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The Financial Express

Looking for a 'zero-budget'

| Updated: May 19, 2022 21:02:07


Looking for a 'zero-budget'

Finance chiefs find few better options than zero-based options when the time comes for annual budgets of organisations. That's beside knowing, deep withinthat it's a losing haul. The fallacy that everyone jumps on the bandwagon with no clues how to go about it isn't unfounded.

Most managers, certainly in their early careers aren't given the wherewithal to go for the clean-sheet approach. It isn't made any easier for a running business where nothing stops. That's where clarity and calm must be delivered in a sane manner.In the truest form, zero-budgeting includes looking at all expenses, trimming fat and ditching 'nice to have' costs and even projects. The chaos begins different departments weighin. Each will have centrally driven projects or shared expenses to be absorbed as is common in the getting monkeys-off-the-back approach of headquarters.

Finance Chiefs and CEOs will inevitably, every few years be mandated restructuring, retrenchment and budget savings to be achieved. These have three to five years implications. And those that giggle over the fact will be tongue in cheek by the time that period is over and expenses and manning has climbed back due to, guess what ? Newer projects and expenses culminating from the restructure.

Governments have bigger fish to fry. Demands of the peoples' representatives, voted in or otherwise, clamouring of businesses through federations and trade bodies, not to mention political considerations and agendas, have to be accommodated in some form or shape. Let's not leave out the holistic commitments to global agreements. At the other end of the divide is a famous question 'where will the money come from?'

For the last two years discipline was sent to the cleaners somewhat akin to that following the post-global meltdown fourteen years ago. Staggering stimulus packages combining cash injection, loans and tax reprieves drained every economy. Inexplicably though admirably, a few countries weathered the storm much better than others. Bangladesh maintained Gross Domestic Product (GDP) growth, albeit lower than projections, whereas most others floundered. The United States (US) sank into debt that was nearly 70 per cent of GDP. The United Kingdom has not been as deep in debt since World War II.  The 'limited engagement' now reclassified Proxy War in Europe has and will have telling impact with no quarters given.

The war has had, yet to be determined financial implications. The less propagated economic judder continues to set records. Inflation, cost of food and essentials, rising energy prices leading inevitably to higher interest rates have in effect jettisoned post-pandemic bounce back. More are woes for countries thatwalk the tightrope of keeping economies afloat even while paying back debt.

Stronger economies have withstood the blow, some at great political risk. Forecasters are predicting setbacks for President Jo Biden in the mid-terms elections and Boris Johnson has had a severe further jolt to his leadership credentials by losses in council elections, notably Westminster where the Conservatives have never lost since 1964. They're not debilitating, not for now but a solid pasting by the electorate.

Bangladesh has been stellar in economic performance even though there's a distinct fragility for a country where tax-GDP ratios are the lowest in South Asia. Import and small list export dependent, the storm in the distance is ominous. Exports based on Free on Board (FOB) softens impact of costs. Not so in the case of imports which are Cost and Freight (C&F) and which are bound to take the hit of both price and shipping costs. That has begun. The West and aligned countries are faced with unexpected cost of living. Others that were aligned with Russia or tried to be 'neutral' are getting hit even as they figure out how to avoid incurring the western i.e. US wrath.

The changing of trade currency from greenbacks to roubles that Russia is pursuing has almost succeeded with energy distributors from Austria, Germany and others caving in.The new arrangement requires energy expenses paid in in Roubles aRussian bank in Switzerland, to be converted to greenbacks in a parallel account. The upshot is new demand for Russian currency, thereby raising its value and keeping the country's economy churning. India has quietly acquiesced to the new arrangement and in keeping with its long-standing relationship, increased import of fuel from Russia.

Even before the war rising costs, shamelessly perpetrated by the business chain had left Bangladeshis reeling. International price hikes are now hitting citizens harder. If international prices of essential imports continue rising along with shipment costs, every sector of the economy comes under the scythe. It's not going to get any better than before getting worse. Her exports depend on growing consumption, especially in Europe and the US. Belts are going to be tightened there and nice-to-have product consumption will inevitably fall. 

In a month's time the new budget for Bangladesh is to be announced. It's still not too late for a zero-budgeting of sorts being introduced, especially in the wake of the stress on citizen's purses.

 

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