Despite all the different angles, one needs to admit that the government has tried to introduce several positive dimensions. One consequently now needs to wait and see how the socio-economic-health factors within the budget proposal contain the negatives and promote the positives including future foreign direct investment in our Economic Zones. Those involved in Bangladesh with socio-economics have a very difficult time ahead-- thanks to the COVID virus pandemic or the recent cyclone that devastated our shoreline. Relevant authorities have presented a budget that has drawn attention of all concerned. It has been formulated to save the population not only from the encroaching fangs of the terrible virus but it also aims at staving off hunger and finding jobs for the jobless.
The last few days have witnessed a flurry of news about the dire economic situation prevailing in Bangladesh. There has also been at times revelation of potential positivity. This dynamics has brought forth once again re-affirmation of the old adage that that there are two sides of the same coin.
Before moving on, one needs to refer to some negatives. The media has pointed out that the country's merchandise exports declined by 61.57 per cent to US $ 1.46 billion in May this year as compared to that of this month last year. Shrinking global demand amid the COVID pandemic has been held responsible for this. The country had apparently fetched US $ 3.81 billion through exports in May 2019. It may however be recalled that the monthly earnings in April and March this year were US $ 520.01 million and US $ 2.73 billion respectively.
Provisional data of the Export Promotion Bureau (EPB) in its website has indicated that the monthly export earnings during the current financial year has shown a downward trend, except in the months of July and December, 2019. In the first 11 months (July- May) of this fiscal year (FY2019-20), the overall export earning has fallen by 17.99 per cent to US $ 30.95 billion as against US$ 37.75 billion in the corresponding period of last FY.
However, one analyst has noted that one should also look at the other side of the coin. One should be encouraged by the fact that exports in May were around three times higher than in April. It has also been pointed out that April reflected the unfortunate situation of heavy lockdowns which had forced factory owners to suspend most production.
In this context one has to also take note of the fact that leather and leather goods exports has seen a 21.66 per cent fall to US$ 739 million during July to May FY 2020. This was US$ 944 million a year ago. Similarly home textile exports have fallen by 16.22 per cent to US$ 671 million this fiscal year till the end of May 2020.
Jute and jute goods have, however, shown positive growth by 5.74 per cent to US$ 818 million in the first 11 months. This was US$ 774 million in the first 11 months in the last FY.
The cumulative trade deficit has widened due to the economic fallout. It needs to be mentioned that it has had an adverse impact on the country's balance of payments due to the gradual widening of the trade gap and the current account deficit. Trade deficit, according to the data made available by the Bangladesh Bank indicate, stands currently at US$ 14.22 billion in the first ten months of the current FY. Between the months of July and April, trade gap increased by 1.73 per cent from that of one year ago. Current account deficit in the July-April period stood at US$ 4.12 billion.
Executive Director of Policy Research Institute Ahsan H. Mansur has significantly commented in this regard that trade deficit is still in a stable condition - however, the ongoing trend indicates that it will be unstable in the future. He believes that the global economy and that of Bangladesh will take more time to start the expected turn around.
Such an observation has the denotation that oil prices are unlikely to move upwards very soon. This will directly and indirectly affect not only the Middle Eastern oil producing countries but also the United States, United Kingdom and some other countries like India and China.
It has also been observed by some other economists that remittances from expatriate Bangladeshis will not rebound if the economies of the Gulf countries do not pick up.
It has been mentioned by some of our economists that our foreign exchange reserve stood at US$ 32.92 billion as of April 30 this year, which was good enough to settle our immediate and mid-term reduced import requirement. There is also the report that our foreign exchange reserves have risen to a record US$ 34.23 billion because of International Monetary Fund (IMF) assistance. This institution had released emergency funds worth US$ 732 million to Bangladesh to address the multiple effects of the COVID pandemic.
A BRAC survey has reported in the second week of June that earnings of 51 per cent household in the country has plunged to zero while a massive 95 per cent of our population has suffered losses in income due to the virus outbreak. The study suggests that although daily wage earners have slowly started to regain their livelihood, many of them and their families will need support for at least three more months to recover from their period of setback.
It has also been mentioned that there was a total of 2,317 respondents, of which 68 per cent was from rural areas and 32 per cent from urban areas. They were also from different socio-economic backgrounds and from 64 Districts in Bangladesh. Average monthly household income of the respondents was Taka 24, 565 before the beginning of the enforced public holidays from March. It had apparently declined now to around Taka 7,100 in May. Average income of women-headed households had also declined 80 per cent whereas that of men-headed households had fallen by almost 75 per cent. It was also underlined in the survey that there was an increase in violence against women as poverty intensified over the past weeks. This last aspect was similar to what has taken place elsewhere in South Asia and also in Latin America.
However, it has also been underlined that constructive steps have already been initiated in the rural areas through corporate social responsibility, Financial and industrial institutions have taken the initiative to distribute food and basic clothing in most of the affected areas. One needs to note here that this approach has helped to widen the efforts of the government and their decision to provide subsidised food and also funds to marginalised people all over the country. Carried out in a coordinated manner, it will be a constructive a-political engagement which will leave its own footprint.
Reference needs to be made here also to the World Bank report titled "Global Economic Prospects, 2020" released on June 8. In that report the WB has made public its prognosis about what is expected to happen in the coming months. There is reference in particular to South Asia-- to Bangladesh, India, Nepal, Pakistan and Bhutan. In Bangladesh, growth is expected to slow to 1.6 per cent. In India it is expected to be around 4.2 per cent, in Nepal around 1.8 per cent, in Pakistan minus 2.6 per cent and in Bhutan around 1.5 per cent. This analysis has been based on the terrible effects created by the COVID on industrial production, global plunge in exports and earnings and remittance to be sent in the coming months by South Asian expatriates back home. This has been followed by a statement issued by OECD on June 10 that extreme poverty will persist through 2021 and that the world economy will contract by at least 6 per cent.
It is within such a difficult paradigm that Finance Minister Kamal presented on June 10 our Taka 5.68 trillion budget proposal for 2020-21 in the Jatiyo Sangshad.
It was explained by the Finance Minister that the required money will be coming from - tax revenue of the NBR (58.1 per cent), domestic loan (19.4 per cent), foreign loan (13.4 per cent), non-tax revenue (5.8 per cent), tax revenue non NBR (2.6 per cent) and foreign grants (0.7 per cent).
It has been proposed in the budget proposal that the money will be spent in the following manner in different sectors-- Public Administration (19.9 per cent), Education and Technology (15. 1 per cent), Transport and Communication (11.4 per cent), Interest payment on Loans (11.2 per cent), Local Government and Rural Development (7 per cent), Defence (6.1 per cent), Social Security and Welfare (5.6 per cent), Agriculture (5.3 per cent), Health (5.1 per cent), Public Order and Safety (5 per cent) and Energy and Power (4.7 per cent). Expenditure in this budget is also planned in other sectors like Industrial and Economic Services, Housing Culture and Religious Affairs. It may also be mentioned that seven mega projects will receive out of this budget figure Taka 342.66 billion - including Padma Multipurpose Bridge, Padma Bridge Rail Link, Roopur Nuclear Power Plant, Matarbari Power Plant, Metro Rail and Payra Deep Sea Port.
Some financial analysts have noted that the price of many items will increase - including car registration and renewal of road permit, mobile and internet service, widening the possibility of being able to whiten black money and also enhancing customs duty on many items.
Many others have, however, also pointed out some positives that need to be acknowledged-- the fact that both health and education sectors have been given high priority, that the social safety net arrangement will help, particularly the lower income and vulnerable groups, and that the 2 per cent incentive pertaining to remittances will continue and this will help several areas of our country.
Muhammad Zamir, a former Ambassador, is an analyst specialised in foreign affairs, right to information and good governance.
