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The Financial Express

‘Reform’ key to bankrolling budget

Economists warn of negative growth


| Updated: June 28, 2020 12:34:35


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Carrying out necessary reform in the financial sector and addressing health crisis are crucial to financing the budget while preventing economic growth from tumbling, economists say.

They also put emphasis on setting the right priorities for providing livelihood support and implementing the stimulus packages.

They peddled the message to policymakers while speaking at a post-budget discussion, organised by the Centre for Policy Dialogue or CPD.

Planning minister M A Mannan joined the discussion as the chief guest, while CPD chairman Professor Rehman Sobhan presided over the programme.

CPD executive director Dr Fahmida Khatun moderated the discourse.

Former Bangladesh Bank governor Dr Salehuddin Ahmed, executive director of Policy Research Institute (PRI) of Bangladesh Dr Ahsan H Mansur and president of Metropolitan Chamber of Commerce and Industry, Dhaka Nihad Kabir joined as discussants.

The CPD distinguished fellow Professor Mustafizur Rahman made the keynote presentation at the virtual conference.

Mr Mannan said there is social and political stability in the country, despite the prevailing Covid-19 crisis.

Responding to a question, he said that the government would review some proposals, including additional taxes on mobile phone and internet uses.

He also said the budget has been prepared with an optimistic premise that the impact of Covid-19 will be more moderate than it is now.

Former commerce minister Amir Khosru Mahmud Chowdhury said the budget has been announced in a setting where everybody is concerned about protecting their lives and livelihood.

However, the economic indicators like export, import and employment generation were already on the downward spiral before the Covid-19 situation, he said.

"It appears to me, somehow, that the budget has not been prepared considering the issues, rather it is a little variation of the government's budget template," he said.

He suggested the government prioritise the survival of ordinary people, many of whom have already lost their jobs both in the formal and informal sectors.

He also underscored the need for raising budget allocation for the health sector.

In his intervention, Dr Mansur said the first half of the next budget must prioritise the control of Covid-19 situation, livelihood support and proper implementation of stimulus packages worth more than Tk 1.0 trillion.

"If we cannot materialise the three issues, this economy will not turn around in the coming days," Mr Mansur warned.

"We cannot achieve the expected GDP growth of 8.0 per cent, we may witness negative growth instead," he said.

The revenue challenge for the budget is fundamentally unaddressed, he said, adding no reform measures have been introduced in the areas of VAT, income tax, customs in the last one or two decades.

"The inertia (in revenue) is the result of such inaction," he said.

Terming the health budget allocation, 'adequate', the economist said proper administration is the challenge for the sector.

"The government needs to deploy competent people in the sector, because health crisis is the forefront crisis now," he said.

Underscoring the financial sector reform, he said the current volume of non-performing loans is on the rise, though the central bank has proclaimed the indicator is on the wane.

"No companies are actually repaying to the banks due to the situation and as a result the volume of non-performing loans is rising," said Dr Mansur, who is also chairman of BRAC Bank. .

Former Bangladesh Bank governor Dr Salehuddin Ahmed said the banking sector and the capital market have deteriorated further as the fallout of COVID-19.

To remedy the situation, he underlined the importance of reforming the capital market and the revenue administration.

MCCI president Nihad Kabir said her chamber always discourages schemes like whitening of black money.

She argued such a facility demoralises genuine taxpayers.

She welcomed the reduction of corporate tax to 32.5 per cent.

"We have been demanding such a reduction for a long as the country has at least 80,000 corporate houses," she said.

She said out of 350 listed companies, around 200 firms are well-structured.

President of Inter-Parliamentary Union and chairman of Parliamentary Standing Committee on Ministry of Environment, Forest and Climate Change Saber Hossain Chowdhury, member of the Parliamentary Standing Committee on Ministry of Foreign Affairs Nahim Razzaq joined the discussion as the guests of honour.

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