One year ago finance minister AHM Mustafa Kamal had concluded his budget speech on a note of hope that life would be going back to normal. He had hoped that we would be freed of coronavirus and a bright new day would dawn on the horizon. But we have not been rid of the pandemic, nor has a bright new day dawned. The economy is still in a crisis, uncertainty prevails. People's incomes have decreased. A large number of people have been pitched into poverty again. But none of this has been reflected in the budget.
The business community will be pleased with the 2021-22 budget. Corporates tax rates have been slashed, local industries have been given protection. Business turnover tax rates have also been cut. The finance minister has given businesses all sorts of benefits. However, the budget has no perks for the common people. There is hardly anything for those whose incomes have decreased. The budget also has no mention of those who have become poor anew. There are no provisions to give funds to the common people. And the middle class, across the board, will be dismayed by the finance minister's budget proposal.
When the finance minister presented his second budget last year, there were discussions about tackling the first wave of coronavirus. The economy has still not recovered from the impact of the first wave. Just as it was getting onto its feet, the second wave hit. And along with the efforts to tackle the second wave, there is the anxiety of a third wave in the offing. There is uncertainty about procuring the Covid vaccine.
There is a global consensus that Covid will not go away anytime soon. A few countries have managed somewhat to overcome the crisis simply by the correct and extensive application of the vaccine. That is why the finance minister, perhaps, spoke of vaccinating 80 per cent of the people. But even if 2.5 million (25 lakh) vaccinations are given every month according to his target, it will take nearly a decade to vaccinate 80 per cent of the people. There is a wide gap between reality and expectations.
Lives and livelihood
The finance minister has projected the new budget as 'Bangladesh is heading towards to a robust future, placing priority on lives and livelihood'. In other words, both lives and livelihood must be protected. The budget does not guarantee 2.5 million vaccines being given every month, nor does it have any direct plan for protecting livelihood. Receiving all sorts of perks, business persons will increase their enterprises, investments will go up, production will increase and this will lead to more employment -- the finance minister is probably depending on this age-worn trickle down policy.
Receiving all sorts of perks, business persons will increase their enterprises, investments will go up, production will increase and this will lead to more employment -- the finance minister is probably depending on this age-worn trickle down policy.
The finance minister restricted his discussions to the big-sized budget and the big-sized growth. He kept up high ambitions with the huge budget of Tk 6 trillion (Tk 6 lakh crore) and the huge GDP target of 7.2 per cent. Yet this time all quarters were willing to give the government generous concessions. He had held discussions with economists and experts before the budget and they had all said that there was no need to discuss GDP and budget deficits this time. On the contrary, the government should spend. Money must be placed in people's hands in order to increase demand. So it would not be a problem if the deficit increased. The finance minister did not heed this advice. But demands will not increase if there is no cash in people's hands. Without demands, the economy will slow down. Perhaps there is a lack of understanding about how to give cash to the common people.
Economists say that there is discrepancy in much of the data presented, including the poverty rate. There was a lack of clarity on many issues, much of the statistics was not updated and there was no clear explanation of employment generation in the proposed budget
Tax cuts and priorities
Bangladesh's corporate tax rate in highest in South Asia, and even amongst its competitors. Business persons have long been calling for a cut in these tax rates. The finance minister slashed corporate taxes in two consecutive budgets. This time it was cut by 2.5 per cent. As a result, corporate tax has gone down by 5 per cent in two years. This is quite a concession for business persons. The finance minister has also given a big VAT cut for local industries too this time. And in order to curtail dependence on imports for various household products, other than VAT, advance tax has also been exempted. New tax facilities have been given to locally assembled mobile phones and the IT sector.
In this budget speech, the finance minister said that this time he had moved away from the conventional system. He said that the health sector had been given highest priority. Second priority had been attached to keeping up the implementation of stimulus funds. Third priority was the agricultural sector, in order to ensure food security. Then was the education sector, human resource development including skills development. The fifth priority was attached to rural development and employment generation. Lastly was expansion of social safety nets. Priorities may have changed, but the allocations were of the same conventional mould.
Extensive reforms required
This is the 50th budget of Bangladesh. And this is the time that Bangladesh has qualified to be upgraded from the least developed country category. This will pose several challenges in front of Bangladesh. The finance minister discussed this in detail too. But missing from the deliberation was discussion on reforms for the coming days. The country does not have much capacity either for income or for expenditure. In fact, there is acute lack in qualitative expenditure. Unless this is resolved, the problems in implementing the budget will remain, economists say.
Prior to the budget, a major grievance of the business community was the overall taxation system. Several business persons complained that the tax system was anti-business. Extensive reforms were required to address this problem. The stimulus funds are being provided through banks. It was this finance minister who had spoken about banking sector reforms in the 2019-20 budget. And as the tax-GDP is lowest, the government couldn't even create a large stimulus fund with its own resources. So, extensive reforms are needed in the taxation system.
Outdated data
The finance minister said many things. If he read out the entire speech, this may have been recognised as the longest speech in the country's history. But economists say that there is discrepancy in much of the data presented, including the poverty rate. There was a lack of clarity on many issues, much of the statistics was not updated and there was no clear explanation of employment generation in the proposed budget. The budget had no allocation for those who lost their jobs and those who had been pitched anew into poverty.
At the beginning he said that the rate of poverty in the country was 20.5 per cent. The last household income and expenditure survey of the country was carried out in 2016. At that time the overall poverty rate in the country was 24.3 per cent. Based on that survey of 2016, the government's estimated poverty rate for 2019 was 20.5 per cent. That was the figure the finance minister presented. Yet due to the prevalence of coronavirus, it is estimated that the poverty rate has crossed 30 per cent. According to some surveys, it is actually over 40 per cent. But the finance minister based his budget of data from two years ago. So the new poor have got nothing from this budget, not even acknowledgement.
How big is the budget?
This fiscal's budget is around Tk 6.04 trillion (Tk 6,03,681 crore). This includes revenue of around Tk 3.92 trillion (Tk 3,92,490 crore). The budget deficit is 6.1 per cent. A large chunk of the deficit will come from foreign loans, that is, around Tk 1.12 trillion (Tk 1,121,88 crore).
However, the worrisome factor is that everyone had expected that the government would have at least been able to implement the budget of the outgoing fiscal, that all the funds would be spent. There is, after all, no alternative to increase expenditure in order to boost the budget. But the budget had to be amended as around Tk 300 billion (Tk 30 thousand crore) could not be spent.
Presenting the budget
The Jatiya Sangsad (national parliament) session, presided over by speaker Shirin Sharmin Chaudhury, began on Thursday at 3:00pm. All persons related to the parliament and the session had been tested for Covid-19 in advance. Around 170 members of parliament, including prime minister Sheikh Hasina, joined the session.
While the budget was presented for over an hour, the finance minister read very little of the written speech. Most of the time there was an audio-visual presentation on a large screen. At the end of the budget speech, the finance minister presented the finance bill. Before the session began, the budget was approved at a special meeting of the cabinet held in the Sangsad Bhaban (parliament building). Then president Abdul Hamid signed it.
Conclusion
The finance minister, in his budget speech, said, "The people are the life force of our economy." The hopes, expectations and the confidence of this life force, the people, all depends on the implementation of this new budget.
* This report appeared in the online and print edition of Prothom Alo and has been rewritten in English by Ayesha Kabir