Finance Minister AHM Mustafa Kamal on Thursday placed in parliament yet another national budget -- country's 50th since independence -- amidst pandemic-induced constraints.
The budget for the next financial year (FY 2021-22) that has been crafted on the traditional framework has accommodated some concerns that have emerged given the devastating impact of the pandemic. It, however, bypassed a few.
The government has a big expenditure plan. But it lacks clarity in the matters of some pressing problems, including the economic hardship being faced by the poor and low-income people because of the Covid-19.
If not others, businesses are sure to greet the budget with an open arm because of the tax sops offered to them by the finance minister, who is genuinely interested in helping the private sector to come out of the woods in a hard time.
However, his generosity in tax matters comes in contrast to the size of the budget for the next FY. The budget expenditure -- Tk 6.03 trillion -- is 12 per cent higher than the revised budget for the outgoing fiscal (2020-21).
The budget formulators, for the first time in many years, have not set a bloated tax revenue target. They, seemingly, have taken into cognisance the ground realities. The NBR has set the tax revenue target at Tk 3.46 trillion for FY'22, which is equivalent to the original target for the outgoing fiscal. Yet reaching this target might prove difficult since the NBR is unlikely to achieve even the revised target -- Tk 3.01 trillion -- set for the FY 2020-21. If the Covid restrictions persist for some more months, the overall revenue receipt in the next fiscal would suffer.
In such a situation, the budget deficit projected at 6.2 per cent might go up further in the next fiscal in the event of full execution of the budget. Implementation of the budget, however, has been a problem for many years because of the lack of capacity in the line ministries and relevant other organisations.
The deficit financing using domestic sources would not be a problem for the government since the banks are awash with excess liquidity and the savers are somewhat crazy about sanchayapatras that offer yield more than twice the banks make available for term deposits. The size of interest payment against such borrowing, however, has been bulging. Tk 620 billion has been earmarked in the budget for next FY for interest payment against domestic borrowing, which creates additional pressure on the government's purse.
The government policy measures and allocations concerning health, education, agriculture and safety net in the proposed budget have been issues of special interest because of the pandemic effect.
As far as allocations for sectors like health, education and agriculture are concerned, there has not been any notable change in the budget for next FY. The ministries concerned, percentage-wise, have got allocations almost identical to that of the previous years. There were high expectations that the allocation for the health sector in the proposed budget would be more than usual. But that hope has largely been dashed.
The tax exemption proposal for 250-beds hospitals to be established in districts and specialised hospitals for 10 years is a step in the right direction. Keeping an allocation of Tk 100 billion in the budget to respond to any pandemic-related emergency is also an appropriate step. However, proper spending of such an allocation remains an issue that needs to be addressed by the government.
As the pandemic has hit hard the poor and low-income people, poverty level and safety net have been the most discussed issues in recent times.
Several studies have found a significant increase in poverty level due to the pandemic effect. One study has said that the rate of poverty has doubled to over 40 per cent because of the Covid onslaught on the people's livelihood.
The finance minister in his budget speech avoided any mention of the poverty increase. But, he spoke about the government plan to bring down the poverty rate to 12.3 per cent and the extreme poverty to 4.5 per cent by the FY2024.
The finance minister elaborated on the safety net programme and the beneficiaries of the programme during the Covid-time.
According to the minister, Tk 1.08 trillion has been allocated, which is equivalent to about 18 per cent of the proposed budget and 3.11 per cent of the GDP, for the safety net programme. Under the programme, all the poor elderly people, widows and deserted women of 150 upazilas would get allowances from next FY. Similar benefits are now extended to the same groups of people in 112 upazilas.
The proposed budget has bypassed the hardship of the new poor and urban poor. The government safety net programme addresses the issue of poverty, not the new poor both in rural and urban areas. Hopefully, the issue will be addressed before the finalisation of the budget.
Generation of enough employment opportunities is an issue more important than any time before because of the effect of the pandemic on the employment situation. Millions have been thrown out of their jobs and dislodged from their usual sources of income. The private sector has been the leading provider of jobs. But a sort of stagnancy in private sector investment has almost stalled employment generation. Lending rate supports and stimulus packages could not reverse the trend. It remains to be seen how the tax sops proposed in the budget help prop up the private sector.
Much would depend on vaccinating the population. The USA and Europe are almost back to normal business activities because of their massive vaccination programmes. But with the deadly pathogen still taking a toll on the life and livelihood in the countries of Asia, Africa and Latin America.
By any means, the government will have to vaccinate the people above 40 within the shortest possible time, if it wanted all the economic indicators back to normal. The government has not yet come out with a comprehensive programme to vaccinate 80 per cent of the population that would help achieve so-called hard immunity.
