Dr Zahid Hussain served as a Lead Economist in the Macro, Trade and Investment Global Practice of the World Bank. Since joining the World Bank in 1995, he has worked on several of the organisation's flagship reports on Bangladesh. Prior to that, he was a member of academia, with 14 years of teaching experience in a number of universities in Bangladesh and abroad. In an interview with Eresh Omar Jamal of The Daily Star, Dr Hussain talks about how the Covid-19 pandemic and the various challenges it has given rise to are expected to affect the Bangladesh budget for FY2020-21.
The national budget for FY2020-21 is being formulated during a time of global pandemic. How does that change the process of budget creation?
The pandemic caused the process to be affected in a number of ways. The preparation of inputs for the budget was delayed because of disruptions caused by the pandemic. The Bangladesh Bureau of Statistics (BBS) could not prepare the preliminary GDP growth estimates in time. Bangladesh Bank could not update their monetary and financial database.
Because of prolonged public holidays, the budget consultation process could not be carried out in line with past practices. Inter-ministerial meetings to discuss various ideas and the demands for appropriations submitted by the line ministries in their Call Notice submissions could not be held as extensively as the government would have liked it. The government had no option but to seek inputs from stakeholders on their websites and a few online webinars. Economists and business leaders expressed their views through the print media and television talk shows as well as interviews.
What has this crisis exposed in terms of the state's inability to meet universal basic needs such as healthcare, social security, etc.? In what ways are those failures connected to past budgets and budgetary allocations?
Covid-19 has exposed the gross inadequacies of our health and social protection systems. The healthcare system is so overwhelmed and badly managed that the public is now afraid of seeking healthcare from the public and private institutions. In some sense, we have seen both the market and government unravel in proportions never experienced before.
Health, education and social protection have been the three most palpable areas of budget neglect over the years. In Bangladesh, public expenditure as a share of GDP in each of these sectors have been abysmally low, even if they are compared with countries that have had a similar level of per capita income with ours. Adding to this inadequacy of the budget is the low quality of expenditures in each of the three sectors because of bureaucratic red tape, lack of competence, cronyism and corruption. These in turn are underpinned by lack of transparency and accountability.
What radical changes should the government make in the structure of the upcoming budget, as compared to previous budgets? And are there any changes that the government will be forced to make, due to current circumstances?
The pandemic has changed the national economic priorities dramatically. Growth and macroeconomic conservatism has given way to tackling the disease, virus transmission and its devastating impact on employment and incomes of the poor and the vulnerable.
The expenditure priorities need to change radically relative to the budgets that were previously prepared during normal times. Health, social protection, education, and agriculture all need to come to the forefront. Expenditures on infrastructure must also be prioritised and spent more wisely to make sure that only those critical for diversification of the economy and at an advanced stage of completion get the needed allocations.
Because of declining revenue mobilisation, the focus on getting value for money has to be increased significantly than the past order of magnitude. Fiscal austerity—i.e., cutting the fiscal deficit—is at a high premium. There is room for austerity in both the non-development (subsidies) and the development budget (projects that can be deferred without much impact on productivity and welfare).