Home ›› 09 Jun 2022 ›› Front
The yearly race to provide a gargantuan estimate of income and expenditure of the government is finally on.
Buoyed by the turnaround of the pandemic as well as the economic condition, Finance Minister AHM Mustafa Kamal is expected to unveil a Tk 6,78,064 crore proposal today which appears to be a signal achievement for him this time around since his first budget speech on June 13, 2019 ended up in a fiasco for his ailment caused by dengue fever.
The earlier two budgets in FY21 and FY22 were, however, a nightmare witnessing a much less-than expected economic growth, a bleak outlook of which was plundered by the raging pandemic, which was a host in itself to cause financial ruins all across the globe.
A seasoned accountant Mr kamal aims at jump-starting the pandemic recovery through investments in key economic sectors this time, and all will be staring at him today how he is going to play.
As far as scholarship is concerned in regard to the budget preparation, the ambidextrous financial analyst is up to the task.
Even under the corona-ravaged business and economy, Kamal secured good marks in delivering budgets and achieving the macroeconomic budgetary targets.
He, however, failed to repeat his educational feats of securing golden marks in reshaping the economy, and hitting the estimated economic growths due mainly to the pandemic.
It was his bad luck – bad in this sense that a brilliant student of accounting has got his answer sheet infected by virus.
Today is his heyday to unveil the budget for the next Fiscal Year of 2022-2023 amid a gloomy economic outlook for the nation as well as for the whole world due to factors not being under his control, nor even in the hands of Prime Minister Sheikh Hasina due mainly to Ukrain war and West-imposed sanctions on Russia.
A few days ago Kamal has said, “We could not estimate the budget properly due to the wide ranging impacts of the Russia-Ukrain war, and its uncertainty.”
True, the Russian imposed-war has strained the global supply chain of wheat, energy, cooking oil, fertilizer, and major industrial raw materials, the costs of which have skyrocketed, exerting price pressures for the rich, developing and the poor nations all alike. As a definite consequence, the deficit financing is swelling, volatility in forex market is reaching to an annoying level, and freight costs are going to nearly double the pre-war level for Bangladesh.
People are struggling to negotiate with the soaring costs of essentials. The scenario is almost identical to other global nations as well.
The whole world has been encountering a tough and unprecedented economic turmoil while negotiating with the hard landing economic consequence emanating from the West-imposed sanctions on Russia.
The Tk 6,78,064 crore budget implementation would not be that tough, given the prevailing calm in the political and pandemic fronts, much to the soothing for the policymakers in the wheels.
Inflation, however, will hound Kamal as he has little tools to tame the aggressive price pressures, stemming from the international heated market and a section of local greedy businesses. An undone Kamal will then put blame on the international factors such as war, soaring freight and product prices to shore up his image and prop-up people’s confidence in the government.
While government figure on inflation (6.29 per cent in April) was rejected downright by the economists as well as the consumers altogether, the hard-pressed fixed income group and lower middle-class people could emerge as a huge pressure for the finance minister, and the outlook on inflation through 2023 will deem to be horrifying that could be a festering factor for the economy.
According to the World Economic Outlook (April 2022), inflationary pressure will persist throughout this year. By 2023, it is expected to weaken, but will still be moderately high in developing nations due to the gradual depreciation of their local currencies against the US dollar.
Due to the ‘downward rigidity’ about inflation as economic theory says, price pressure will not go down in the whole of next fiscal year.
Shrinking reserve, immature handling of forex crisis, and dwindling remittance earnings are going to be the ticking bombs for the finance boss.
Without having reform programmes on his priority list, Mr Kamal has to pay much to fix the inner ailments of major economic institutions. A series of mere budgetary measures and tax breaks will fall short of healing the wounds.
How ready is Kamal to encounter the challenges and the headwinds of the economy, with just putting long-term actions to upend the decade-old near obsolete economic management system?
Any indifference towards wide-ranging reforms in this regard will hit the economy hard in the long run.
Pounding hoarders, lifting duties on essentials, and increasing local production for both food items and industrial raw materials are a few tools the finance minister has in his hands for a respite from the price shock, short-term and long-term basis.
The Centre for Policy Dialogue CPD on Monday said the surging inflation in Bangladesh has sent living costs to such an extent that many families are grappling to maintain a decent life with limited budgets.
“Apart from the higher price of basic food items, the high price of non-food items is putting a huge burden on the households.
The crowd-sourced data shows that maintaining even a modest standard of living is becoming prohibitively expensive for households in Dhaka,” said CPD Executive Director Fahmida Khatun.
Except for export front, no good news prevails in the economy. Inflation, budget deficit, trade deficit, current account deficit, even debt to GDP ratio, also turn to be a matter of worries. However, the situation has not gone beyond control.
The budgetary allocation in the form of incentive has been in place to attract remitters. The mere budgetary allocation has proved to be futile to woo the much-needed remittance. Unless regulatory and administrative measures are in place to nab hundi operators, incentive against remittance cannot serve the purpose of the government.
Thus fixing economy, the government needs prudent fiscal policies aligning with monetary directives and administrative measures.
While only a few are budget issues, all are governance issues.
Today’s budget will have efforts to bring back laundered money, sooth Corporations with lower tax rates, and extend money whitening facilities to kick start the sputtering economy.
On moral grounds, legalising tainted money should be shunned altogether. But for a teetering economy, shoring up the economic crisis is a first priority for any finance minister.
For offering unethical fiscal package for looters, Kamal will be grilled by many quarters. But if succeeded and if the money is invested in productive sectors, all quarters will get the benefit.
Except for recent Repo rate adjustment, the central bank keeps performing like a novice. Failure to stem importation, money laundering through banking channel through tricks of undervaluation and overvaluation, and the recent inept handling of forex market simply prove that there must be a harmonisation between fiscal policy and monetary policy.
Finance Minister AHM Kamal needs to realise the severity of this core financial urgency in his budget, or beyond budgetary limitations.
It is time to act first. Budget proposal is the beginning of a fiscal year. Let the budget be a big bang for Bangladesh’s transition to a middle income country envisaged by visionary leader Prime Minister Sheikh Hasina.
“No time to go wobbly.”
