A budget for the poor

The government is set to reveal its next course of action to revive the Covid-19 hit economy with the announcement of the 2020-2021 FY budget, and to include an outline of its plans to stem the effects of the pandemic.

While designing the budget, the government has put all its thoughts in making sure that no one goes hungry and thus shifted its focus from Gross Domestic Product (GDP) growth to food programmes and social security.

And to do so the government is likely to take yearlong food programmes.

Sources said a record amount of allocation will be given in this regard. Social security programmes will also expand.

It has been learnt the government is planning the next fiscal budget with a five per cent budget deficit. If this is true then it will be of Tk 1 lakh 75 thousand crore, a record amount in budget deficit in the country’s history. The deficit budget is calculated against total GDP which amounts to Tk 28 lakh 85 thousand crore.

The ministry has already informed Prime Minister Sheikh Hasina of the possible budget deficit. The ministry said expenditure has to be increased even if at the cost of borrowing. This is likely to add to the deficit. Budget deficit was predicted at 5 per cent or Tk 1 lakh 45 thousand 380 crore in the current FY discounting grants.

With this, the current FY budget is likely to be worth Tk 5 lakh 23 thousand 190 crore. According to finance division, the deficit can amount to Tk 1 lakh 75 thousand crore.

The finance ministry however predicts a 6 percent GDP growth for the next fiscal year on the one hand while on the other, it has also been learnt that allocation for mega development projects will not be trimmed despite the deficit. But the Annual Development Programme (ADP) will see a cut in growth compared to the previous years.

Sources said the finance minister has already held several meetings with the PM Sheikh Hasina over the next FY budget where the premier stressed on reviving the ailing economy. The prime minister instructed the authorities concerned in finding ways to restore job markets for Bangladeshi expatriates across the world and to think over expanding export.

According to the food directorate and disaster management ministry, the government has already provided food aid to nearly four crore people. This programme will continue in the next year as well. Cash money is also being handed to bring the poor under the programme. Over Tk 1200 crore taka has been disbursed in this regard and similar allocation will continue in the next budget as well. 

Former finance adviser to caretaker government and economist Dr AB Mirza Azizul Islam said, the circumstances are completely different this time around when it comes to the question of budget. Therefore revenue collection in the next fiscal, and the budget deficit will be big challenges. He said budget deficit should be kept below 5 per cent at all times which will be a tough task this time around. He suggested that the government should consider how it can overcome the challenges through sale of savings certificate and borrowing from banks because hopes from either of the sources are thin. The government has already borrowed a hefty amount from banks in the country which might dry up lending capacity of the banks if the trend of government borrowing continues. He suggested taking loan from the central bank and relying on foreign assistance in this regard. Getting foreign financial assistance will be another challenge, he said.

Sources said the economy is in dire straits and businesses are in woe. All sorts of development activities have stopped due to the coronavirus pandemic. Dried-up investment has forced many businesses to resort to layoff. Around 2.5 to 3 crore people are at the risk of falling into poverty, adding to the existing 5 crore. Import has also suffered during the period alongside already ailing export. Expatriates are no better off in the situation as their income has also come down significantly cutting down on Bangladesh’s remittance. Lack of export and earnings in remittance have hit hard the country’s foreign exchange reserve. In the fiscal year 2019-2020 the government may face a one lakh crore taka deficit in revenue earning as well. Analysis is on to figure out the government’s next revenue policy, how much money and from whom it will be collected. In this regard, to promote trade and commerce the government may cut down on corporate tax. Besides, the government may not impose any new tax on the people considering their already dire situation due to the pandemic. But to catch tax dodgers, the government may undertake some policies.

Under the circumstances, the execution of the current budget is not going on as expected. Both ADP and revenue collection have already been trimmed. This was done even before coronavirus pandemic hit the economy. The economy is at worst now. The focus has now shifted towards feeding the destitute and keeping the economy alive for budget implementation. The government has already announced close to one lakh crore taka packages for industries, services, SME, agriculture and social security sectors.

The finance minister is going to announce this year’s budget in a completely different and unprecedented circumstance. The government believes this challenge is completely new. Therefore, continuation of many previous trends may not be present in this year’s budget. The government at first planned around a Tk 5 lakh 90 thousand crore budget which has been revised and is likely to be around Tk 5 lakh 60 thousand crore.

aal/nm/wi