Problems aplenty, prospects bleak

Finance Minister AMA Muhith has proposed a new budget with a lot of stress on future reforms and analysis of why things went haywire this year. But his biggest challenges of squeezing out a 7.2 percent growth and strapping inflation remain unchanged.
He has rightly pinned growth on how fast the global recession wanes, a prospect not very bright so far. Still he banks on trade and agriculture for growth. Export is already tapering, as he himself has pointed out. And agriculture remains an iffy thing with this year's growth having already slowed. His agriculture programme for the next year has not spelled out anything even near dramatic.
He feels a much improved power and energy situation will boost growth, which is foreseeable. A surplus of over 1,170MW of power by 2013 is welcome news. Setting up of over 50 new power plants is also music to the ear. But the dual-fuel nature of the plants -- a mix of gas and furnace oil or diesel -- cannot take away the worry about whether we will again face a similar kind of pressure on foreign reserves as we had after the rental plants became operational.
The proposed budget has not promised anything on infrastructure except mentioning those projects taken in the past years, most of which are limping. When investment depends on infrastructure so much and traffic jam is a stumbling block in business, this kind of non-commitment does not give much relief.
But then again the proposed budget has not promised any new thing in most areas of human development including education and health. The minister has basically basked in his past glory.
The proposed budget's major challenge once again remains its financing. Foreign financing of the budget has been estimated at 1.8 percent of GDP, which is quite high if compared with this year's 1.3 percent. The question is how the foreign funds will be made available. When there is a sluggish ADP implementation, foreign aid faces the major cut. This becomes more possible when Muhith himself has confessed that “we have not yet been able to formulate the policies required for simplification of the processes of formulation, processing, implementation and evaluation of development projects”.
Then, as on previous occasions, the pressure will come on domestic financing. In the proposed budget, domestic financing has been kept at 3.2 percent of GDP, which is quit low compared to this year's 3.8 percent.
And the finance minister will have to resort to domestic financing once again. And that would build inflationary pressure once again. Muhith has proposed to more than double non-bank financing, mainly savings schemes, to Tk 7,400 crore by adjusting interest rate on such instruments. But even after increasing interest rates, this year's result of non-bank instrument sales is poor.
These all pose the risk of depending heavily on bank borrowing, contrary to his promise, if he has to generate growth, and then inflation will be difficult to tame.
And if inflation remains high, the budget's vision of more private investment may remain elusive because of high interest rate. The finance minister's view that investment-interest rate correlation is not very significant may not come true here. Because very little ground exists to reduce business cost.
The finance minister has rightly pointed out that investment depends on infrastructure and good governance. But his outlining of good governance steps and corruption is scanty.
The finance minister wants agriculture to play a major role and yet it has not received any new offers. The proposed subsidy has reduced from this year's. Role play of an endowment fund created in the past has been cited for research in agriculture. But the fact remains no money has been spent from this fund so far.
His education sector plan has no new initiative and dwells on past programmes. So is his health sector and infrastructure vision. Industrialisation plan is also packed with past projects.
The proposed budget has talked about reforms, but these are all old initiatives, again. And they have done little to reduce cost of doing business.
So in balance, when we enter a new fiscal year, we all hope and pray that the finance minister has thought through the figures he has presented so that the nation does not get another surprise of targets getting mauled.