new fiscal year.
While there was no mention of this provision in the budget speech and the accompanying documents, Kamal's statements since then suggest he will most definitely slip in the provision when the final budget gets passed in the parliament.
In the first 10 months of this fiscal year, Tk 14,459 crore of undisclosed income was legalised by paying a 10 percent tax, according to the National Board of Revenue.
"There will be a multiplier effect of five. Do you know how much money that is? Tk 70,000 crore. The face of Bangladesh will change -- you will see a turnaround in the next six months."
In the absence of credible data gathering by the government statistical agency, one must wonder how the finance minister can pinpoint the amount of multiplier.
The provision to legalise black money was always there, even during the times of Saifur Rahman and Hussain Muhammad Ershad, he says.
"In 15 years, Tk 14,000 crore was whitened -- and in 10 months, Tk 14,000 crore of black money got amnesty. This shows there is demand. And that, people have faith in this economy."
Economists however vehemently oppose the provision -- as it penalises upright taxpayers --which is nothing unusual for the finance minister.
In fact, rarely has Kamal, an accountant by training, seen eye to eye with the economists.
"I try to work with everyone -- economists should appreciate me. We both want the same things. Very few countries have logged in positive growth last year -- we were never in the negative. This needs to be praised."