In the backdrop of and amid devastating corona pandemics the Finance Minister is going to present a proposed budget of five lac and 66 thousand crores in the parliament on 11 June 2020 for the financial year 2020-21. The budget is about 7.5% higher than that of the preceding year. If we consider the state of Bangladesh economy, it is no different from rest of the world. The Bangladesh economy is in a critical state as corona pandemic has badly affected the low income community and practically blocked the implementation process of the budget. More than 120 million people of the country are under severe health risks and nearly 74% families now have reduced income flow and about 55 million people are in extreme poverty with a daily income of only 1.9 US dollars.
Revenue income of the country during 2019-20 has been experiencing a negative growth for the first time in several years as economic activities were stagnant from March to May of the current fiscal and is likely to continue in the same vein. On the other hand, revenue collection target for the year is likely to fall short by Tk.1.5 lakh crore, which means, against a collection target of Tk.377 thousand crore the possible revenue collection for eight months from July to February, 2020 has been 41.4% of the targeted figure and probable collection for the remaining 4 months may be at the most another Tk.70 thousand crores. This goes to prove that the government has fixed an unrealistic revenue target of Tk.360 thousand crore in the revised budget due to which 19% of the target in 2019-20 budget finally rose to 50% of revenue growth.
The depression that has set in due to corona virus may persist throughout the current year although offices and establishments are being reopened and efforts are being made to transact among other things normal business activities. At a time when business activities are effectively stagnant and there is a down slide in export trade, target to collect projected revenue is practically impossible. Tax payers will be under immense pressure and according to revenue officers, collection at the end of the year will fall short by about Tk.30 thousand crore which will eventually make management of the economy difficult.
Budget is usually framed on the basis of estimated expenditure of the government. Income budget is formulated after formulation of the expenditure budget. If collection target falls short of expenditure target, the government has to borrow from local and foreign sources to bridge the gap and ultimately the burden of the loan is transferred to people of the country. The government has to tighten its shoes to negotiate loan terms from now.
Bangladesh has been achieving a growth rate of 7-8% during the last few years. But this year IMF/World Bank projected a 2% rise against a government projection of 5% (growth rate). In reality income of both people at home as well as those living abroad are going down.
Results of a joint survey by BRAC and others have revealed that out of people under economic and health risks 54 million are extremely poor (daily income is US$ 1.9). They include newly impoverished families also. People under extreme poverty and high economic risks are 47.3 millions while 36.3 millions are under high health risks.
It has been observed in course of the said survey that there have been diverse negative effects on low income people due to the outbreak of Covid-19. At least one member of 34.8% families has lost his/her job. Average family income has also gone down by at least 74% in three months from March to May 2020. People working in informal sectors including day labourers are the worst affected. Export of RMG in April 2020 has gone down by 84% against the corresponding period of last year. 1116 factories have been closed down between mid March and 7 April this year and about 2.2 million workers have lost their jobs.
Highest employment in Bangladesh is provided by agriculture, industry and service sectors. Besides, agriculture a major crisis may arise in two remaining sectors. Alongside industries the health service organizations and educational institutions are also under intense pressure. Overall employment situation including the above two sectors is heading towards a crisis and Bangladesh economy is likely to experience contraction this time.
Secondly, due to massive infection of corona virus in the world, Europe and USA being two major victims, demand for export of our RMG products has gone down significantly due to which there is a strong possibility of a major negative growth in our export income. Reduced export may affect demand for imports and employment. In eight months imports have reduced by 4% compared to last year. By year end the negative growth may reach 10%.
Despite various adversities there was a ray of hope exhibited by NRB income, but corona virus has also put that off. Middle East has been the main source of foreign employment for Bangladesh where outbreak of corona virus and a decrease in oil prices have brought stagnancy in development activities. Most of the countries have decided to send back our manpower and more than 10 million of them have already come back. As a result, Bangladesh is under increasing pressure in terms of remittance income.
There is an increasing tendency of Bank borrowing by government to meet the challenges of declining revenue income and stagnancy in economic activities. This may induce the government to resort to deficit financing in the form printing of bank notes. According to Bangladesh Bank, the government has already printed currency notes worth Tk.18,000 crores and according to media reports the government is seriously considering printing of notes worth Tk.73,000 crores to finance incentive package of equal amount which is definitely going to affect exchange rate of Taka.
It is not yet clear how far the government will be able to attract foreign assistance in the present situation. But it looks like that the entire internal source is becoming Bank reliant. The government collected last year an amount of Tk.48,000 crores by selling savings certificates which has come down to only Tk.7,673 crores this year. Such repeated instances of Bank borrowings will lead to reduction in loan volume for the private sector which will affect economic growth and increased money supply will cause price inflation and increase cost of living in money terms.
The biggest challenge thrown by corona virus is to resist the virus and save the poorer segments of the world population from hunger. The big challenge in this case is to remove the policy lapses and inconsistencies of the government. Lockdown has been relaxed when Covid-19 is spreading. As a result, number of deaths is mounting.
The government must ensure donations and incentives to the right people and transparency to relief distribution. Self-employment must be encouraged and state restrictions should be relaxed to motivate the voluntary organizations in social development activities.
It is difficult to rescue the national economy from the dungeon of stagnancy without bringing about major qualitative changes in revenue collection process. According to information received from Ministry of Finance, the govt. has decided to pursue four strategies to increase collection of revenue which are: adopt special policy to increase the number of taxpayers, provide incentives for concerned officials and bring all activities of Customs and bonded warehouses under automation. In addition, the govt. will procure, install and make effective Electronic Fiscal Device (EFD). All these strategies are fully traditional.
To remove stagnancy in revenue collection, development and social expenditures should be linked with revenue collection. If this expenditure can be linked with revenue collection it will enliven both social development as well as revenue collection.
Immigrant work force returning from abroad should be provided capital and training opportunities for self-employment according to their efficiency. At the same time they should be given adequate training keeping in view the demand in foreign market in post corona situation. At the same time, special efforts should be made for their foreign employment.
Corona virus will have more far reaching effects than is being predicted and all the people of the country will have to be involved to overcome the crisis. In this case there is no other alternative to liberal and accommodating policies by the government.
(The writer is a TV personality)
