The issues of poverty, the job market, small and medium enterprises, and coronavirus vaccinations have been underestimated in the budget proposed for the next fiscal year, said the South Asian Network on Economic Modeling (Sanem) yesterday.
“This would lead to limitations in formulating policies,” said the think-tank in its post-budget media briefing held virtually.
Selim Raihan, executive director of the Sanem, said there was a disconnect between the title of the budget — Bangladesh Towards a Resilient Future Protecting Lives and Livelihoods — and its content.
“This disconnect is due to the improper and inappropriate assessment of the Covid-19 situation.” He called the revenue target unrealistic.
The proposed budget has targeted to raise Tk 389,000 crore and elevate the revenue-to-GDP ratio to 11.3 per cent.
“The revenue-to-GDP ratio seems to be unrealistic and historically high,” said Prof Raihan, calling for revising it downwards.
In the current fiscal year, the revenue-to-GDP ratio would be around 8 per cent.
The finance minister has proposed to reduce taxes for many businesses, so the revenue target was not achievable, he said.
The think-tank pointed out that there had not been enough data collection about the pandemic situation from government organisations although statistics was very important to understand the ground reality.
The poverty rate has increased, and there has been a big crisis in the labour market. Micro, small and medium enterprises have suffered the most and have received the least amount of support.
“Emphasis must not only be placed on financial recovery, but also on social recovery,” said Raihan, a professor of economics at the University of Dhaka.
The recovery of social issues such as education, health, social security, poverty, and inequality needs to be addressed.
“The solutions presented [in the budget] seem to be on an ad hoc basis,” he said, calling for overall planning on the crisis.
Budget implementation is a major issue, according to the think-tank.
Sanem’s research found that actual spending stood around 75-78 per cent in the past 10-12 years compared to the proposed budgets.
“Increased spending does not imply that policies are being properly implemented.”
The monitoring and evaluation process of the goals stated in the budget was not clear, so discussions of budget implementation were dependent on spending figures only, the Sanem said.
It said the budget deficit of 6.2 per cent could be higher.
To meet the budget deficit, it is important to ensure an “honest use” of the loans to be taken from the banking sector, Raihan said.
The government targeted a 40 per cent higher amount of funds to be mobilised from external sources compared to the current year.
“I have a huge doubt whether it is possible to receive such a higher amount of external sources,” Raihan said.
Despite two waves of Covid-19, the government estimated the growth of the private investment to be 8.8 per cent in real terms at the end of FY21, up from 5.5 per cent a year ago. A 10.8 per cent growth has been set for the upcoming fiscal year.
“I want to be optimistic, but the reality does not give such hope. To reach the targeted growth, we need a historically high amount of investment in the private sector. But our recent research shows 15 major sectors are reluctant to invest now and are trying to restore their business amid the pandemic.”
The Sanem said there was no mention of new poor, although about 2.5 crore to 3 crore people slipped below the poverty line.
“How they would be incentivised or receive benefits was not mentioned in the budget although it said the poverty rate would reduce and jobs will be created.”
The duty benefits on imports also pose a risk as it may discourage businesses to expand exports, it said.
Prof Sayema Haque Bidisha, research director of the Sanem, said there had been an increase in allocation in the social security and health sectors, which was certainly positive.
“The budget is, overall, business-friendly, which is positive, and there is a visible effort in reviving the economy.”
But it was not clear how much the general public, the low-income people and the middle class would benefit from the efforts made to boost businesses, she said.
“It is also not clear how many small and medium-sized enterprises will benefit from the concessions, and it is also not clear whether the kind of incentives given to stimulate businesses will actually spread to the labour market. Therefore, a real roadmap is needed.”
She said there was a need for major reforms in health and education, especially in the face of the pandemic.
“There was an expectation for something different, which we did not observe.”