Published:  12:42 AM, 15 May 2020

A comprehensive budget needed to deal with Covid-19 impact

A comprehensive budget needed to deal with Covid-19 impact

Budget for every fiscal year (FY) is placed in the parliament by finance minister in the month of June. The nation eagerly waits to watch the budget session. The newspapers also bring budget message in the heading. As the fate of the country's over 160 million people depends on budgetary allocation, the importance of pre-discussions on budget is imperative.

All walks of people in the country want to participate in the pre and post-budget discussions to inform their actual demands to the government. The think-tanks, economic analysts place their suggestions just some days ahead of passing the budget. Naturally, the budget for developing economies comes as blessing for low and middle-income group people.

Already, think-tanks associated with different platforms expressed their views in respect of budget for fiscal year 2020-21. The views came against the backdrop of novel coronavirus that hit the country in the first week of March this year. The budget for upcoming fiscal would be a challenge, no doubt. If deadly covid-19 sustains longer period, there needed to revise the budget depending on situation.

Any projections made by researchers about the impact of coronavirus did not appear. So, current situation clearly tells a difficult moment coupled with economic fallout might have been arisen. Now, the nations hit hard by Covid-19 are eagerly waiting to see sunny days through a budget. 

Bangladesh had been experiencing 5 percent deficit budget for the past over the years. Budget deficit is gradually widening due to rise in expenditure than revenue earnings. This fiscal budget might have been prepared to display with wider budget deficit than before due to presence of Covid-19 pandemic.

There are allegations why we face budget deficit instead of a balanced budget. Tax-GDP ratio in Bangladesh is not so standard compared to other emerging economies. However, the country's revenue earning departments had been hit hard by covid-19. To achieve revenue target this fiscal has become a dream to the concerned authority. Alternative avenues should be discovered to bring sustainability in the economy. 

Finance minister on June 13, 2019 placed a Tk 5,23,190 crore budget for 2019-20 fiscal with a focus on developing communications infrastructure and human resources. The budget was placed aiming to achieve 8.2 percent GDP growth. However, the budget in FY 2020-21 stands as challenge before policymakers.

There are many issues that have to be included in the budget keeping previous sectors. As there is possibility to experience recession in the economy due to Covid-19 outbreak, the need for enhancing budget capacity to face post-Covid-19 challenge is a must. Any prediction regarding economic losses is impossible.

Existing poverty rate might be double. Unemployment rate also began started rising inception Covid-19 pandemic. What should be noted here that foreign exchange reserve is set to face shortfall since export earnings and remittance inflow are likely to decrease sharply within months.  So, intellectual measures in the budget for FY2020-21 ought to be undertaken to save vast number of population.

At first, we have to save our lives from coronavirus by enhancing required amount of finance in the health sector. Health sector in the budget must be focused anyhow.  Actually, allocation for health as share of total budget has fallen from 5.1 percent in FY19 to 4.9 percent in FY20. Since 2017, health budget of share of GDP remains at 0.9 percent level. Government budget for health (as a share of GDP) is considerably lower than the targets stipulated in the 7th FYP and WHO benchmark.

In 7th FYP, around 1.12 percent of GDP target was set and WHO fixed targets 5 percent of total GDP. Utilization of overall health budget has been sluggish in recent years and it was lowest in FY18 (83.7 percent) during the last ten years - a reliable sources said.

The nation might face food deficit due to corona impact. Agriculture sector in this current moment has been vital to manage post-Covid-19 impact on food security. Budgetary allocation in the sector needed much. The growers' demand is to be given priority in the budget. In need, ever first volume of subsidy in farming sector might be scaled up in this budget.  Enhancing Crop insurance is a must that helps to save farmers from natural calamities.

The farmers availing crop insurance facilities are rare. But, in India, a number of crop insurance schemes are in operation. A wider budgetary allocation than previous fiscal in agriculture sector is required.  Recently announced subsidy worth Tk 9,500 crore in the sector is not good enough. Only agriculture sector can help us to survive during and post-Covid-19 period.  Subsidy in the budget should reach the marginal level farmers. Subsidy is likely cover combined harvest machines, fertilizer, irrigation, seeds, pesticide among others.   

Social Safety Net programmes in this budget must be widened than previous years. An amount of Tk 95,619 crore has been announced as stimulus packages in light of Covid-19 pandemic where a good number of Social Safety Net programmes are included. Allocation for social safety net has been increased by 15.5 percent from Tk 64,404 crore in budget FY 2018-19 to Tk 74,367 crore in budget FY 2019-20. Nevertheless, in FY2019-20, the social safety net allocation excluding pension is only 1.8 percent of GDP which is much lower than the target of 2.3 percent of GDP outlined in 7th FYP.

ILO social Protection Floors Recommendation, 2012 (No.202) states that member countries should establish and maintain their social protection floors comprising basic social security guarantees, in accordance with national circumstances. In view of situation, the budget needs to give importance Social Safety Net programmes to comply ILO instructions given earlier.

Education budget decreased as a share of total budget from 12 percent in FY 09 to 11.7 percent in FY20. Government budget for education as a share of GDP remained at 2.1 percent in FY 20 which is considerably lower than the respective 7FYP targets of 2.8 percent and UNESCO target of 6 percent.  Implementation of education budget in FY 18 (85.8 percent) is lowest in the last decade.

Overall budget implementation rate was 80 percent ( FY18) Figures are remained below the standard set by 7 FYP (3 percent ) and education 2030 Framework for action of UNESCO ( 4-6 percent) . Inception Covid-19 outbreak, education sector had been affected much. Traditional teaching method in the classroom has become dream right now. We have to introduce online method to teach learners that needs huge equipment related to information technology.

So, education sector needs a substantial share of total budget next. In Bangladesh context, a ready fund for climate issue is also required to battle against any natural calamities. Climate issue in the budget is important one.  It is being noticed that over the last seven fiscal years, significant portion of subsidy goes to power and gas sector for boosting industry production. But, this year, agriculture sector deserves a lion's share of subsidy to get rid of food deficit during Covid-19. 
 
Migrant workers abroad and their families deserve cash incentive and other facilities more. A special fund in this budget might be created for remittance senders hit hard by Covid-19. It is our holy duty to stand by the expatriates with financial packages who are now stranded abroad in absence of works.

Nevertheless, allowances for financially insolvent disabled people, launching of program for livelihood improvement of tea-garden laborers, giving stipend for disabled students, ensuring food assistance in CTG -Hill Tracts area ,  introduction of program for improving livelihood of disadvantaged community, Rehabilitation and generation of alternative employment for beggars profession , initiating a street children rehabilitation program.

Allocation for living standard of marginal people. Senior citizens, child, marginalized group except gender issue must be brought under wide coverage in the budget.

By reducing corporate tax of mobile operators  ,internet facilities has to be scaled up aiming to bring more comfort in daily life of man. Internet helps for online shopping, working for home, learning from different platforms, gathering current information, delivering class lecture towards students among others. Besides, mobile financial services, internet banking, doing business are needed internet.

Budgetary allocation might be narrowed in public administration, energy and power, recreation, culture and religious affairs, housing. Rather, the allocation in health sector, agriculture sector, social security and welfare, public order and security, education sector, local government and rural development, industrial and economic services requires to be enhanced in order to face post-Covid-19 situation. 

Bangladesh lags behind in respect of research sector compared to other emerging economies. With a view to promote research sector, a huge amount of finance is to be allocated that would come from budget. To fight against any pandemic that are facing now, research activities coupled with meritorious people is a must. Research needs finance.

So, there is an opportunity to create a fund in the budget for carrying out research activities due to tackle any outbreak. As income inequality is widening in our economy, income tax ceiling might be increased. Tax authority should take preparation to catch tax dodgers red handed. To revive corona-ravaged economy, a decent tax policy is to be taken in hand. Additional tax imposes on luxuries goods, tobacco, gambling materials is a timely approach.

I will request the finance minister to sit with economists prior to place the budget in the parliament. As we have to face post-pandemic situation with this announced budget, application of intelligence is badly needed. As Covid-19 entered into the economy for damaging macroeconomic indicators and livelihoods , the  2020-21 budget would surely stand as helping tools to take the economy forward despite untold limitations.


The writer is a banker and analyst of economic affairs.
Email:[email protected]  


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