Flattening the curves of coronavirus, poverty, and economic recession, are three major challenges for the cash-starved government in implementing the country’s upcoming fiscal budget, as the pandemic-inflicted downturn has ravaged the growth prospects of global economies.
Non-economic issues like defeating the COVID-19 pandemic are of greater concern than income and spending for the whole of the next fiscal year, as health risks have overshadowed local business activities and put a brake on the economy.
“Things seem upended as economic indicators dim, hit by the prolonged toll of the virus,” said a top budget official at the finance ministry.
Economists said, achieving an 8.2% GDP growth target in the next fiscal year was not based on good homework as the World Bank forecast a 1% expansion for the upcoming financial year and 1.6% for the current year, with the economic outlook becoming increasingly grim to support the overly ambitious assumptions.
Fixing the coronavirus-induced health sector before focusing on resuming, stimulating, or invigorating the economy is now of paramount concern for the macro economy and hard-pressed people, jobless youths, and hapless day labourers.
“The first challenge is corona, the second challenge is corona, and the third challenge is also corona for implementing the budget,” Ahsan H. Mansur, Executive Director, Policy Research Institute, told Dhaka Tribune.
Fixing the corona-induced economy, generating employment, and full scale business resumption, all depend on how quickly and astutely the government stamps out the corona pandemic, he added.
While a large portion of the planned Tk5,65,000 crore budget’s spending is obviously going to be in the next fiscal year, generating significant income to finance both revenue and development budgets in a corona-hit economy seems greatly uncertain.
With all these associated issues in play, Finance Minister AHM Mustafa Kamal is going to unveil the budget for the next 2020-2021 fiscal year in parliament tomorrow.
Zahid Hussain, former lead economist at the World Bank Dhaka Office, said if the government wants to flatten the curves of recession and poverty, it must flatten the curve of coronavirus fatality as a foremost priority.
“You see, business people cannot resume their economic activities due to health risks. If the health ministry due to its incapability cannot implement health related projects, other agencies should be involved with the plan,” Zahid said.
Citing the low performance capacity of the health ministry, the upcoming budget must not allocate poorly for the health sector as fixing the corona-affected health sector should be the first priority of the budget in the interests of the economy, health, and people’s livelihoods.
He said due to the coronavirus, the number of poor is likely to increase to around 40% in the economy. The budget should allocate cash handouts for those who were already poor and the new poor.
Bangladesh’s national poverty rate rose to 35% in 2020 from 24.3 per cent in 2016 due to the adverse impact of the coronavirus pandemic, according to an analysis of the Centre for Policy Dialogue, unveiled in the past week.
To implement stimulus packages, the ensuing budget must have budgetary arrangements both in the forms of allocation and policies, he suggested.
“It is understandable that businesses seeking stimulus are weak firms, and their funding by banks involves risks. The government should share risks with banks so that lenders do not fall sick extending financing to businesses,” suggested the economist.
“The government can issue guarantees to banks so that risk factors don’t make banks shy away from lending to firms affected by the virus,” he elaborated.
Without comprehensive reforms in the financial sector, stimulus would not bring such good returns for the ailing economy and corona-ravaged businesses, Zahid maintained.
Focusing on challenges for the upcoming budget, Ahsan H. Mansur said that after stamping out the coronavirus, attention should be shifted to fix the economy, spur investment, and create domestic demand.
“Until you defeat the virus, domestic demand and productivity will not rebound to accelerate the pace of the stalled economy,” Mansur remarked.
The budget must allocate at least Tk3,000 per month for each of 15 million new poor and unemployed for six months, as the economy shows no sign of rebounding anytime before January next year.
He suggested the government should not borrow from banks, but look to donor cooperation and Bangladesh Bank for deficit financing.
“Increasing hospital capacity to handle corona patients, and making modern treatment and machines available to all public hospitals is a must for the sake of health and economy.”
Salehuddin Ahmed, former governor of Bangladesh Bank said a revenue target of Tk3,30,000 crore from the head of the revenue board would not be achieved, as the outlook for large scale business resumption seems grim under a corona emergency.
He said bank borrowing to the tune of above Tk80,000 crore for deficit financing in the 2020-21 fiscal year should be shunned for the greater interest of business, as demand for bank credit would be higher once business activities resume.
“If the Tk3,30,000 crore revenue target is not achieved, bank borrowing would be higher,” he said.