Finance minister AHM Mustafa Kamal has presented the new budget, but with nothing very new within it. It seems to be a continuity of the past 10 years, despite changes in the economy.
On one hand, growth is at an all-time high. On the other, there is also unprecedented inequity in income. The reason behind this is growth without employment. The financial sector is chaos and most banks face a liquidity crisis.
Repayment of interest on high-interest loans, taken to meet budget deficits, has spiralled out of control. There is a huge shortfall in revenue collection. The pressure upon the macro-economy is not reflected in the budget. There are no signs of any plans for damage control.
Coming to power for the third consecutive term, the first change that the Awami League government made in its economic planning was the change in finance minister. Abul Maal Abdul Muhith presented the budget for a stretch of 10 years. There was a bit of a difference in the presentation of the 2019-20 budget by the new finance minister on Thursday. AMA Muhith had set a precedence of a lengthy budget speech and the new finance minister followed suit, but this time there was also a documentary that displayed the emergence and achievements of Bangladesh. Also, the finance minister fell ill and so the prime minister Sheikh Hasina had to take over reading the budget, something that has never been done before.
Failure in implementation
Awami League has the experience of presenting 11 consecutive budgets. The present finance minister used to be the planning minister. That means he was not far from the task of budget implementation. However, this time too, the budget wasn’t fully implemented. Every year there has been a repeated performance of presenting a massive budget, making adjustments towards the end, and then finally making further amendments. In other words, there have always been promises over the past decade, of implementing a large budget, but then falling short of the commitment.
Why are changes made in the budget? The finance minister’s speech stated briefly that it seems that revenue collection will fall somewhat short of target. That is why he brought down the revenue target of the current 2018-19 fiscal to Tk 226.68 billion (Tk 22,668 crore). However, given the state of revenue collection, the deficit is likely to be much more. That will entail further amendment at the end of the financial year.
The budget has been adjusted when it comes to expenditure too. Revenue expenditure had been cut down to Tk 220.32 billion (Tk 22,032 crore) and development budget slashed to Tk 60 billion (Tk 6,000 crore).
There has also been failure in utilising the funding sources to meet the budget deficit. For example, the target had been to procure Tk 501.16 billion (Tk 50,116 crore) from foreign aid sources to meet the budget deficit, but only Tk 473.97 billion (Tk 43,397 crore) is being procured. Also, Tk 420.29 billion (Tk 42,029 crore) was to be procured from the banking sector, but only Tk 308.95 billion (Tk 30,895 crore) is being availed. On the other hand, the government will sell Tk 450 billion (Tk 45,000 crore) worth of saving certificates, though the target had been Tk 261.97 billion (Tk 26,197 crore).
The budget for the current fiscal is around Tk 4.43 trillion (Tk 4,42,541 crore). Of this, earnings have been around Tk 3.20 trillion (Tk 3,20,990 crore), meaning an overall deficit of Tk 1.26 trillion (Tk 1,25,929 crore).
The new budget
The finance minister has proposed an expenditure of Tk 5.23 trillion (Tk 5,23,190 crore) for the coming 2019-20 fiscal budget. However, income target is Tk 3.82 billion (Tk 3,81,978 crore). The finance minister hopes to procure foreign grants to the tune of Tk 638.480 billion (Tk 63,848 crore). Another Tk 473.64 billion (Tk 47,364 crore) from domestic sources will be procured from the banks.
As it is, the banks are in a deep financial crisis. They have no hard cash and the private sector is unable to avail loans. Yet the finance minister is planning to reach out in that direction. If he succeeds in doing so, the private sector will be deprived.
The final source to meet the budget deficit is the cost-intensive saving certificates. The public has no confidence in the share market and interest on deposits in low. They thus turn to the safe and profitable alternative of saving certificates, The government targets earnings of Tk 270 billion (Tk 27,000 crore) from this source. This may eventually be increased.
The new finance minister’s new budget is massive. A large chunk of this budget’s expenditure will be in the non-productive sector. This includes 19.3 per cent from the revenue budget for salaries and allowances, and another 8.7 per cent for pension. The most dangerous factor is that 18 per cent of the allocation will go into repaying interest. Every year a massive budget is presented and every year the government is taking costly loans to meet the shortfalls. The new finance minister is going down the same path.
What lies within the budget
The finance minister AHM Mustafa Kamal has not displayed any extraordinarily high ambitions in the new budget. Income and expenditure targets haven’t been too unrealistic. He has admitted the difficulties in budget implementation, but has also spoke of fulfilling the projected aspirations. How he intends to do so remains unsaid.
He has attempted to reassure the common people in certain sectors. He said the budget contains nothing that will push up prices of essentials. However, it is to be seen how far this will prove true.
The finance minister has promised that employment will be created for 30 million (3 crore) people by 2030, though this too he didn’t elaborate upon.
He has allocated Tk 1 billion (Tk 100 crore) for start-ups for the young entrepreneurs. There is allocation to bring educational institutions under the MPO umbrella. The number of beneficiaries in the social sector is increasing. Crop insurance has been promised and much more.
Those pleased with the new budget are the readymade garment sector entrepreneurs, who will be receiving incentive on exports. The upper class will be gaining in many ways. While he complained that the people did not pay income tax, the minister cut surcharge on assets. Owners of black money are also being facilitated. The finance minister has stood in favour of the wealthy and powerful. Now that the budget has been declared, the challenge of implementation begins.
* This piece appeared in the print edition of Prothom Alo and has been rewritten in English by Ayesha Kabir