Will the government be able to handle its finances well in next fiscal?
Budget, as taught in our secondary school, is no more all about numbers.
It is also a strong philosophical tool for the governments to take the country forward, drive growth, ensure equitable distribution of growth as well as national wealth, make adequate investment in education and health infrastructure, and, more importantly, ensure food and energy security and thereby social harmony with clear visibility about the future.
This has become an absolute reality in an era where the Nobel peace prize is being given in recognition of the fight against poverty.
A question may come -- is there any way to make a drastic “quality shift” in the process used for formulating and implementing budget? Having studied economics for many years and having done a dissertation on development planning in Bangladesh, I would rather expect the budget document to reflect serious background research on issues like growth-inflation relationship; impact of electricity generation on growth, and on the other hand, growth warranting electricity generation; effective land management in view of land loss to manufacturing and infrastructures; impact of private as well as public investment on growth; size and impact of informal economy on growth and possibility of mainstreaming the black or informal economy; way to ensure food security for the increasing population; effective handling of the entire subsidy economics; as well as effect of public sector economics on the entire economy; and, more importantly, on how the neighbouring or similar competing countries are responding to similar or emerging issues or challenges, in order to make growth inclusive and ensure forward-looking capacity building.
This is more needed in a country where there is an identified paucity of market or social research and the economists fail to respond when they don’t have any link with the party in power or their input is very shallow or emotion-driven.
Now the million dollar question is: How will the next budget be?
My journalist friends are saying this is not going to be great in any way -- just kind of an expansion on the same philosophical platform or political direction. Revenue estimate will increase by maybe 20-22%, expenditure may increase by 18-20%, and Annual Development Program (ADP) will be increased by 15-20%, with every expectation of cutting its size at the end of the fiscal.
Our finance minister has already mentioned that the budget would aim at realizing the unmet promises of the present government. Added to that, there would priority focus on tackling the Rohingya economics.
As usual, some economists have advised him not to concentrate much on the size of the budget. At the same time, they have made a loud plea for an appropriate subsidy policy.
Those who know our finance minister can possibly appreciate that he did not differ much with the suggestions put in by the economists, and hinted at keeping the budget outlay within Tk5 trillion and fiscal deficit around 5.0% in the ensuing budget.
Taking clue from what is happening and particularly being cognizant of the serious “capacity disconnects” among the regulatory and implementing agencies, we have doubts whether the finance minister would be able to materialize many of the electoral pledges that the ruling alliance had made within its current tenure, for the same would necessitate an over-bloated budget, in terms of resource allocation. We are aware of our identified resource constraints, and the global situation is not also in our favour.
No doubt, the minister will be facing a daunting task of keeping the fiscal deficit below 5.0% and subsidies within the estimate that he is expected to make in the next budget.
On the inflation front, the challenge is likely to be more than estimated. I would not be at all surprised if we get to see the international oil and food prices dictating terms for all of us.
The government facing a “take it or leave it” situation will be forced to align all its policies in line with the international prices, thereby making management of budget deficit, as well as subsidies, a continuous struggle for the government.
Therefore, the entire budget exercise for the next fiscal will no doubt be a tough one, given the current state of the economy, uncertain and challenging global scenario, and meagre political might available at the disposal of the government to drive any meaningful policy reforms.
We have witnessed the government finances going haywire during the outgoing fiscal, mainly due to the rising expenditure on account of increased volume of food import and diverting additional resources to manage the Rohingya situation.
Will the government be able to handle its finances well in next fiscal? As usual, we would expect the finance minister to put the public finances in order. We would be very interested to watch how he reins in the runaway subsidies.
Crude oil prices in the international market are already up, and predictions are there that the price level is likely to maintain an upward trend, and thereby warranting a local price adjustment to give a further boost to inflation.
The obvious question would be: While the government is likely to be too busy tackling the current issues like subsidy, fuel price adjustment, inflation, or some important political developments, where would they get time to think about the future, do necessary homework to launch an inclusive growth plan, and thereby take the country towards a sustainable development path?
No doubt, it is going to be a tough war and may even become tougher, if we -- policy planners, politicians, private sector, development partners, civil society, and other important stakeholders -- do not get into a “fair game.”
Mamun Rashid is a leading economic analyst.