When it comes to an individual or family, the budget is an account of income and expenditure for a specific span of time. But the role of a nation’s budget is massive in magnitude. Other than the matter of income and expenditure, it also documents priorities. A national budget carries a precise message about nature and trends of the economy. What message has been delivered by the FY2018-19 budget presented on 7 June by the finance minister in parliament?
Generally speaking, investment is essential to build a development and prosperous future for Bangladesh. Investment is essential in the industrial sector to generate jobs. Unemployment is a mammoth problem for us at the moment. Our average GDP rate is around 7 per cent, but it lacks in employment. The number of unemployed in the country, mostly youth, is over 20 million. And 47 per cent of the graduates are unemployed. Around 2 million young people enter the job market every year and so investment must be made in productive areas for their employment. But our employment for long has remained stagnant at 23 per cent of our GDP.
It would be unrealistic to expect to increase investment in the productive sector in FY2018-19. According to UNCTAD, foreign investment has fallen by 7.8 per cent in 2017, as compared to 2016. As it is, many of our local investors have lost interest in investing within the country due to violent politics and unrest. In fact, they have been siphoning off their funds abroad. According to the Global Financial Integrity reports, USD 61.63 billion was illegally sent overseas from Bangladesh from 2005 to 2014. In 2013 alone there was a capital flight of USD 9.66 billion. The finance minister’s budget speech had no significant plans for bringing back this money, nor any effective strategy to promote investment. This certainly does not deliver any positive message.
Bangladesh’s significant resource is its young demographic. Around half of the population is 24 year and below in age. In economics, this is referred to as ‘demographic dividend.’ Basically, youth is considered to be producers, not consumers. They are generally hard-working, creative and dynamic. And so a country’s socio-economic development depends largely on effective utilisation of this population-related advantage. Such an advantage is not permanent and that is why priority must be attached to this matter.
If demographic dividends are to be used, our youth must be provided with quality education. Proper health care must be ensured. Opportunities, particularly employment opportunities, must be created for them. Without meaningful employment, our youth may be derailed. As it is, many have become addicted to yaba and involved in all sorts of criminal activities. If this continues, the demographic dividend may turn into a nightmare. The youth may make our dear Bangladesh unlivable.
Unfortunately, the finance minister’s budget has no extra arrangement for increasing the competence of our youth and creating employment for them. Investment in health and education is decreasing. In the 2010-11 revised budget, allocation for the education sector was 14.3 per cent. In 2017-18 it stood at 12.6 per cent and in 2018-19 the allocation for the sector stands at 11.41 per cent. In the health sector, last fiscal the budgetary allocation was 5.39 per cent. In 2018-19 it is just 5 per cent.
Comparing to international standards, investment in our education and health sectors is dismal. Internationally, investment in the education sector is 6 per cent of the GDP and 20 per cent of the total budget. In our country it is 2.9 per cent and 11.2 per cent respectively. Similarly, in the internationally, investment in health is 5 per cent of the GDP, where in Bangladesh it is 0.92 per cent. By such paltry investment in a social sector of such unprecedented potential, what message is the finance minister giving us?
Coming to economic disparity, the Gini ratio of 0.458 in 2010 stood at 0.483 in 2016. This reflects the growing disparity in income and opportunity in the society. That is why in comparison to 2016, the income of the top 5 per cent wealthy persons in our society increased by 121 times in comparison to the lowest 5 per cent, which in 2010 was just 31 times. F this trend continues, unrest will grow in the society. But our proposed budget of 2018-19 has no guidelines about bringing this disparity to a tolerable level. On the contrary, the opportunity offered with government patronage for uncontrolled looting in the financial sector can only lead to sharper inequalities. According to the apex business boy FBCCI, our banks are being robbed. The government has given this scope for robbery and the robbers are getting away with the loot. In fact, they are being encouraged to rob.
It has been during the term of this finance minister that the boards of the state-owned banks have been formed in the interests of ruling party leaders and their cohorts. At the outset of the year, a rule was enacted to allow four persons of the same family to be on the board of directors for nine consecutive years, ushering in a dynastic grip on the banks. Recently the government increased the government deposit rate in private banks to 50 per cent. As in the past, the government has proposed an injection of Tk 20 billion in the private banking sector to fill the capital deficit caused by the looting. That is why though only state-owned banks had default loan problems in the past, at present the private banks are submerged in the same crisis. In such circumstances, by increasing allocations to meet the capital shortfall and decreasing income tax for the banking sector, rather than taking legal action against the looters, what message is the finance minister giving us. Does he want to encourage indiscipline, looting and lawlessness? By creating such opportunities, money from the common many is being handed over to the wealthy, thus increasing social disparity further. Unfortunately, while the bank owners are being given such incentives, he has failed to allocate a few million taka to include teachers in the MPO, forcing them to take to the streets.
For the social safety net, allocations have been increased from Tk 542.06 billion in 2017-18 (13.54 per cent of the budget) to Tk 646.56 billion in 2018-19 (13.92 of the budget). It is claimed that this bides well for the common people. But there is loophole here too, because 35.2 per cent of the social safety net is spent on pension for government officers and employees. A very small percentage of them are of the lower class. The finance minister has clearly done injustice to the lower social class, particularly the poor, in his proposed budget. He has appeased the interests of a specific coterie. By keeping the income tax ceiling at Tk 250 thousand, he has done another injustice towards the lower class.
The finance minister is an elderly man, experienced and wise. This was his twelfth budget. We had hoped he would rise above coterie interests in this budget, would announce certain important reforms and take initiative to restore discipline and good governance in the financial sector. We had also hoped he would pull the budget process out of the ancient rut and determine certain significant priorities for the future. We are disappointed.
* Badiul Alam Majumdar is secretary of SUJON (Citizens for Good Governance). This piece has been rewritten in English by Ayesha Kabir.