Loading...
The Financial Express

Looking forward to a budget for survival


Looking forward to a budget for survival

Bangladesh is preparing itself to brave the fallouts of the unprecedented pandemic through yet another unconventional budget in a couple of months' times. Last year too it was equally challenging.  The ongoing budget kept the health sector at its centre. However, it also focused on various short and medium-term strategies for increasing social security and employment for livelihood protection and recovery of the economy. There was uncertainty about whether it would be possible to give a budget at all. However, by April last year, a well-thought-out economic stimulus programme equivalent to 4.4 per cent of GDP was declared by the Prime Minister. This made things much easier for the budget makers. By incorporating the stimulus programmess into the budget framework, they could deliver a reasonable budget for the fiscal year 2020-21. While keeping the allocations for the implementation of large ongoing projects intact, they were able to provide an integrated budget to address the challenges of both lives and livelihoods. Even though we learnt a lot during the current fiscal year, the budget for the next fiscal year will not be substantially different. My own hunch is that this will be more focused on the health sector.

Along with increasing the conventional allocation for the health sector to address corona, the most notable aspect of the current budget was a special allocation of ten thousand crore taka. Arrangements were made to fill the gaps in the health sector, including the cost of purchasing vaccines. Advance payments for the vaccine were also made to the Serum Institute of India (SII) from this allocation. However, due to an unprecedented spike of Covid-19 cases in India, there was some uncertainty about getting that vaccine in time. It may still be possible to keep the supply going due to the deep ties between the two countries. Still, considering the reality, the government was wise enough to start shopping for vaccines from different sources. Supposedly, 4 million doses of vaccines will arrive from Russia next month. It has also opened doors to the Chinese vaccines. The US source has also been rightly explored.

The government will be well advised to make some internal readjustment in vaccine management given this emergency. The vaccines previously sent to the less-affected Upazila and district levels may be brought back to the corona hotspots like Dhaka, Narayanganj, Gazipur, and Chittagong. There is money in the budget for vaccinations. Funding from the World Bank and ADB has also been received. More external funding support may be forthcoming, particularly from ADB. So, there is no reason to worry about the financing and implementation of the vaccine rollout. However, this epidemic is a global crisis. Hopefully, the world community will come forward to our assistance. At the recent UNESCAP conference, our Hon'ble Prime Minister has called for global cooperation. Bangladesh has a very strong institutional base for producing vaccines. Happy to know that the government has approved the rules for going into joint ventures for producing Covid vaccines in collaboration with both Russia and China. It may also look for other international companies with whom our pharmaceuticals have strong experience of cooperation.

I hope the upcoming budget would give an update on the other initiatives that were supposed to be completed during this budget. What has been the status of implementation of the directives given by the Hon'ble Prime Minister to open ICU units in all district hospitals?  Have the ICU units been set up in all the districts? Has it been possible to ensure a central oxygen distribution system there? If so, why so many patients still have to rush to Dhaka? Adequate incentives were supposed to be given to the doctors and health workers engaged in corona treatment from the current budget. Have these incentives been given to them? If it requires additional cost, the revised budget should be able to meet it. The focus on the availability and distribution of oxygen must be kept on. Some of the industrial giants have come forward to support oxygen supply to the hospitals. They deserve special recognition for this humanitarian gesture.

We may have to fight against Corona for the next few years. It is the best time to ponder how to fill the gaps in the health system, how to reform our primary, secondary, and tertiary health systems in the medium- and long-term, and how to build an appropriate health insurance structure. I am sure the Finance Minister will pick up some of these issues, and hopefully, give necessary policy directions and allocations in the upcoming budget. The 'business as usual' will not suffice in case of health budget in the present unusual reality. The health budget has been hovering around 5 per cent of the total budget. This must be raised to at least over 7 per cent in the next financial year. In the following years, it should be further increased to reach at least 10 per cent. Since health is life, the budget of this sector should be the heart of the next national budget.

Surely, the additional allocations must be invested in the right places. Usually, only one-fourth of the health budget goes into primary healthcare. This ratio should be increased to one-third as soon as possible. The fact remains that twelve per cent of our diseased do not receive any formal healthcare. In the urban areas, the percentage is almost double (23 per cent). If government investment in medicine and medical equipment can be increased for the primary healthcare centres, this limitation can be addressed.

One may ask where will this extra money come from? Along with the additional funding from conventional domestic and international sources, we also need to think 'out of the box.' For example, national and international researchers involved in anti-tobacco campaigns have calculated that a proper tax on tobacco products could prevent about 2 million people from smoking (reducing health costs) and generate an additional 3,400 crore taka in revenue. Similarly, the 1 per cent health development surcharge levied on tobacco products could be directly channeled to the health budget.

However, it is not possible to save people just by increasing the budget of the health sector. Because of the pandemic-induced economic slowdown, unemployment and poverty have spiked at an alarming rate. We have not been able to bring all of them into the social safety net. While our social security programmes have been reformed a lot, making them smarter and seamless is a goal yet to be achieved. The Ministry of Finance is trying to build a good database on this. They also acknowledge that the smart social security structure needs to be built in such a way that there can be well-built partnership between government and non-government organisations. The Finance Minister said recently that the Standing Order on Disaster had been amended. I don't know whether the health sector has been identified separately in that standing order in the context of the lessons learned from Covid-19. If not, it is certainly possible to add issues such as how to automatically activate the administration, public and private hospitals, the private and private sectors, and the concerned local governments and social enterprises in a coordinated manner in case a health disaster strikes again.

In the current financial year, a few micro-credit programmes have been introduced, for example with support from PKSF, to enhance the skills of the risky informal sector workers and restore their livelihoods. However, this programme is minuscule compared to the demands. MRA could be encouraged to push similar programmes through major MFIs as well. Besides, the implementation rate of the Tk 20,000 crore stimulus programme for SMEs has been very slow. Actual implementation of this fund has been around seventy per cent only. Meanwhile, many young male and female entrepreneurs are doing digital businesses from their residences. The small shopkeepers in the neighbourhood have kept our economy strong even in this crisis. These entrepreneurs need working capital. They are being kept away from getting small loans by asking for miscellaneous papers such as Trade Licence, TIN Number, Trade Address etc. If the regulatory institutions were a little more liberal, they could be easily provided with small loans using financial innovation.

It should be noted that Citibank and bKash recently conducted a pilot with some of these micro entrepreneurs. They used artificial intelligence to monitor their transactions in mobile financial services and banking channels and launched small loans of up to 10,000 Taka for a short period. This pilot must be called successful, as 99.7 per cent of the loan has been repaid. Based on this experience, it is now possible to increase the scope of this micro loan programme. We must move forward with similar "out of the box" thinking. Bangladesh Bank is thinking of coming up with another new micro-enterprise loan programme worth Tk 10,000 crore.

Hopefully, they will be able to complete this work very soon. Bangladesh Bank has already set up a digital dashboard monitoring system to pace up implementation of the stimulus programmes. It has also introduced credit guarantee schemes. Bank rates and interest rates on agricultural loans have been reduced. Hopefully, all mobile financial services will be interoperable very soon. For that, the National Payment Switch of Bangladesh Bank is being reformed. As the digital financing infrastructure exists, Bangladesh Bank is now able to do a lot of things. Now the focus should be on the maintenance, replacement, and renovation of these modern digital infrastructures. As the amount of digital financial services, including mobile financial services, has increased so much, the old digital financial infrastructure may not be able to withstand this pressure for long. The Bangladesh Bank authorities are surely aware of this situation.

However, only loans and financial services are not enough to deal with the prevailing unemployment situation. The fiscal policy must be equally active in this regard. It is worth mentioning that many of our taxable citizens are still out of the tax net. Of course, the NBR will try to collect taxes from them using digital technology. In addition to this, a national campaign should be launched to raise awareness among the citizens so that they understand the value of paying taxes while the country is struggling to fight the pandemic. Also, Ministry of Finance will have to increase the allocation for social security programmes at a massive scale. Hon'ble Prime Minister's special cash donation to the disadvantaged before Eid has undoubtedly been timely. Similar cash support to the farmers who have been affected by natural calamities and the vulnerable people in the informal sector also augurs well. There is still room to increase the amount and scope. The subsidy being given to rice harvesting machines should be continued in the next budget as well. The small entrepreneurs involved in manufacturing domestic machinery in the light engineering cluster in Bogura or any other place also need to be given such incentives simultaneously. At the same time, full implementation of the policy of procuring rice at reasonable prices is essential to keep the market price of rice stable. Food imports should also be continued to keep food stocks in order. In addition to all this, investment in education and training must be given due priority to compensate for the damage caused by the pandemic.

Agriculture, expatriate income, and export sector have been our key strengths during this crisis. We are expecting additional incentives for these three sectors in the next budget. According to Reuters polls of over 500 world-renowned economists, global economic growth is expected to reach 5.9 per cent this year. I will not be surprised if our growth rate outpaces this global average more noticeably. However, there is no need to worry so much about growth either. Vaccination in developed countries, an increase in the Biden administration's infrastructure development budget, and continued incentives in other European countries will, of course, boost their citizen's incomes. As a result, our export demand abroad will also increase. Therefore, the decision to keep the export-oriented industrial units, including RMG, running was indeed farsighted. In addition, the decision to continue building of the infrastructure of the mega projects was also prudent. The construction work of the whole country needs to be continued in this way. In the light of the Keynesian economic thinking and as directed by the Hon'ble Prime Minister, the city roads, drains should be repaired and kept clean, and construction works such as the renovation of village schools, colleges, huts, roads should be continued in full swing. Job creation must be the main goal at this time. The main task of the forthcoming budget will be to save lives through health services and to keep the unemployed alive by providing employment opportunities.

The responsibility of saving people is not only of the government alone. Corporates and the rich should also come forward with social responsibility. Bidyananda Foundation is providing Iftar to the poor at only1 Taka. We would like to see many more of such initiatives. It will be possible if the commercial banks come forward with CSR support as per the latest guidelines of Bangladesh Bank (April 26, 2021, BRPD Circular No. 09). It says additional one per cent of their net profit must go to their CSR expenditures this year to help feed, employ and provide health care support to the extreme poor, if needed through partnership with local administration and MFIs. This will generate additional 116 crore Taka and the central bank should see that this reaches the most vulnerable.

Dr Atiur Rahman is Bangabandhu Chair Professor of Dhaka University and former Governor of Bangladesh Bank. [email protected]

 

Share if you like

-->