Focus should be more on equality, jobs, saving lives: CPD

The national budget for FY22 should focus more on equity, redistributive justice, protecting jobs and saving lives, and less on economic growth, said the Centre for Policy Dialogue (CPD).These observations were shared by the private think-tank on Monday at the virtual press briefing on state of Bangladesh economy in FY2020-2021.Towfiqul Islam Khan, Senior Research Fellow, CPD, made the keynote presentation at the media briefing on behalf of the IRBD research team.

From the approach to the design of budget for FY2022, stress has been given to pursuance of expansionary fiscal policy, and, focusing on redistribution rather than economic growth. From the public expenditure side, priority has been urged for social safety net expenditure, health and education and CSME-oriented investment-augmenting measures.

CPD presentation noted that, although growth in revenue mobilization started to pick up, pace of public expenditure in FY21 failed to do so. In terms of growth in industrial production and manufacturing, small industries were lagging behind their large and medium counterparts. Food inflation was on the rise, while the opposite was true for non-food items. Although positive developments were observed in cases of export earnings, remittance inflow and foreign exchange reserves, disquieting trends were evident as regards overseas migration, import of capital machineries and FDI inflow.

Instead of designing a Covid-specific budget, the government largely opted for a business-as-usual one in 2020. Assumption was that managing the fallout from Covid-19 will be easy, and the economy will bounce back within a short period in FY21. Recovery from the entire fallout will take much longer than expected - susceptible to changes in the nature of Covid-19 and the availability and effectiveness of vaccines. Government needs to formulate a medium-term recovery plan.

In its report CPD emphasized that the transparency and accountability of Bangladesh's Covid-19 stimulus plan will be key to its successful operationalization and implementation. Liquidity support cannot be treated as philanthropy and so banks cannot provide loans to anyone on humanitarian grounds. A large portion of people, who are actually poor and in dire need, did not receive any form of support from the government-whether in the form of relief items, liquidity support or fiscal stimulus.

Excess liquidity in the banking system may induce commercial banks to behave in ways which may jeopardize the stability of the financial system and make it difficult for the central bank to achieve its monetary policy goals. Stimulus packages provided through banks has created new avenues for corruption and malpractices. Liquidity support and fiscal stimulus packages rolled out without prior assessment of the ground realities may not be able to address the needs of the most vulnerable people in society.

The event began with introductory remarks by Dr Fahmida Khatun, Executive Director, CPD. She noted that the study has focused on analyzing the state of the macroeconomy and highlighted two specific sectors in view of the ongoing pandemic - Food price volatility during Covid pandemic period and Banking sector.

Professor Mustafizur Rahman, Distinguished Fellow; Dr Khondaker Golam Moazzem, Research Director also shared their views through responding to questions from the media. Mr Md. Al-Hasan, Senior Research Associate and Mr Syed Yusuf Saadat, Senior Research Associate were also present at the event.