Budget 2017-18: A cocktail of populism with economic interests

Haradhan Ganguly
Thursday, June 8th, 2017


Finance Minister AMA Muhith in presence of Prime Minister Sheikh Hasina presenting budget proposal for fiscal 2017-18 on 1 June 2017 (PID)

 

Behind a set of challenges like declining exports and remittance growth, stagnant private investment and hefty reliance on foreign financing-highest in history, we got budget for the next financial year 2017-18. In nowhere and no time a budget is approached challenge less in any country. Question is capability to face the changes. Our octogenarian Finance minister is self-assured. But his confidence is political show up or reality based would be proved at the end of 2017-18. But budget 2017-18 invites a wide spell of debates among economists and concerned stakeholders which is natural. Professor Nurkse says, where there are six economists, there are seven opinions. But we are not citing them who are extremely one-eyed and politically sided with and telling budget as the killer of the poor when it is till reading out in parliament. Even their banner was prepared before the proclamation of the budget. Nor we are in side with those to them budget is beaming with heavenly glow. In between we are opting for reality though differed by others.

 

We share AMA Muhith and his desire to reach the goal. We never differ with socio-political and economic commitments and goals of the government. We view a mid- term projection like budgets will be the summation to reach our end and that is goal of 2030 and budgets are the parts of our 7th five year plan and perspective plan to turn Bangladesh into a middle income country. It is also true long term perspectives must be reflected in the short term measures. Any anomaly in one budget must leave space to be addressed in next another one in their long way of trajectories. So we differ deficit financing part of the budget that is showing a huge spiral in foreign financing. 80 percent growth projection of gross foreign aid would expected to flow in fiscal 2017-18. Proposed budget shows, $7.6 billion of foreign aid would fly into the country in the next fiscal year, which would a record in history. Bangladesh managed to utilize foreign aid of $2.7 billion at most in a fiscal year and that was in 2015-16.So the revisiting of the same scenario leaves a big uncertainty.

 

To meet total expenditure of TK. 400266 crore, the total revenue will have to be increased by 34 percent. Total expenditure is set at TK. 293494 crore. The big chunk of it will come from the National Board of revenue (NBR). VAT target is set at TK. 91254 crore and the target for both the VAT and tax collection has been set at 40 percent higher than that in the current revised budget. On going fiscal year sees the non fulfilment  of targets of revenue earnings by both by NBR and Non-NBR sources. Not only this, apart from more VAT collection, other source of collecting money to fund mega projects is foreign financing which has projected to increase by 68 percent from that in this year’s revised budget. We are not saying it to just putting figure for the sake of solving mathematics. But uncertainty is enormous and finance minister is overconfident. He was kept mum except saying on the much talked about issue of capacity of such big budget implementation. In press conference and among critics outside the media, the very implementation capacity of the budget particularly the issue of revenue collection is often questioned. Referring the past experiences of implementing the ever growing budget volumes over the years he said this proves our ever expanding implementing capacity. So it seems he is not willing to be a part of this debate. With honoring his determination, ever increasing gap of budget implementation makes us worried about.

 

26 percent big budget than present could it be termed really a big one? I am differing from telling that. Do we know it just occupies only 18 percent of our GDP and the extent of our GDP at present stands to TK. 22 lakhs crore. Such a hue and cry on “big budget”, “big budget” how much it is near to reality. Yet it would be worthwhile if it is to have been kept within 13 percent of GDP. We are avoiding the act of munching of statistics off and on, we just to say about the introducing of new VAT law is meant for bringing more informal sectors into formal sectors of the economy. We support it. But the very implementation of the chain of VAT would be tough enough. There is every possibility to turn it into a hotch potch. Seemingly what is the weakness of the proposed budget. It is the big area of non development expenditure. Where annual development programme (ADP) gets TK. 15913 crore, non development expenditures stand to TK. 23413 crore. That means lion share of expenditure will go to non development areas in the form of salaries of government employees, interest payment and subsidies. At present TK. 192932 crore is earmarked for non –development expenditures. But this are all traditional exchange of views which are generally followed up with some changes as before.

 

What is about growth target. That is 7.4  % It is not at all changeable. Since Bangladesh starts its stride onto higher path of growth. But question is another. Growth or higher growth would be meaningless unless and until it ensures ever increasing employment opportunities. Here the proposed budget gives no answer. Even answer of finance minister in post budget press conference was limbo, rather theoretical. Citing the labour Force Survey, CPD said 4.7 lakh people got jobs per year between 2013 and 2016, down from 13.3 lakh between 2010 and 2013. During 2006-2010, 16.8 lakh people got employment annually. Net employment in the manufacturing sector has fallen 9 percent. The decline in female labour force was 11 lakh at a time when the manufacturing sector posted 11 percent average growth during 2013-2016. Decline in manufacturing sector jobs indicates the changes in the investment scenario. So economic growth does not become meaningful unless enough jobs are created and the unemployment rate brought down.

 

The inflation rate is kept within acceptability. Though it is a proposal to keep it at 5.5 percent. But where it stands in its end we cannot say. There is a common saying in economics that price of rice commands market. If rice price is showing upward trend, prices of all goods and services foods and non-foods show their sympathetic rise in prices. Recent price hikes of rice and gas and some other essentials give the hints that inflation will not rein in 5.5 percent. Agriculture minister Motia Chowdhury hinted at the press conference, government is arranging rice import at G to G level. Media told us 6 to 9 lakh tons of rice are going to import. Definitely its efficient management will have salutary effects on the market no doubt. But millers and owner of chatal can negate government’s sincerity. It is not denying the fact that recent Haor tragedy caused food shortage to the level of 10 lakh tons. Blust diseases and Fungi infection made the situation deteriorated more. Millers are trying to offset 25 percent duty on rice import at private level. For that they are creating artificial crisis in rice market by shortening supply. For that they are showing reluctance to sell rice to government granaries at TK.34 determined by government. We believe, this maneuvering in rice marketing will not be unknown to the concerned ministry.

 

For creating employment opportunity we need labour intensive export sectors, commercially motivated agricultural sectors and expansion of manufacturing sectors. These sectors will ensure quality jobs with having a big value-addition. For this we need investments. But private investments are shy enough. CPD said, to reach target growth, private investment of some TK.66000 crore and public investment of nearly TK. 50000 crore will be required in fiscal 2017-18. In proposed budget we find no specific proposals about how to revamp private investments. In the allocations in various sectors , the CPD said the provisions for agriculture and allied sectors are higher than the outgoing fiscal year’s, but their share in the total budget is contracting over time. Reality is that our growth is achieved and expected to achieve on the basis of demands created by public investments. Growth is dependent on creation of demand. Here is our weakness. Finance minister also remains silent on putting the tattered banking system back into form again. As long as the banks particularly the state banks remain in the present sorry state, more and more loans will go bad and the cost of funds will remain higher. This budget also proposed again TK.2000 crore to recapitalize the banks. These are the peoples’ money given to banks as a reward for their misdeeds. On the other hand, excise duty on bank’s deposits will divert middle and lower middle class from banks. Discouraged savings will have negative impact on the economy and it will enhance lack of transparency in transactions. As a whole middle and lower middle class will be daunted a lot.

 

But day to day essential items, nearly 82 life saving drugs, motorcycles, refrigerator, ac and its parts, edible oil, soft ware industry, bus, train and lunch tickets are kept outside VAT. In addition, at present,various rates of supplementary duty are imposed on 1362 products at import and supply levels. This steps will protect local industries from uneven competition. This will give solace to middle and lower middle class and business community to a great extent provided market monitoring is launched effectively. Social safety net programmes are praiseworthy. Henceforth freedom fighters are to be eligible to get two festival bonuses. The budget, 2017-18 is an effort of making a unique cocktail of populism with economic interests.

 

(The writer is a freelance contributor and a secretary of the United Nations Association of Bangladesh- UNAB, gharadhan@gmail.com)

Leave a Reply

  • National
  • International