Ensure proper implementation

Finance Minister AHM Mustafa Kamal placed the proposed budget for fiscal 2023-24 with a record outlay of Tk7, 61 685 crore in the Jatiya Sangsad yesterday. Hopefully, with some additions or deductions, the election year budget will be approved for implementation from July 01, 2024.

The budget is up by over 12.34 per cent from the current budget size of the outgoing fiscal year. The proposed budget sets the GDP (gross domestic product) growth rate at 7.5 per cent like the previous budget and the inflation rate at 6 per cent. The budget is not as ambitious as it was in the outgoing one. According to economists, though the size of this proposed budget has increased, the government did not manage to boost its sources of revenue significantly.

Under such circumstances, the government borrowing will go up in the next FY to cover the budget deficit. Though the Covid-19 pandemic is no longer a vicious threat that it was, the placement of the budget comes at a time when Bangladesh’s economy is feeling the heat of global instability caused by the Ukraine-Russia war. When the Finance Minister placed the budget in June last year inflation was not all-pervasive. It was just crawling into our economy. The situation since then has worsened to the point where it is now out to engulf the whole economy.

Amid this severe economic constraint, the Finance Minister has placed the budget proposal for FY24 while facing pressure from several key issues – inflation, remittance, foreign trade deficit, and volatility in the forex exchange rate. The foreign exchange reserve has dropped by about 30 per cent while Taka has lost its value by 25 per cent against the US dollar. The inflation is three percentage points higher (according to official figures) than it was, a year back. As a preemptive measure to stop the crumbling down of the economy, the government took a loan of 4.7 billion dollar from the International Monetary Fund (IMF). The loan was granted on certain conditions. What the IMF asked the government to do, our economists had long been asking the government to do almost the same.

Prominent economists of the country asked the government to withdraw a 9 per cent interest rate policy and to initiate a market-determined and uniform exchange rate as was insisted upon by the IMF. If done so, they would have made locally manufactured products cheaper in the global market. It would also have redirected more remittances through the formal channels. The country wouldn’t also have to cut down on subsidies so far given in the energy sector. Now the government continues to hike the prices of gas and energy in line with the IMF condition giving a big blow to the livelihood of the poor.

It is incumbent upon the government to keep the prices of essentials within people’s buying capacity. At the same time, it has to meet the conditions set by the IMF. It is a daunting task for the government to maintain equilibrium between the two. The main challenge of the budget, like the previous years, will be regarding its implementation. The budget has set lofty targets. However, there is hardly any point in having a budget if it remains unimplemented.

Bangladesh’s expanding economy requires financial resources where taxation is the critical component. However, domestic resource mobilization efforts in Bangladesh have not been encouraging till now. Bangladesh has one of the lowest Tax-to-GDP ratios in the South Asian region. To keep up with the high demand for resources to meet the expenditures of a growing economy like Bangladesh, the government sets a high target for the NBR every year.

Unfortunately, the target remains unfulfilled as achieving this in the current institutional setup is challenging. The government should plug the loopholes in the tax policy so that the rich tax-dodgers and holders of black money may not get away with their stratagems, but are duly brought under the tax net. On this score, the NBR may set a target of increasing the number of taxpayers annually.

Unfortunately, Bangladesh is yet to show its capability to execute budgetary allocations. Due to a lack of efficiency, accountability, and capacity, the budget at the end of the fiscal year leaves much to be desired. The gap between the original and executed budgets has grown substantially in recent years. The government in FY 2011 was successful in implementing around 97 per cent of the budget. On the other hand, the budget implementation rate in the recent fiscal years has hovered around 80 per cent.

The targets for public expenditure have remained consistently unmet. The weak implementation consistently forces the government to revise allocations for different sectors. Experts attribute this phenomenon to several factors, including weak governance, rising corruption, increasing inefficiency, lack of accountability, and a deficiency in capacity building.

With a lax budget execution rate, the economy will have difficulty reaching the goals set in the budget. Bangladesh has set the goal of becoming a high-middle-income country in 2031 and a developed country in 2041. Against this backdrop, the need for full implementation of the budget is essential. To ensure a decent macroeconomic outlook, there is no alternative to increasing the budget implementation rate. It is time to follow the peer economies of Bangladesh regarding the ways they are showing success in budget execution. The stakeholders must focus on the importance of budget execution. The budget must be result-oriented and transparent. In the implementation stage, there should be thorough observation and supervision.

The proposed budget has outlined challenges in the economy for the forthcoming fiscal year. The government needs enough governance tools along with the fiscal measures to overcome the challenge.

No pilferage should be allowed. Raising exports and remittance earnings should be given serious priority as these are the two biggest sources that can swell our foreign exchange reserve. With the foreign exchange reserve increasing the inflationary pressure will gradually go away. The government should bear this in mind while implementing the budget. The martyred national leader Tajuddin Ahmed while presenting the the first budget of Bangladesh said “Whatever might be the size of the plan, ultimately its success will be measured by the extent to which it will be implemented. This can only be assured by a massive collective effort of a disciplined people.”

With strong coordination, good governance, and efficient management, the budget can achieve its goal. The proposed budget has outlined challenges in the economy for the forthcoming fiscal year. The government needs enough governance tools along with fiscal measures to overcome the challenges.