Although the government is in a severe fund crisis with declining foreign exchange reserves, it has become desperate to accelerate revenue collection by putting new tax measures and unrealistic collection targets in the proposed national budget for FY2023-24, which will only be a burden on the people, says noted economist Dr Debapriya Bhattacharya.
“The acceleration in revenue collection started slowing down since 2014 but collection is not increasing in proportion to GDP. The government is trying desperately in the new budget to fulfil that. Because, like I always said, the government has no money, no dollars to spend,” said Debapriya, the convenor of Citizen’s Platform for SDGs, Bangladesh.
The eminent economist made the observations at a discussion organised by Citizen’s Platform for SDGs at Dhaka’s BRAC Centre Inn on Wednesday.
He said that due to the lack of democratic accountability in Bangladesh, there is a lack of transparency and efficiency in budget formulation and implementation.
As a result, inequality is increasing even though the number of poor people has gradually decreased.
Debapriya, also a Distinguished Fellow of the Centre for Policy Dialogue (CPD), said that income and consumption disparity was revealed in a 2022 survey, but wealth disparity was not published. According to him, wealth inequality in the country is more than the other two inequalities.
Highlighting the mismatches in the FY24 budget during his presentation at Wednesday’s programme, he pointed out that in Open Budget Survey (OBS) 2021, Bangladesh’s score was 30 — which was lower than that of the global average of 45 and the South Asian average of 38. Bangladesh’s score is higher than Nigeria’s and Uganda’s.
Besides, Bangladesh ranks 137th out of 143 countries in terms of public expenditure-GDP ratio and 119th out of 123 countries in terms of tax-GDP ratio.
Debapriya said that if there is a lack of democratic accountability, there will be a problem in tax collection and it will hurt development expenditure.
Currently, two-third of the government’s revenue comes from indirect taxes. As a result, inequality is increasing in the society, he added.
Inflation and private investment
Another major mismatch in the proposed FY24 budget is that the inflation target has been set at 6 per cent. The budget does not say anything about how the target will be achieved when the inflation is estimated to be at 7.5 per cent at the end of FY2022-23, said Debapriya.
In May, the country’s inflation rate hit 9.94 per cent, which was the highest in the past 11 years.
Debapriya suggested that to reduce inflation, the cap on interest rates must be lifted. Although this will make private investment a bit costly temporarily, there is not much solution beyond this.
There is also a big mismatch when it comes to private investment targets, he said. The budget proposed to reach 27.8 per cent of GDP when 21.8 per cent was estimated for FY23. “Such a big jump is not possible amid a dollar crisis and rising inflation.”
Asif Ibrahim, the former president of the Dhaka Chamber of Commerce and Industry, said that the economic zones should be completed soon while political stability is needed to boost private investment.
Also, there is a mismatch in the budget about the exchange rate. Currently, the official exchange rate of the dollar is Tk 108, but the budget is expected to drop that to Tk 104.
CPD Distinguished Fellow Mustafizur Rahman said that the carryover projects have become a major problem for Bangladesh. “It should be analysed why the project deadlines and costs are increasing.
“Transparency and accountability must be ensured in project implementation. Those found guilty must be brought to justice,” he said.
He also added that the Planning Ministry’s Implementation Monitoring and Evaluation Division should be strengthened and decentralised for proper project scrutiny.
Education and health services
The discussants at Wednesday’s discussion said that the country has not been able to allocate 2 per cent of GDP for the education sector in the national budget for a long time. The FY24 budget is also the same.
BRAC Institute of Educational Development’s Programme Head Samir Ranjan Nath said that there was no discussion about the Covid-19 pandemic’s impact on the education sector. But there is still a lot of work to be done to deal with these impacts.
Meanwhile, Bangladesh among South Asian countries still allocates the least in the health sector.
Dibalok Singha, executive director of Dushtha Shasthya Kendra, said Bangladesh has only four doctors and nurses for every 10,000 patients. This number should go up to 23 doctors and nurses in line with the international standard by 2041.
The share of the social safety net programme (SSNP) budget for compatible SSNPs has declined from 62.2 per cent in FY2009-10 to 29.7 per cent in FY23 to 29.2 per cent in FY24 as a share of GDP. It also declined from 1.6 per cent in FY2009-10 to 0.8 per cent in FY23 to 0.7 per cent in FY24.
Debapriya said that such allocations usually increase during election years. But it does not appear in the FY24 budget. So it can be said that the new budget has not been announced with the upcoming general election in mind.
CPD Senior Research Fellow Towfiqul Islam Khan said that since inflation has increased a lot, there must be a Plan B for the SSNPs. In that plan, the allocation in this sector should be increased. But then again, the reality is that the government does not have enough money.