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While we are combating health concerns of the Covid-19 virus, we understand that we are approaching a hard time for the economy. The signs are already visible as day-labourers, temporary workers, rickshaw pullers, transport workers and poor people dependent on a variety of jobs have become jobless, their formal and informal income has stopped. Industry and business of almost all kinds have started feeling the heat of the crisis. Our export industries are no exception as demand for their products have fallen and many orders have been cancelled. The government has declared stimulus funds for various sectors of the economy, relaxed some conditions on bank loan, import tax etc. To ensure food security of poor people, activities have been initiated both at public and private levels. Amidst all these, preparation for the budget of 2020-21 is going on. At this moment of economic sluggishness, the new budget needs to consider some ongoing concerns as well as address potential special needs in the coming months.
Due to the impact of Covid-19 pandemic, revenue collection is expected to be much less than the target. The main source of our tax revenue is the revenue collected by the National Board of Revenue (NBR). During the current fiscal year 2019-20, the tax revenue target of NBR is Tk 3.25 trillion (3,25,600 crore), which is 45.4 per cent higher than the actual NBR revenue collection of 2018-19. In the current fiscal year, tax revenue collection (by NBR) till January was Tk1.25 trillion (1,25,564 crore) which was 7.5 per cent higher that the revenue collection of July-January period of 2018-19. Thus, even before of starting of economic crisis due to Covid-19, the performance of revenue collection was not satisfactory -- only 38.6 per cent of the 2019-20 target was achieved in seven months. Thus, even in the normal situation it was quite unlikely that the revenue collection could meet the target of this fiscal year. The expectation of fulfilling the tax revenue target has become even more gloomy due to the current economic crisis. As most of the economic activities have been shut down, income of corporates and business persons will decline and consequently advanced income tax payment by them will obviously be lower than that of last year. Similar trend will be noted in case of Value Added Tax (VAT), customs duty (as import is going down), supplementary duty and so on.
While at one hand revenue collection is expected to be less on some accounts, there will be some revenue savings too. For example, the amount needed for cash subsidy to certain export will decline due to decline in export, expenditure of foreign travel of government officers will go down, government expenditure on organising seminars, meetings, training programmes will be less. Besides, cost on fuel of government transport, overtime payment, repair and maintenance will also be less.
Not only revenue expenditure, development expenditure may not reach the target since most of the development activities have been halted.
Both the public sector and the private sector will go through similar subtraction and addition in their income and expenditure. It is expected that overall economic activities will decline leading the economy towards a recession. We already observe various indicators of recession, such as decline in both aggregate demand and aggregate supply. Different international organisations and governments of rich nations are forecasting a great depression in the world economy. We don't know how long the Covid-19-induced economic crisis will continue. Now, the most important task for Bangladesh is to mitigate health risks, address health needs to mass people and ensure food security and livelihood of millions of poor people.
In this backdrop, the national budget for fiscal year 2020-21 should consider the following issues:
* Allocation for health sector must be increased. The health sector allocation for the next one year should emphasis on building infrastructure for addressing contagious diseases, universal free vaccination fund for Covid-19 (hopefully during FY2020-21, the vaccine will be available), improving emergency health screening facilities at critical points like airports, land ports etc.
* Allocation for social safety net programmes should be increased. In this connection, number of beneficiaries as well as the amount of benefit for different programmes should be increased. In the current fiscal year, allocation for social safety net programmes is TK 744 billion (74,367 crore). The safety net budget should allocate more money to various food security programmes including school feeding programme for children, 100 day employment generation programme etc.
* More allocation will be necessary for expanding open market sales (OMS) of basic food products.
* Stimulus package should be developed for various small enterprises in the informal sector. In this connection, funds can be allocated to very small enterprises in the informal sector through organisations like Palli Karma Sahayak Foundation (PKSF), Bangladesh NGO Foundation, Amar Bari Amar Khamar, Palli Sanchay Bank etc. This fund can be allocated as loan for 2-year period.
n Public expenditure on various development projects should continue. In this case, priority should be given to those projects which create employment for people, especially, for workers. Allocation for research projects should be on a priority basis. Research projects for health, agriculture, climate change should get priority. Other research funds should be carefully allocated. Public spending on foreign travel, training programmes, seminars should be reduced. We must remember that public expenditure is necessary for stimulating aggregate demand and for increasing overall investment. In all public expenditures, where possible, government should stress on purchasing locally produced goods.
n Given the fact that the price of petroleum in the international market is falling, the government may think of reducing the petroleum price in the local market. This would not only reduce public spending on petroleum, but will also contribute to lowering cost of production in industries. As the quick rental power plants can directly import petroleum from international market, it is necessary to monitor their production cost and set electricity price accordingly.
n Fund for procuring agricultural products on a larger scale will be necessary to ensure food security of the poor. Government also needs to take proper initiative to ensure timely supply of agricultural inputs so that we can have enough crop for feeding the people.
Tariff on importing luxury commodities should be increased. Moreover, fiscal measures should be devised in such a way that local production is encouraged.
n Only shorter versions of The Gender Budget Report and the Child Budget Report may be printed in 2020-21. The detailed report could be published online. This may be followed for printing of most of the budget documents.
n Fiscal measures should be taken to reduce cost of the Internet, so that more activities are performed online, which are cost effective.
Overall, the 2020-21 budget should put strong emphasis on efficiency of allocation of resources as well as efficiency in implementing the allocated budget. Food security and ensuring livelihood of poor people should be central to all budgetary allocations for the next fiscal year.
Dr. Nazneen Ahmed is Senior Research Fellow, Bangladesh Institute of Development Studies (BIDS).
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