A budget not backed by a detailed plan is ultimately a barren instrument. Traditionally, we have been observing that the budget speech contains some outline of the plan (not detailed). The economic plan results in a budget but our expectations for the economy mostly centre round the yearly budget. Economists, analysts, and policy makers are well aware that the overall planning framework being pursued in Bangladesh is that we have a perspective plan 2021-2041 based on which five-year plans are made. The economy is currently guided by the 8th Five-Year Plan (8FYP).The annual budget is basically a financial plan for implementing the projects, programmes, and activities of a plan phased in a specific fiscal year.
The budget for the fiscal year 2021-2022 has been proposed by the government in a situation when we are experiencing the aggravating second wave of COVID-19. The crucial question is: could not we have formulated a special plan in view of the unprecedented catastrophic situation like the pandemic with devastating consequences affecting the whole economy, public health and lives? The government discarded the option of designing a separate COVID-19 response plan instead of the Five-Year Plan on the ground that the government's ongoing development drive to qualify for transition to developing country in 2026, to meet SDG targets and to realise the Vision 2041 would be slowed down.
The budget follows the plan of actions stated in 8FYP which was, as argued by policy makers, prepared to facilitate the phase-wise implementation of VISION 41 embodied in the Perspective Plan2021-2041(PP2041). It is worth mentioning here that the document of PP2041 clearly states: "Two principal visions underpin the PP2041: (a) Bangladesh will be a developed country by 2041, with per capita income of over USD 12,500 in today's prices, and fully in tune with the digital world; (b) Poverty will become a thing of the past in Sonar Bangla". It is thus obvious that we expect realisation of the two visions by 2041. One is GDP growth rate that would reach 9.90 per cent, and the other would be zero poverty rate.
The two aforesaid pillars of PP2041 already faced major setbacks- GDP growth rate plummeted to 5.20 per cent ( as shown in the Table) and poverty rate surged to at least 29.5 per cent in FY 20 according to government source, but updated data generated by some non-government research organisations indicate that poverty rate ranges from 35 per cent to 43 per cent ( Daily star 08-6-21).
The government would not accept privately surveyed findings on new poor. Table shows that we are lagging behind about three percentage points in case of GDP growth rate, and the poverty rate escalated to 29.4 per cent in FY20 from 20.50 per cent in FY19. Data on poverty rate in FY21 are not available from the government source. Projections made in 8FYP start from FY21.To meet deficiency in annual GDP growth may be easier. However, growth in per capita income is much more important for our lofty mission. Would it be possible to achieve gradually higher per capita income maintaining pre-COVID continuum? It is still uncertain when COVID-19 would no more affect us.
That the journey towards the two visions has tremendously been interrupted by the quite unanticipated pandemic created by COVID-19 is generally recognised in the 8FYP.The plan says: "The unexpected COVID-19 pandemic has complicated economic planning and policy making with its fast spreading furious and damaging impact on human health, confidence and economic losses. Planning under these extreme global and national uncertainties is a huge challenge." We had been on the road to achieving our lofty and dignifying goals before the onset of Coronavirus. But COVID-19 made a big hole in the road creating a broad gap that obstacles our desired movement. Now we urgently need an immediate plan to bridge up the gap first.
What were the presumptions about the control of COVID-19 while the plan was drafted during the continuing onslaught of the virus? The current expectations are that global recovery will happen from calendar year 2021( 8FYP). All the premises of 8FYP about the pandemic situation and economic trends proved wrong. Besides, 8FYP was not formulated on assessment of micro-level economic losses suffered by several categories of business, income earners and job losers. Comprehensive data on trends and dynamics of actual poverty level are still unknown at the government level. NGO-run assessment widely differs from those of BIDS studies (not yet updated). When COVID-19 would be no more is quite unpredictable. Rather, the infection rate is now on the rise. Vaccination programme is also beset with severe constraints.
The budget gives us sectoral spending allocations and targets. Are they adequate? Adequacy depends on what projects, programmes, and activities we need to meet routine and non-routine requirements of the state, economy and society. Now we require adequate allocations to overcome the pandemic and to compensate for the damage caused to economy and people. Is what is contained in 8FYP enough to combat the adverse impacts of COVID-19 upon health and economy?
Observation is that four major strategies have been mentioned in 8FYP to cope with the COVID impacts. These are (i) increased public expenditure, (ii introducing fiscal stimulus package, (iii) expansion of social safety net programmes and (iv) increasing money supply to maintain liquidity of the economy. Strategies refer to how we would achieve the desired outputs (vision, mission, goals, objectives, and targets). Specific and relevant outputs to achieve are not defined, analysed and inserted in the plan. An evaluation of the strategies needs to be made to judge their efficacy.
First strategy is to raise public expenditure level but the details of expendable activities and outputs are not available. It is here worth-noting that Health Ministry's failure to meet the spending targets can be explained not only by incapacity, but also by lack of specific project, programme, clear goals and objectives backed by suitable strategies. Expenditure targets achievement and effectiveness largely depend on specificity and detailing of work plan, not on general guidelines.
Second strategy is to offer stimulus packages. We are quite in the dark about micro-level economic losses sustained by businesses and individuals. Besides, we overlook the shock absorption capacity. Indiscriminate and assumptive financial assistance programmes cannot be need-based, equitable and effective. The government should have arranged for micro-level surveys of economic impacts in order to design appropriate strategies.
Third strategy is to expand social safety net programme. It is a routine activity for the government. The government should normally spend more each year. Do we know which groups of or how many people lost ( and could not restore pre-COVID status) safety of minimum livelihood as a result of COVID onslaught? Arbitrary allocation and strategy formulation without specific database on income or job losers can hardly yield optimal benefits to the real aggrieved.
Fourth strategy is to increase liquidity of banks and financial institutions so that people and businesses can cope with shocks by way of having access to fund. This strategy is not fundamentally separate from first and second strategy, rather integral part of the first two strategies as policy, method, and procedure. The issues of discriminatory bank lending out, lenders' vulnerability to added credit risks, and need -based credit allocation have not been duly addressed. We ought to rethink about a new planning design with suitable strategies considering the interests of the worst sufferers in society and economy.
Now, we have three options. The first one is to make a bridging plan to address the cure of COVID-19 and at the same time, the recovery of economic and social ills in order to qualifying for realising the targets and goals of the first phase of PP2041.The second option is to recast the 8FYP with greater emphasis upon the control of COVID-19 and recovery of economic and social damages. The third option is to postpone the COVID-related recovery steps specified in 8FYP and to formulate a detailed plan of what exactly we are going to do to control the virus and to recover the pre-COVID achievements in economy and other sectors so that we may relink ourselves to 8FYP's projections.
Undeniably, we were smoothly proceeding towards graduating from LDC ( least developed country ) status to developing country status in 2026, fulfilling SDG targets, securing UMIC ( Upper middle income country) status by FY2031, and implementing Vision 2041.We are, for the time being, forced to wait for resuming our full-fledged journey. As 8FYP does not contain appropriate planning framework for the Budget FY2022, immediate decision on planning is crucial. We should keep in mind that the comprehensive recovery plan for far-reaching COVID impacts should not be the product of an add-on approach in lieu of in-built approach as the degree of focus and emphasis remains naturally greater in case of what we design first.
Haradhan Sarker, PhD, is ex-Financial Analyst, Sonali Bank & retired Professor of Management.