Have we exercised or are we going to exercise utmost prudence in preparing the national budget in an environment of the pandemic that still looms with a damaging fallout? It is claimed that the budget for FY21 was aimed at streamlining the healthcare system, and to redress the Covid-induced damages of the economy. As voiced in Finance Minister's budget speech, priority was given to health, agriculture, and employment generation while allocating resources for ADP. What now broadly matter more in case of the national budget dealing with the emergency are not only allocations of fund, spending priorities, taxation, and how deficit is met, but also the specially designed plan behind the budget.
Has a special interim plan been prepared to combat the adverse effects of coronavirus pandemic? The 8th Five-Year Plan (8FYP) was launched with effect from July 2020 (the planning document released in December 2020) when we and the whole world had been hit by the outbreak of Covid-19. The budget for FY21 had to be prepared amidst the onslaught of Covid-19, a global catastrophe that is not only non-routine, but also quite unprecedented and still continuing. Though the first wave subsided to a controllable range in February 2021, we have now been experiencing the second wave of the fatal pathogen. It is very uncertain when we would get rid of the virus. The premises of 8FYP regarding Covid-19 have already undergone a significant change in terms of the behaviours and the range of impacts.
We have not yet been aware of the government's new overall plan in consideration of the pandemic except Bangladesh Preparedness and Response Plan ( BPRP) for Covid-19 ( The main goal of the proposed plan is to prevent and control the spread of Covid-19 and to reduce morbidity and mortality due to Covid-19 infection). BPRP also claims for a recast in view of vaccination programme, and the need for rapidly ensuring availability of safe and effective vaccines for herd immunity.
Fund is used for multiple activities-- projects and programmes which are detailed in the framework of a relevant plan, not in the budget. The budget is just the financial version of the plan. Covid-19 has had basically two-fold impacts, one on public health, and the other on the economy as a whole. A critical question thus crops up: can we effectively overcome the pandemic situation wholly depending on the 8th FYP plan?
Since the budget mainly focuses on periodic financial aspects of the plan, utmost prudence in spending and funding is highly imperative. It is widely suggested that there is urgency for huge spending to save lives and livelihood, to streamline the health care system, to create employment opportunities, and to increase social protection programmes. The views are ostensively justified but we are in the dark about the plan as to how and how much we ought to spend to accomplish the intended goals. Our expectations fundamentally pertain to the background plan. Arbitrary (without corresponding plan) allocations violate the principle of prudence.
Has the government completed any comprehensive survey on economic impacts of Covid-19 at the micro-level? We know only macroeconomic impacts mentioned in 8FYP. A few studies were carried out by BIDS, but not updated. BIDS is yet to complete some other studies sponsored by the government. The Brac Institute of Governance and Development (BIGD), and Power and Participation Research Centre ( PPRC) also did a lot of studies. CPD and SANEM also carried out surveys and held virtual discussions. Most of the findings date back to 2020 though we find some indicative and also usable data. One vital survey by BIGD-PPRC shows that the pandemic created 2.45 core new poor in the country ( The Daily Star dated 21-4-2021).This is a highly significant message for the policy makers.
How can there be an effective plan and yearly budget unless most updated, analytical and micro-level data on the nature and the magnitude of economic impacts are available? Can't the government evaluate the findings of the studies carried out by the reputed non-government organisations ? The government mostly depends on the data generated by Bangladesh Bureau of Statistics (BBS). Unfortunately, no micro-level study by BBS on economic consequences of Covid-19 is observed. Would it be wise to allocate fund in the budget without micro-level assessment of Covid-induced economic losses suffered by different categories of business enterprises and people?
After the first wave of Covid-19, the government offered more than a trillion-worth stimulus packages. Was the monetary sum of the packages ascertained considering real loss and shock absorption capacity of several categories of businesses? It is surprising to learn that all the business organisations equally lack the capacity to absorb any loss of income or production caused by any unforeseen event. Fortunately, Covid-19 has not destroyed any fixed asset or fixed capital of any business. Every affected individual, business, and sector cannot be assisted fully, and on uniform criteria. Therefore, properly informed judgment is required to determine appropriate fund allocations through prioritisation.
We should preferentially spend for revamping the healthcare system; for assisting the job losers, the new and old poor; for encouraging new entrepreneurs; for cottage, micro, small, and medium businesses based on the degree of actual losses and shock absorption capacity; for protecting those groups of people who really suffered a substantial decline in earnings or pay; for continuing to provide small and marginal farmers with output price support and input price subsidy; and funding rural employment generation projects (farm mechanisation, locally creating and training technical personnel for mechanised farm sector, non-crop agriculture growth, storage infrastructure, petty business). Special incentives should be offered to those businesses which would significantly contribute towards job creation. Stimulus packages should also be highly selective.
Employment generation and reduction of poverty rate cannot be possible without GDP growth. Revenue collection target must be set in consistence with projected growth of GDP. The government should not allow unbridled borrowing for higher spending. Is the conventional debt escalation index safe and acceptable in practical sense? Many argue that we should not adopt austerity measures while coping with the pandemic. The views are quite self-contradictory because austerity is economically unacceptable only when we cut essential expenditures that reduce production and income generation as a whole. Can we not think of curtailing some items of less important expenditure in times of crisis? Can we not rationalise expenditure on stimulus packages aimed at coping with COVID impacts? There is ample scope for gradual curtailment of huge borrowing interest, recurrent expenditure on use of goods and services, and expenditure on transport. Cost of governance should be gradually reduced.
Industrial index indicates that on an average, industry has recovered the production level of the pre-COVID period though some of them are lagging behind. If huge investment is made with loan, demand and income of people will rise, but at the same time, indebtedness will increase more. Is it inevitable that we must all keep our living standard as before or even much better than before by any means even in times of the pandemic. Most importantly, we must have provision for those having no power to meet basic needs. Job creating firms, of course, need investment and incentive. Exporters can be incentivised on the basis of specific criteria.
Overnight recovery of pandemic-borne economic distresses cannot be feasible. The pandemic has caused us to move at least five to ten years back particularly in terms of escalating poverty rate. We should have designed a new interim plan instead of the existing 8th Five-Year Plan (8FYP).Then, the budget could have been prepared with much better fit. But we are not walking along that trajectory. Here might be the underlying weakness of budgetary effectiveness. Even then, we hope for the highest possible prudence in budget-making.
Haradhan Sarker, PhD, is ex-Financial Analyst, Sonali Bank & retired Professor of Management. [email protected]