Was National Budget of FY2021-22 timely?

AKM Asaduzzaman Patwary

Addl. Ex. Secretary (R&D), Head of R&D, DCCI.

budgetThe national budget of FY2021-22 was declared in the august parliament amidst much uncertainty with the theme of Bangladesh towards a resilient future Protecting Lives and Livelihoods. With this orientation and ideology, Government unveiled, maintaining the sustenance of expansionary budgetary policy, Tk.6,03,681 crore budget for the new fiscal year which was 17.47% of projected GDP and 11.95% higher than revised budget of FY 2021 with 7.2 percent GDP growth target keeping the inflation at 5.3 percent. The national budget preamble stated the post-LDC preparedness of Bangladesh to tap the opportunities of FDI and international trade growth. Apparently, it is a brave move of Government to declare a budget on time while economy breeds amidst manifold challenges. Since economy is going through a critical time, finding no other choice, the budget considered a slim and focused recovery to avoid and contain the COVID-19 pandemic shocks, especially to eradicate the challenges and all crises. The budget consists of broad plan for recovery that includes strategic approaches like discourage luxury expenditures and prioritize government spending for job creation, smooth and low-cost lending and widening social safety net coverage to reduce the number of extreme poverty and new poverty happened due to COVID induced job loss which are apparently pro people. With these all attributes and aspects another key economic yardstick Investment to GDP ratio was aimed to 33.1% where Private investment share is 25%.

screenshot-23The trend of deficit budget is incremental during pandemic against the growing expense of Government. The allocation for the ADP is Tk. 225,324 crore having priority on Health, agriculture and employment creation priority while allocating resources for the ADP. Of DP budget. 29.4 percent was for human resources sectors (education, health and related other), 26.4 percent for communication (roads, rails, bridges, and related other communications) followed by 21.7 percent for the overall agriculture sector, rural development, water resources, agriculture and related others and 10.24 percent for other sectors. For employment generation, tax holiday for 5 years on skills development centre and the highest allocation for human resource can bring in some positive impacts on employment generation with some cascading effects. However, implementation effectiveness of ADP has always been a critical issue which need special attention for efficient usage of public fund and rational development. Alongside, Government has taken various fiscal and non-fiscal reform measure including automation and digitalization of Income Tax, VAT, and customs department, online tax payment, E-TDS mechanism and non-requirement of proceed realization, zero VAT for service export, mandatory provision of E-TIN in some business engagements or initiatives, reduction of interest charged on arrear VAT, individual turnover tax to .25%. Government has set increased target of revenue budget of TK.3,89,000 crore sourcing TK. 330000 crore from NBR revenue which is large as usual but unusual in current time. These reforms in National budget may ease tax-friendly culture and revenue realisation to smallest degree. However, more innovative approaches, strategies are required like engaging field administration, local government in districts in revenue realisation covering the non-tax and non-NBR revenue.

screenshot-24Despite having the revenue shortage, Government reduced corporate tax rate by 2.5%, import duty on raw materials and other duty in some local industrial sectors and eased minimum surcharge on net asset. Alongside, the various CD, SD and Vat and tariff have been rearranged to favour local industrialisation rehabilitation and revival especially furniture, agro-mechanisation, Footwear Industry, Pharmaceutical, automobile and electronics and home textile, CMSME business and tourism as the service sector.

Allocation of Tk. 1,07,614 crore in the social safety net sector, 17.83 percent of the budget and 3.11 percent of the GDP to widen the coverage. Since the root cause of economic injury is pandemic therefore cash and kind benefit for poverty hit beneficiaries have been compounded encompassing extremely high and high poverty groups as well as the widows, destitute women disabled person allowance and honorarium hike of freedom fighters. Tk. 10,000 crore has been committed to meet the emergency requirements to respond to the pandemic. These initiatives are taken to contain the COVID effects and repercussions so that economy can tackle the headwind and severity. These robust recovery supports are rarely noticed even in any welfare developed states in pandemic time. OSS service span was changed to ease the business registration and new investment. Against feeble flow of private investment and credit, investment climate confidence and investment spurring and stimulating moves should have been prioritized. With some adjustments, the finance bill was passed in parliament though budget could have identified any strategic stimulus aiming at distressed CMSME as first phase of stimulus has multidimensional challenges in reach out. Since the budget meant to be expansionary however to best utilize limited resources, resource austerity plan needs to be enforced in Government project and operational expenses. Though country strategy for economic preparedness of LDC graduation is inevitable however these were not well-defined in fiscal plan. And, the budget could have indicated an inclusive and time-bound public health safety roadmap to redress the epidemic repercussions.

Government endeavored to balance the economic prosperity and COVID led atrocity upholding the spirit of live and livelihood management so that economic growth spree remains uninterrupted. Valiant economic leadership of current Government has been reflected in national budget despite manifold backlash. Though many countries witness L, W shaped rigorous recovery putting huge public fund but Bangladesh kept the export and industrial base operational with high level of precaution to keep the economy functional. As a result, export trend, the lifeline of GDP, remains better and higher than last year with 15% growth to $38 billion due to firm commitment to export led industrialization and economic growth though global trade decline by 5.5%. COVID will jeopardize the economy but efforts are to be maximum for keeping the damage, economic loss and risk minimum. Therefore, overall budget can be termed as steadfast and intrepid move to battle hard against pandemic led economic unpredictability with an aspiration of recovery and achievement of long-cherished economic trajectory.