Economists have described the proposed national budget for 2020-21 as ‘unrealistic and unimplemenatable ‘ as most of the budgetary goals have set without considering the current macroeconomic situation.
Finance Minister AHM Mustafa Kamal on Thursday tabled the budget in the Parliament amid increasing coronavirus pressure on the economy.
“Budget set lofty goals which reflect no economic reality. Even it overlooked the ongoing Covid-19 health crisis,” Dr AB Mirza Azizul Islam, a former finance adviser to the caretaker government, told The New Nation.
He said the budget was unveiled at a time when economic activities came to a standstill amid Covid-19 outbreak. Factory production, export and consumer demands fell sharply, while millions of workers lost their jobs and Bangladeshi expatriates in large number retuned home due to the pandemic shock.
“The pandemic creates an uncertain situation at home and abroad and nobody knows how long the situation will prevail. In this context, achieving the key budgetary goals is almost impossible,” added Mirza Aziz.
He mentioned that the budget set a higher revenue income and GDP growth target. On the other hand, it also projected high external funding to finance the deficit budget. All these targets do not match with this extraordinary time when the domestic and global economy ravaged severely by the coronavirus outbreak.
“The budgetary targets, including income, expenditure and GDP growth were set ‘unrealistically’ going beyond the reality on the ground. Even the government keeps its economic policy unchanged in this extraordinary situation, caused by Covid-19 pandemic,” observed former Bangladesh Bank (BB) governor Dr Salehuddin Ahmed.
He said, “Our expectation was that the proposed budget would be formulated taking cue from the economic reality on the ground. But we did not see the reflection. So, most of the budgetary goals would remain unattainable taking a hit by the ongoing Covid-19 economic uncertainty.”
Commenting on the government’s big expenditure plan, Dr Salehuddin Ahmed told The New Nation that it plans to spend Tk 5,68,000 crore in the next fiscal, the highest in Bangladesh’s history. “But the question is that how the government would realize resources to feed up such a ‘gigantic expenditure,” he added.
He also said that the proposed budget also set an impractical revenue collection without considering the current economic peril. There are apprehensions of a significant fall in revenue earnings due to prevailing economic uncertainty and health emergency.
Expressing concern over the swelling budget deficit, Dr Salehuddin Ahmed said, “It is the red line of the budget and the government would face daunting challenge to finance the next fiscal year’s budget deficit.
The proposed budget set deficit target 6 per cent of the GDP for the first time in the country’s history whereas there was a decades long tradition to keep it 5 per cent.
In the fiscal year 2020-21, the overall budget deficit will be Tk 190,000 crore and the major portion would be financed by record external and domestic borrowing.
Out of the total deficit, Tk 80,017 crore will be financed from external sources, while Tk 1,09,983 crore from domestic sources of which Tk 84,983 crore will be borrowed from banking system and Tk 25,000 from Savings certificates.
“The government may have options to mobilize domestic funds to finance the budget deficit though there are multiple risks. But mobilizing expected foreign funds would be difficult if we think about our capacity,” said Dr Salehuddin Ahmed.
The new budget also projected 8.2 per cent GDP growth for the upcoming fiscal year and the economists also expressed their doubt over achieving the number.
“Achieving an 8.2 per cent GDP growth is ‘impossible’ given the current macroeconomic situation,” said Dr Ahsan H Mansur, Executive Director of Policy Research Institute, Bangladesh.
Besides, he said, persistent slowdown in domestic and global economies amid Covid-19 pandemic may drag down the GDP growth to record low that the global agencies earlier projected. “The downturn in economic activities as a result of months long nationwide shutdown may also impact the GDP growth outcome for the outgoing fiscal year.”
Referring to the budget documents, he said, the budget has allocated Tk 3,62,855 crore for operating and other expenditures while Tk 2,05,145 crore for the Annual Development Programme (ADP) which are also fall short of reality.
“The government should take austerity measures to contain its ever rising administrative expenditure. But the new budget allocated a higher allocation to the head overlooking the present economic crisis. Even, a higher allocation has been made to implement ADP’s despite the government agencies lack capacity to execute development projects,” observed Dr Ahsan H Mansur.
He also expressed his doubt over full ADP implementation in the next fiscal year referring to resource crisis amid a gloomy revenue earnings situation.
The expansionary budget has set the revenue collection target at Tk 378,000 crore for the upcoming fiscal year, which begins on July 1. Out of this, Tk 330,000 crore will be collected through the National Board of Revenue (NBR).
Tax-revenue from non-NBR sources has been estimated at Tk 15,000 crore while the non-tax revenue is estimated to be Tk 33,000 crore, according to the budget documents.
When asked, Dr Ahsan H Mansur said, “We do not know how long the pandemic situation will persist. But, it is evident that it will linger even for months. This will jeopardize project implementation, revenue mobilization, production and exports and overall business climate. Considering all the aspects, we can easily predict that the new budget will miss most of its goals, as these were put up in the fiscal framework far from the reality,” he added.
He also said that we all expected an exception budget in his exception time. But the Finance Minister delivered a budget ‘as usual’ keeping its previous trend intact. Even the government’s policymakers failed to induce any major reform in its ‘fiscal blue-print’ overlooking the pandemic situation in the country.
