FY 2020-21: Budget financing a big challenge 

The novel coronavirus has wreaked havoc in life and economy. Different countries across the globe have enforced lockdown to stem the spread of the virus. As a result, economic activities grind to a halt, and trade and commerce have come to a stop. In such a situation, the world is suffering from an acute economic crisis – a crisis that is changing the financial structure of the world as well. Given the economic fallout from the coronavirus pandemic, Bangladesh is no exception. 

Therefore, it is being forced to change its financial structure. Due to the pandemic, export volume, remittance flow and domestic consumption will decrease, shrinking the government’s revenue collection. Besides, the size of the budget has to be increased to build the post-pandemic financial infrastructure of the country. As a result, the government’s expenditure will go up against low revenue earnings. That’s why Bangladesh is bringing changes to its policy related to deficit financing.

According to the finance division of the finance ministry, Bangladesh had long been preparing a budget based on its own finance. This time, it is forced to compromise its previous policy due to the pandemic. An official of the division said the next budget is being prepared to rely on international donor agencies’ possible assistance since the upcoming fiscal year will see a significant decline in revenue collection.     

It is learnt that the size of the next fiscal budget might hover around Tk 5,65,000 crore.

Dr Shamsul Alam, member of the General Economics Division (GED) of the Planning Commission, said Covid-19 has foiled all the plans. This is really tough to mobilise money for the budget at this moment. Revenue collection usually rises at the fag end of a fiscal year, but it’s a whole different picture now as the country is hit hard by coronavirus, he said. This is not logical to demand taxes from the taxpayers at this critical period, he added.  

Ahsan H Mansur, executive director of the Policy Research Institute, said the next budget should be prepared to take into account the coronavirus pandemic. People’s life, livelihood and their rehabilitation should be the central focus of the budget, he added.  

Sources in the finance ministry said the budget is being prepared with the idea that possible assistance will be found from donor agencies. The government is in touch with the World Bank, IMF, Islamic Development Bank (IDB), Asian Development Bank (ADB), Japan International Cooperation Agency (JICA) and Asian Infrastructure Investment Bank (AIIB). A few lending agencies have already assured of cooperation, the sources added.

Sources in the Economic Relations Division said Bangladesh had earlier taken budget assistance from the World Bank and Asian Development Bank. In addition, it also received loans from the International Monetary Fund to keep a balance of payment – this fund was used to meet the budget deficit. But the scenario is different this time. Bangladesh never sought budget assistance from development partners like JICA and IDB. These two agencies issue grants and loans for project-based work. This is the first time, the finance minister has sought budget assistance from these two lending agencies, added the sources. 

IDB earlier approved $2.3 billion ‘Strategic Preparedness and Response Package’ for its IDB member countries to mitigate the impact of the COVID-19 pandemic in the short, medium, and long-term. Finance minister sought budget assistance from that fund during a conversation with IDB President Bandar MH Hajjar via video conference on Apr 25.

Since the Covid-19 unfolded, the finance minister has been seeking additional financial assistance for the current and upcoming budget while in talks with chiefs of different lending agencies. Meanwhile, the government has sought $50 crore from AIIB for the current fiscal and another $50 crore for the next two fiscal years. It also asked for $10 crore from the China-led lender in credit to fight adverse impacts of coronavirus.

Moreover, the government sought $100 crore from ADB, $70 crore from IMF, $50 crore from WB as additional grant alongside ongoing assistance, and $15 crore from IDB.

/af/wi/