Boon for corporates, bane for commoners

Cautious or realistic – either of the two – that goes well for the just-declared budget as Finance Minister AHM Mustafa Kamal took the podium in the parliament on Thursday to give an account of the government financial plan for the Fiscal Year 2021-22.

The two questions pop up naturally after going through a series of draft budget documents and finance bills for the upcoming fiscal.

The budget has a projection of 2.74 per cent revenue growth target over the last year’s original estimate, lowest since the country’s independence.

While the draft budget eyes 7.2 per cent GDP expansion, one may wonder why the finance minister fails to foresee economic activities next year that could generate an abundant revenue income to stoke growth or expand economy.

A reason being that may be he cannot rely on the revenue administration for desired income, or he thinks economy will dip further as a consequence of global pandemic.

The external indicators are not that disturbing as far as export earnings, remittance, import and reserve positions of the country as of May are concerned.

Now, the question appears as to whether the Tk6,03,681 crore budget is a realistic one when it comes to implementation.

As the budget envisions Tk2,14,681 crore or 6.2 per cent of GDP as deficit, the finance minister leaned to more external borrowing to largely finance the budget deficit.

While the proposed budget eyes Tk97,738 crore in foreign debt, Kamal seems to be shying away from bank borrowing target of Tk76,452 crore for the next fiscal year.

The borrowing target set last year was Tk84, 980 crore.

Economists fear the increased foreign borrowing, despite being low cost, could trigger enhanced debt service liability for the economy.

The country's external debt soared to a record level in 2020 due to higher government borrowing.

The overall external debt in December, 2020 stood at $70.7 billion, nearly 16 per cent more than that of March last year, according to the latest data of the Bangladesh Bank.

Economists said the foreign loans swelled due to the financing of mega projects, sluggish economic activities, poor revenue collection and the Covid-related spending.

They suggested proper utilisation of the borrowed funds to avert the risks of defaulting on debt repayment.

Inability to repay foreign loans would affect the country's credit rating, they added.

The ever-highest budget came as a welcome Phillip for corporations as listed companies will see two percentage point lower corporate tax on their incomes in the next fiscal year.

The proposed budget has broadened the social safety network while their paltry allowance ranging between Tk500 and Tk700 will remain unchanged.

The budget has made no allocation to mitigate plights of the new poor due to Covid-19 pandemic, nor has it outlined anything like creating employment opportunity for millions of the unemployed hardest hit by the raging pandemic.

Only a budgetary announcement of rolling out Internship for fresh graduates is nothing but a mockery to millions of jobseekers.

The fresh graduates seek low-cost fund to become self-reliant and millions of day labourers want government handouts in these trying times.

The 192-page budget speech is dominated by the done-list of the incumbent government while a do-list for the next fiscal year amid Covid is virtually non-existent, much to the frustration of the commoners, the unemployed, the new poor and the deemed entrepreneurs as well.

Small and medium entrepreneurs along with traders and millions of shop owners will simply curse themselves as no specific fiscal measures were announced for them in FY22 budget.

A recent joint report by the Centre for Policy Dialogue and the Bangladesh Institute of Labour Studies also found that the Covid-19 pandemic had rendered about 3 per cent of the country's labour force jobless and created an estimated 16.38 million 'new poor'.

Day-labourers, numbering about 1.08 million, working in construction, informal services and transport, lost jobs, it said.

Small and medium enterprises and the informal sector would face the highest number of job losses at the end of 2021, it predicted, suggesting an effective social dialogues for ensuring the recovery of the labour market during this hard time.

According to the unemployment indicator of the Word Bank, in Bangladesh, the unemployment rate was 4.2% till 2019. And there were 1.38 crore underemployed people in the country till then, as per a study by the General Economics Division under the planning ministry. 

And due to the pandemic, the unemployment rate has become around 13%, according to a survey of Bangladesh Institute of Development Studies.

Informal sector of the economy that creates lion portion of jobs has not been taken into account either through budget allocation or policy interventions.

Employers in the informal sector are set to be sandwiched further due to their huge bank loan burden, low product demand and technological deficiency to compete or survive with local and foreign brands.

While the budget has thrown a lifeline for corporations, no structural changes have been proposed to kickstart the sputtering economy.

While the draft budget has rationalised surcharge for the ultra-rich, it has not provided any new incentives to spur industrialisation or restart closed factories.

However, existing industrial incentives will continue next year.

The budget has given the highest priority on education and technology as 15.7 per cent of the total outlay to be spent on the sector followed by 11.7 per cent for improving the creaky transport infrastructure, 7 per cent for local government and rural development and 5 per cent for social safety net programme.

The finance minister, however, deserves appreciation for not extending special money whitening facility beyond this fiscal year while he will be criticised by individuals as their tax-free income slab has not been raised despite above 5 per cent inflation.