Budget 2022-23: People's Expectations and Receipts

The Russia-Ukraine war has come as a blow to death just as Bangladesh is on the path to full economic recovery after overcoming the Covid-19 epidemic of the last two years. As a result, the people of the country have to go through an extremely uncomfortable situation with the highest inflation in recent times due to various instability including rising prices of fuel products in the world market. In such a reality, Finance Minister AHM Mustafa Kamal proposed the budget for the fiscal year 2022-23 in the National Assembly on June 9 (Thursday).

 So, theexpectations in this year's budget mainlywere to increase the tax-free income limit, keep the prices of essential commodities within reach by controlling inflation and increase the coverage and financial benefits of various social security programs to give some relief to the common people.  But after the budget, it has become difficult to match the balance between those expectations and the receipts.

   Because a closer look reveals that in this year's budget, instead of increasing the importance of the social security sector, it has decreased a little compared to the previous year. Although this time the allocation in this sector is slightly higher than before in terms of money but it is less than in proportion to the total budget and GDP.  In the fiscal year 2021-22, the allocation for this sector was about 3.11 percent of GDP, but this year it has come down to about 2.55 percent. This is the account shown by the government. But excluding pension, interest, stipend the actual allocation for the social security sector is very low.

  Although the scope of some social security programs has been increased, there is no promise of increasing the actual financial benefits in this year's budget.  The allowance given to the elderly at the rate of Tk. 500 per month has not been increased.  However, the amount of disability allowance has been slightly increased to Tk. 850.  But, considering the current inflation, it is necessary to increase the amount of these allowances to at least Tk. 1000.  Besides, the rice which is currently being given to 50 lakh poor families at the rate of Tk. 10 per kg has been increased to Tk. 15 in this year's budget, which was not desirable at that time. Moreover, the tax-free income limit has remained the same as before. However, considering the current situation, it has already been demanded from various quarters to increase it from 3 lakhs to at least 5 lakhs. These issues need to be addressed at a time when the general public is struggling to cope with rising inflationary pressures.

  Although it has been announced in this year's budget that inflation will be brought down from 6.2 to 5.6 percent (According to the latest BBS data country's present inflation rate is 7.42 percent), it is difficult to find any clear direction in the budget speech of the finance minister.  However, one of the hopeful news is that the government has announced a public pension scheme from this year. To this end, a law was also approved in the cabinet. This is undoubtedly a commendable initiative.

  Let's take a look at education. Although the allocation inthis sector is higher than last time, it has been reduced in proportion to the budget. According to data provided by the economic research organization SANEM, the average expenditure on education in South Asian countries is about 2.5 percent ofGDP. But in this case the cost of Bangladesh it is less than 2 percent. According to UNESCO, this expenditure should be 4-6 percent of the total GDP.

   Meanwhile, the World Health Organization (WHO) suggests spending 15 percent of the total budget on the health sector. But this time the allocation in this sector is only 5.4 percent.  And in proportion to GDP, it is much less than 1 percent.  Needless to say, under-spending in key sectors such as education and health is threatening the future of Bangladesh.

  However, the promising news is that this year's budget allocation to the agricultural sector has increased significantly. This time the allocation for this sector has been increased by 30 percent from the last year.  In addition, the 10-year tax break in the trade of fruits, vegetables and dairy products will undoubtedly play a role in strengthening the sector.

  Adequate allocations have also been made in the power and energy sectors.  However, the finance minister also hinted at adjusting the prices of fuel products with the international market. As fuel is a strategic product, if the price increases, its negative effects will be felt almost every sector. Therefore, the decision should be taken keeping in mind the suffering of the people.

  Apart from this, corporate tax exemption has been given in this year's budget in view of the long standing demand of traders. However, this benefit is mainly available to the bigbusinesses. Small or medium traders will not get much benefit.But it is a timely decision of the government to eliminate tax inequality in the export sector and make it equal for all types of exports. This will help increase investment in the country. On the other hand, the decision to impose a 5 percent tax on mobile phones and broadband internet is nothing but the opposite of the progress of Digital Bangladesh.

  Now the question may arise that, where will the money come from to spend so much in various important sectors? The answer is the operating expenses of the government and the expenditure in relatively non-essential sectors should be reduced and tax collection should be increased. At present, the number of Tax Identification Number (TIN) holders is over 7 million in the country. However, in the fiscal year 2021-22, only 2.6 million have paid taxes. The remaining two-thirds remain tax-exempt even after enlistment. National Board of Revenue (NBR) has to be proactive about why these people are not paying taxes.

 Compared to other countries in the world, Bangladesh's position in the context of tax-to-GDP ratio is very low. This rate is constantly declining. According todata provided by International Monetary Fund (IMF)Bangladesh's tax-to-GDP ratiois on average9.9% for last 5 years, while it is 21.50%for Nepal, 19.67% for India and 14.88% for Pakistan. Even war-torn Afghanistan is ahead of us in this context. Economists say that in a developing country like Bangladesh, the tax-to-GDP ratio should be above 15 percent at the moment. If effective steps are taken in this regard, the revenue of the government will increase. Then the government will be able to fulfill the people's expectations by increasing spending in sectors like education, health and social security.


A K M NAZMUL HASAN is a student of Economics at Rabindra University.