Today, Finance Minister AHM Mustafa Kamal unveils his third budget, which coincidentally is the 50th fiscal plan of independent Bangladesh.
But he cannot dwell on the historic moment as the nation is eagerly awaiting to find out what he delivers amid a pandemic that just won’t go away.
External challenges involving exports and internal challenges involving the ongoing more virulent second wave, threats of further waves, uncertainty about the availability of coronavirus vaccines, and high level of poverty and unemployment are enough to give him sleepless nights in the days leading up to his budget speech in the national parliament.
Kamal is expected to announce a Tk 603,681 crore budget for the fiscal year beginning July 1.
The revenue collection target for the National Board of Revenue would be Tk 330,000 crore, a realistic goal under the current circumstances and at the current pace of tax collection.
There was almost nothing for the new poor, who may number at least one crore, in the outgoing fiscal year.
On and off lockdowns are hurting the economy. Businesses are struggling to stay afloat. Incomes did not return to the pre-pandemic level. Jobs have dried up.
He has to devise ways to support the informal sector, which employs 85 percent of the workforce and starving of funds.
The finance minister would aim to limit the budget deficit at 6.2 percent of the gross domestic product (GDP), slightly up from 6.1 percent in the current fiscal year.
The new deficit target would allow him to spend an additional Tk 30,000 crore. Several economists have called for an even higher budget deficit.
The additional funds will pay off because the mass inoculation, when it begins in full swing, will help the economy spring back to pre-pandemic levels. These expenses are nothing if compared with the loss in economic output, lives and livelihoods.
The government did nothing for the cottage, micro, small and medium enterprises (CMSMEs), which are the backbone of the economy and provide most jobs, until recently. If the CMSMEs are given loans, the interest rate has to be very generous.
The employment sector poses the biggest challenge. Millions of people had lost jobs. Many have returned to jobs. Those who have not lost jobs have seen their income slashed.
The decline in incomes has directly hit the consumption of families. So, raising domestic consumption is of paramount importance.
Luckily, there are many silver linings for the finance minister.
There has been price stability. Macroeconomic fundamentals are still good. The exchange rate is stable. Exports are moderate. Remittance receipts are galloping.
Revenue income has not fallen as many had thought. Foreign reserves have reached record heights. Foreign aid reached a record level.
The World Bank has lined up $500 million to support the poor, revive the economy and vaccinate the nation. The Asian Development Bank is readying $940 million in similar assistance.
So, the finance minister is not constrained by a lack of funds. It is the lack of political will of the government or complacence, if there is any, that may fail him.
Money sometimes can’t buy everything. This time, it is the vaccine. About 2 percent of the population of Bangladesh have been vaccinated so far. Getting more jabs are uncertain as global supply is inadequate.
If the Indian variety of the coronavirus, which spreads fast, causes deep community transmission, Bangladesh will be facing a sheer catastrophe.
Hospitals are simply not ready and don’t have the capacity. Not learning from one’s as well as others’ mistakes can prove costly.
Bangladesh may not afford to provide the cash support in the manner that the US or other rich countries have extended towards the vulnerable segments of their societies. But it can do more, not just for 35 lakh families for two months but crores of others.
It is high time to make the investment in the health and education sectors and design them in a way that serves the country in the many years to come, not just the immediate needs.
The pandemic has undeniably accelerated the digital transformation. The government has to seize the opportunity. Telecommunication is one of the most productive sectors yet one of the most taxed.
The government has taken broadband connectivity up to the upazila level. But the internet cost is still high. The same is true with the price of digital devices. So, one cannot expect to teach students online under the present circumstances.
Save for government employees, the day labourers, street vendors, the low-income groups and the CMSMEs either saw their jobs wipe out or income hit rock-bottom. Income-generating activities have to be given a boost.
In the new budget, there might be little surprises when it comes to taxes. There is little elbow room for raising tax rates on the personal income tax side. The rich might see a higher rate of tax, though.
Bringing more people under the tax net and tackling tax evasion might be one of the solutions.
The National Board of Revenue may focus on widening the net on income tax and value-added tax.
The corporate tax rates for both listed and non-listed firms may be slashed by 2.5 percentage points.
To stimulate domestic consumption and create jobs, Kamal will offer a mixed bag of a tax cut, holiday and exemption.
The government’s pursuit for additional revenue contradicted when it allowed black money-holders to legalise their undisclosed money at a token penalty as such blanket preferential tax treatment only discourages honest and regular taxpayers, who usually fill up the coffers.
The government could not implement the annual development programme in the outgoing fiscal year. So, it needs special attention in the next fiscal year.
Implementation capacity has to be beefed up. Stimulus packages have remained unutilised, although the demand was high.
The government may extend the tenure of the stimulus packages due to expire at the end of the current fiscal year.
The government should do something for the banking sector.
If the central bank can ensure that the board functions properly, most of the major problems facing the banks would not be there. The finance ministry should not interfere in the operations of banks.
Investment is an area that warrants due attention. The private investment to GDP ratio, which actually tells whether the investment climate is congenial or not, had been hovering around 23 percent for many years before collapsing in the last fiscal year.
No new megaprojects should be undertaken. The government should put all its energy into implementing the ongoing large projects.
The government should support local pharmaceutical companies in acquiring vaccine licences, ramping up a production facility and producing locally because the country may need the jabs for many years to come.
More than 41 percent of the population in the US have been fully vaccinated, and the country has already started to reopen the whole economy.
The US economy is growing at a record pace. The same will happen if Bangladesh can vaccinate a sizeable population of the economy and achieve a much higher GDP growth rate than the 7.2 percent target set for fiscal 2021-22.
Before that happens, the finance minister will have to keep protecting the poor, the economy, businesses and agriculture.
Bangladesh is well-known for handling disasters. It just has to prove that again.