Home ›› 14 May 2023 ›› Opinion
The country’s national budget is drafted for the purpose of achieving economic growth as well as ensuring nation’s welfare. For the past one decade, economic growth in Bangladesh was average 6 per cent. The average growth rate is highly accepted, no doubt. Besides, socio-economic indicators in Bangladesh look competitive also.
On account of developing in some indicators, Bangladesh has so far qualified to enter into the bracket of developing country. In FY 2020, economic growth in Bangladesh was recorded at 3.45 per cent. As a result of coronavirus pandemic, the growth came down. Afterwards, Bangladesh was able to perform better in respect of economic growth. According to Bangladesh Bureau of Statistics (BBS) in FY 2022, the growth was calculated 7.10 per cent. Actually, national budget deserves the appreciation for positive growth trend in Bangladesh.
The national budget for the fiscal year 2023-2024 is scheduled to put in place in the parliament on June 1, 2023. According the draft budget, the budget size for FY 2023-2024 has been confirmed Tk 7.64 trillion which is 12 per cent higher compared to running FY 2022-2023. In the draft budget, GDP growth has been estimated at 7.5 per cent and inflation within 6 per cent. A total of Tk 486,000 crore might have been earned as revenue earnings against current target Tk 433,000 crore, the draft budget said.
Total allocation for subsidy and incentives in the budget will stand Tk 1.11 trillion which was Tk 827.45 billion. Annual Development Programme (ADP) size will be Tk 2.63 trillion for FY 2023-2024. The government already approved ADP amount. According to news report, a total of seven issues would be given due importance from the government side for FY 2023-2024. The seven areas are much-discussed inflation, supply chain management, social safety net programme, subsidy and exchange rate issue, providing food among the poor at a low price or free.
On account of Russia-Ukraine war, the world economy is experiencing high inflation calling it now imported inflation. Commodity prices in Bangladesh is on rising trend. Monetary Policy Statement (MPS) failed to contain excessive inflation rate recorded around 9 per cent. The low and middle-income group are expressing dissatisfaction over steady price rise. Purchasing power capacity among people is narrowing day by day. Inflation rate in Bangladesh has become talk of among key issues.
The International Monetary Fund (IMF) approved loans amount of US$ 4.7 billion as per request made by Bangladesh government. The approval came from the IMF board on condition of fulfilling conditions. Already first tranche of total loans among seven instalments has been released. The remaining amount would be disbursed upon satisfaction in the respect of conditions. In view of IMF, structural reform in Bangladesh needs to be done for bringing sustainability in economy. Among conditions, increasing of fiscal space is one of them.
One condition is that Bangladesh needs to increase tax-to-GDP ratio by 0.5 per cent by FY 2024. Generally, national budget sets revenue earning target in addressing budget expenditure. The draft budget aims to earn Tk 486,000 as revenue earnings for fulfilling IMF condition. The National Board of Revenue (NBR), the country’s prime source of revenue collector, was seldom successful in fulfilling cent per cent revenue earning target.
Agriculture, industry and services sectors have roles in boosting GDP size. The growth in these key sectors dropped. In FY 2022, Bangladesh GDP size was US$ 460.22 billion. According to BBS source, GDP size declined to US$ 457 billion in current price. Besides, economic growth in Bangladesh dropped to 6.03 per cent in current FY against estimated 7.20 per cent. The multilateral lenders--the IMF, the World Bank, and the Asian Development Bank- forecasted on economic growth in Bangladesh earlier for current fiscal year. Around 5.5 growth estimation from the IMF, 5.2 per cent from the World Bank, 5.3 per cent from the ADB for current fiscal year came. National budget is formulated with projection economic growth. Is it possible to achieve 7.20 per cent economic growth by the end of FY 2024 amidst current situation in economy? The budget has to consider the issue concerning achieving SDGs and upper-middle-income country status. The budget size needs to increase in materializing visions set by the government.
Deficit budget in Bangladesh is old-fashioned. The government has to seek supports from donor agencies in addressing deficit budget. Due to insignificant tax-to-GDP ratio, the government has no alternative ways but to borrow from external sources. The foreign debt is gradually ballooning for many reasons. The IMF also prescribed a budget deficit ceiling of Tk 114,110 crore for the six months of the fiscal year. The government has planned to keep a budget deficit of Tk 264,193 crore for FY 2023-2024 in light of IMF directive. The Prime Minster has so far endorsed the draft budget. She suggested giving importance on the issues concerning lowering inflation, expanding social-safety net programmes and containing unnecessary imports.
The budget for FY 2023-2024 should give emphasize on IMF conditions related to budget deficit, increasing revenue earnings issues among others. Balance of Payment (BoP) comprising of current account, financial account and capital account is in bad situation. Export earnings, foreign remittance declined resulting in decreasing foreign exchange reserve. Tax exemption and corporate tax cut decision should not be taken right now. The abroad-goers as workers must be equipped with required skilled training. The budget allocation for the purpose should be allocated more for considering current need of the economy. Distribution of food items among the needy people is timely demand. As the poverty-stricken people are deprived of taking required nutritious, the state has to take responsibility through budget support. A healthy nation is badly needed to go ahead. The national budget must allocate finance for those who will take the country ahead with their efforts. Achieving GDP target is not mandatory now. Social safety net programmes will definitely help to achieve SDGs. The budget for FY 2023-2024 should focus on the issue.
The writer is an economic affairs analyst. He can be reached at mazadul1985@gmail.com
