Budget 2024-25: Wish list long, planning falls short

The poet Rabindranath Tagore once said that no matter how large your vessel may be, if it has a tiny hole, it is useless. That which would keep you afloat, will then drown you.

If we compare the country’s economy with a vessel, we will find not one hole, but innumerable holes. And the biggest of them all is inflation. For around two years inflation has been above 9 per cent. The market prices have literally drowned the people up to their necks. They are managing to survive with their heads just above water.

The new finance minister Abdul Hassan Mahmud Ali presented the budget yesterday, Thursday, along with a lot of words of hope. He said, inflation will be brought below 6 per cent. He did admit that controlling inflation had been taken up as a challenge in the last two budgets, but it had stubbornly remained at 9 per cent. That is why, he announced, the two policies adopted in the new financial year would remain intact. That is – to lower the deficit and to maintain austerity. It can’t be said that the finance minister inspired hope that these two factors would lessen inflation this time. In fact, there is mention of investments going down. This will not increase people’s incomes nor create new employment. So this budget is more or less a wish list.

The tax burden will grow heavier on the people’s shoulders. The tax-GDP ratio must be increased in keeping with the conditions of the International Monetary Fund. And so the finance minister had taken full advantage of this to increase revenue income in the budget. This is not being done by means of any new reforms or by putting pressure on tax evaders. Instead he is focusing more on levying higher taxes from those already paying their taxes regularly. The finance minister once again is placing importance on Value Added Tax (VAT) in the 2024-25 budget. Indirect taxes like VAT means this burden will be borne by the common people. Yet they are not being given any sort of tax concessions.

There may be a degree of relief by lowering tax at source from 2 per cent to one per cent on essentials like paddy, rice, wheat, coarse wheat flour (atta) and refined flour (maida), but that is only if the government monitors the market. Such monitoring was absent in the past two years.

But the finance minister has gone all out to facilitate those who don’t pay taxes on their black money. If you have legitimate income, you pay a maximum 30 per cent in taxes. If your earnings are not legitimate, this will go down to 15 per cent. The highest amount of whitening black money was carried out in the 2021-22 fiscal, about Tk 20,000 crore in all. Covid prevailed around the globe at the time. There was no demand for capital flight. There was nowhere to siphon the money to. So when the finance ministers understand fully that black money is not whitened other than under special circumstances, why do they create this scope to whiten black money?

This mystery was revealed in 2009 by the former finance minister, later Abul Mal Abdul Muhit. He had said at the time, “Politics is the highest art of compromise. In politics, one has to adjust with all sorts of people and all sorts of interests.” Awami League has just come to power through a one-sided election, so the new finance minister has reminded us of that old formula of compromise in politics.

On one side there is the burden of taxes, on the other there is the burden of bills – electricity bills, water bills, energy bills. Under IMF pressure, the government is continuously hiking these costs. The budget this time has even increased charge of talking over mobile phones. Metrorail fare is going up. People will be under pressure. The only way out from this pressure is to increase income. That calls for investment and employment. But the finance minister has said he has taken up an austerity policy this time. In order words, a contractionary policy. The aim is to control inflation. The finance minister, though, had admitted that this may lead to a slow-down in the pace of growth in the long run. But he also pledged that public expenditure in the second half of the next financial year will gradually be increased. But there is a big “if” attached to this. He said, this will be possible only if the volume of revenue income can be increased.

That was all about government investment. What about private investment? The private sector is a large area for employment. In the 2023-24 financial year, the rate of private sector investment had been taken as around 28 per cent of the GDP. Where private investment wasn’t increasing by even 1 per cent, this rate of about 4 per cent increase was met with derision. Now the finance minister is saying in the outgoing financial year, private sector investment was actually 23.51 per cent of the GDP, less than that of the 2022-23 fiscal. The impact is apparent on the GDP growth. While the targeted growth was 7.5 per cent, 5.82 per cent was achieved.

The target for private investment in the 2024-25 fiscal has been kept at 27.34 per cent. Yet the credit growth in the private sector has been shown as 9 per cent, which was 10 per cent in the outgoing financial year. The finance minister didn’t reveal what magic he had in lowering credit in private investment to four per cent of the GDP. As it is the targeted investment in the public sector has been lowered from around 7.5 per cent to just above 6 per cent. The budget didn’t offer any answers to the mystery of achieving this growth either.

Rabindranath has said, many say that “Bengalis are more of the philosophical bent of mind rather than of pragmatic work. That is why they advise Bengalis to be practical!” Those who have drawn up the budget, need to heed this advice. Despite being aware of realities, their heads remain in the clouds and that is why every financial year the budget needs to be revised and there remains a serious shortfall in implementation.

The budget is not about speeches. It is a statement on the mid-term macroeconomic policy. This statement is one of the many documents regarding the budget. It mentions the various challenges faced by the economy, such as, a strict monetary and expenditure contractionary policy is being followed in the hope that this will bring inflation down in the near future. But the high interest rates prevailing in the market may slow down the pace of investment and have an impact on the GDP.

Another challenge is, the prevailing high interest rates in the developed world are having an impact on Bangladesh’s shrinking foreign exchange reserves. If these high interest rates continue to prevail in the development countries, it will be hard in the future to retrieve Bangladesh’s dwindling foreign exchange reserves. The later challenges are non-performing loan and the measures taken to merge some banks in order to restore discipline to the financial sector. It will take time for these measures to yield results.

To refer to Rabindranath again, there is quite a lot of “philosophical thought” here too. Those who formulated the budget, made plenty of assumptions for the new financial year. For example, agricultural and industrial production will be strong and will have contribution to economic growth. The growth of developed countries will stabilize mid-term, which will boost exports for Bangladesh. The recently adopted policies will stabilize the taka exchange rate against the dollar. As the price of commodities will fall in the world market and the exchange rate will stabilize in the local market, inflation will fall in Bangladesh. As soon as inflation falls, consumption will increase at an individual level, leading to GDP growth.

With inflation and exchange rates becoming stable, import growth will return to a positive trend. It seems that the policy interest rates are being kept at the highest around the world and this will decrease mid-term. This will help in increasing Bangladesh’s foreign exchange reserves. Due to the various reform measures taken up by the National Board of Revenue, revenue growth will pick up and despite various global uncertainties, the growth trajectory for exports and remittance remains upwards and will continue in the mid-term.

If these assumptions prove to be accurate, only then will the economic crisis clear. Most of the assumptions are dependent on the state of the global economy. So just as the finance minister depends on loans for the implementation of the budget, he must depend on others to overcome the financial crisis too. The question is, how much planning has been done. The French journalist, writer and pilot Antoine de Saint-Exupery said. “A goal without a plan is just a wish.”

It was the IMF that had said not to make the budget too large in size. The finance minister has heeded their words. He has presented a Tk 7 lakh 97 thousand crore taka budget for the new financial year. Of this, the estimated size of the Annual Development Programme (ADP) is Tk 5 lakh 41 thousand crore. The overall deficit will be Tk 2 lakh 56 thousand crore. The deficit is 4.6 per cent of the GDP.

The finance minister hopes to receive Tk 90,700 crore as loan to meet the budget deficit. The government will have to take loans from domestic sources to meet the remaining Tk 9 lakh 60 thousand 900 crore deficit. Of this, Tk 1 lakh 37 thousand 500 crore will be taken from the banking system. The remaining Tk 23 thousand 400 crore taka will be arranged from outside the banking system such as savings certificate sales.

So the finance minister is basically depending on the banking system to meet the budget deficit. If the government alone takes this volume of money from this sector, the slice of the pie shrinks for the private sector. This will harm investment and employment.

The parliament session began at 3:00pm yesterday, Thursday, presided over by Speaker Shirin Sharmin Chaudhury. Finance minister Abul Hassan Mahmud Ali delivered an approximate 1 hour 35 minute budget speech. Various facts and figures appeared simultaneously on the big screen in the parliament hall. The financial minister did not read out the entire 210-page budget speech. But it was taken to be read in entirety. Next, the finance minister raised the National Parliament Finance Bill-2024. Then the parliament session was adjourned.

Earlier in the afternoon, the 2024-25 fiscal budget was approved at a special cabinet meeting chaired by Prime Minister Sheikh Hasina in the cabinet room at the Jatiya Sangsad (national parliament). The prime minister then signed the proposed budget. President Md Shahabuddin then signed the finance bill in his own room in the parliament building.

Throughout the session the members of parliament discussed the budget. The 2024-25 financial year’s budget will be passed on 30 June in parliament.

The common people hope the budget will give some relief from the exorbitant prices in the market. The middle class hope they won’t have to shamefully hide their faces and queue up behind the TCB truck. The private sector hopes the cost of doing business will decrease, investment will increase. The question is, will the budget be able to meet all these expectations? After all, everyone cannot echo Rabindranath: “We are here for but a day or two/What sorrow, I do not have much expectation/Whatever comes to the heart, remains in the heart/I sing in great elation.”

The people have suffered for a stretch of two years. Everyone is searching for a ray of hope. But is there any ray of hope at the end of the tunnel? In the proposed budget the finance minister has increased duty on all sorts of energy saving bulbs and tube lights. So, ironically, it can be said that the light at the end of the tunnel has been switched off. Let’s end with a poem of Jibananda Das, “Oh powerful one, you work in the breast at your own accord!/You are there, you will remain/ Have you given any other assurance?”

* This report appeared in the print and online edition of Prothom Alo and has been rewritten for the English edition by Ayesha Kabir