The countries in south Asia region had been experiencing deficit budget since long. Bangladesh is no exception among them. The fate of people in an economy relies on a budget that is designed by government representatives. Every citizen of a country is slightly or broadly benefited by the financial plan.
So, its importance in an economy is very significant. But, many questions have recently arisen how the 2020-21 budget gets finance to address the deficit. The need of the people hit hard by Covid-19 is on the rise alarmingly. So, a lot of challenges are awaiting before the nation in the days to come. The nation is eagerly waiting to watch budget session scheduled to be held June 10, 2020 in the parliament of Bangladesh.
The south Asian countries, including Bangladesh, might lose US$142 billion to $218 billion due to impact of deadly coronavirus- Asian Development Bank said recently. The global economy also could suffer a loss amounting to $ 5.8-$8.8 trillion, equivalent to 6.4 to 9.7 percent of global GDP. Due to economic fallout, growth pace has been disrupted. The economy has become unable to mobilize resources from its own sources to cover budget deficit. The need for seeking budget assistance from donor agencies is a must.
There is no denying that Bangladesh is marching ahead despite having many limitations. In light of GDP growth rate rise, budget size is gradually being widened. GDP is considered the key indicator of any economy. Whenever, the government plans to set any program, the issue of GDP growth is important to design the plan.
We all are currently aware of novel coronavirus pandemic that was originated from Wuhan, a city of China in December last. Its ferocious dominance across the world vandalized economic dreams set by countries' chiefs. Now, the affected countries are thinking to survive only with domestically produced resources.
According to published report, Bangladesh has sought record $ 4.5 billion in loans from foreign donors to cover the deficit in the national budget for fiscal year 2020-21. The government has sought Tk 1 billion from Japan International Cooperation Agency (JICA), Tk 190 million from Islamic Development Bank (IsDB), $500 million from Asian Infrastructure Investment Bank (AIIB), $100 million from China -led lender, $1billion from Asian Development Bank, $ 700 from IMF and $ 500 million from World Bank.
The proposal seeking financial assistance was already put in place aiming to address around Tk 5.5 trillion budget for 2020-21 fiscal year. Earlier, World Bank (WB) and Asian Development Bank (ADB) willingly supported financial assistance in the budget. Besides, Bangladesh also sought $ 150 million from IsDB as loan to mitigate the coronavirus crisis. Another Tk 500 million is expected to be got from AIIB for next two fiscal years.
It is important to note that finance minister on June 13, 2019 placed a Tk 5,23,190 crore budget for 2019-20 fiscal year with a focus on developing communications infrastructure and human resources. The budget was placed aiming to achieve 8.2 percent GDP growth. Around Tk 1,45,380 crore was calculated as budget deficit which was 5 percent of GDP.
The deficit was to cover by both external sources Tk 68,016 crore and domestic sources Tk 77,363 crore. Resources in the budget 2019-20 came around 62.2 percent from tax revenue, 14.8 percent from domestic financing, 12.2 percent from foreign loan, 7.2 percent from non-tax revenue, 2.8 percent from tax revenue (non-NBR), 0.8 percent from foreign grants.
Based on above stated information, it can be said that lion's share of finance in the budget comes from tax revenue while rest part comes from different sources. Revenue earnings in current fiscal year dropped drastically due to impact of Covid-19. The revenue earnings authority has been deprived of export - import duty to a great extent. Besides, the authority was bound to relax duty on different importable life saving equipments.
The revenue department aiming to scale up export volume showed sympathy towards exporters. In the wake of slowdown in economic activities, the finance ministry already revised NBR's revenue collection target downward by Tk 25,600 crore for current fiscal year. Revenue collection was estimated to Tk 3,77,810 crore in 2019-2020.
The country's economy has now been severely affected due to nationwide lockdown the government has imposed to contain the spread of coronavirus pandemic. Country's overall economic activities including production, consumption, services, export and import and major sources of revenue are severely disrupted by ongoing crisis.
So, it is not possible to bring momentum in revenue earnings that will severely hurt budget of current and next fiscal years. I think sourcing finance from banking system for 2020-21 budget would not be wise. Banks are now getting preparations to disburse stimulus packages announced by government. So, the sector is likely to see fund shortage though Bangladesh Bank is giving policy supports.
In order to revamp corona-ravaged economy, the government has announced stimulus packages worth Tk 95,619 crore which is 3.3 percent of GDP. This packages that were announced from time to time are not good enough to address the post-covid situation.
We have to try to revive economy with the 2020-21 fiscal year budget. The budget size must be broadened to save over 160 million people living across the country. Nevertheless, the number of poor people is on rise alarmingly that might have been doubled from existing rate shortly. It is natural that budget deficit would be widened compared to previous fiscal years. Side by side revenue earnings are decreasing. The challenge to cover budget deficit remains high in this moment.
Strong support from donor agencies is needed for budget assistance. We are optimistic in getting positive response from half a dozen donor agencies. If they refuse to give support for narrowing budget deficit, our economy might fall in trouble situation. Bangladesh economy is emerging one. The country is now leading a lot of mega infrastructures including multipurpose Padma bridge financed by foreign sources. We are now passing days with huge expenditure.
In this moment, there is no alternative to seek support of donor agencies for budget assistance. In the meantime, Bangladesh has so far earned wide reputation to donor agencies in terms of timely repayment of loans. I do believe they will honor our proposals placed earlier seeking budget assistance. On condition of getting soft loans, a discussion is required with multilateral donor agencies. Tenure of loan repayment might have been relaxed also.
As Covid-19 is forcing us to be liable to donor agencies, primitive measures for loans repayment should be taken in hand. Focus on export earnings and remittance should be given priority. Bangladesh missions abroad have to scale up efforts to look for suitable destinations of labor force and goods export. If Bangladesh gets budget assistance more than expectations from external sources, the government would surely be grateful to lenders. I will request to donor agencies to stand by us by providing budget assistance.
Otherwise, our emerging economy is likely to lose growth pace shortly. To conclude, the economies across the world have to be prepared to face post covid-19 situation any how that will be the challenge for the world to keep economy running. Only, extending of co-operation from one another can save the world people. What should be noted here that US $ 4.5 billion loans coming from external sources would be a blessing for our upcoming budget, no doubt.
The writer is a banker and analyst of economic affairs. Email: [email protected]
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