The national budget for the 2021-22 fiscal year should focus more on equity, redistributive justice, saving lives, and less on economic growth, said the Centre for Policy Dialogue (CPD).
CPD, a civil society think tank, also said the next budget should set targets regarding employment and growth in income at the household level rather than GDP growth or per capita income.
The observations were shared by CPD at its Virtual Press Briefing on the State of the Bangladesh Economy in FY2020-21, held on Monday.
As part of its Independent Review of Bangladesh’s Development (IRBD) program, the CPD carries out an interim review of the national economy towards the end of every fiscal year, reads a press release.
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Towfiqul Islam Khan, a senior research fellow of CPD, presented the keynote presentation at the media briefing on behalf of the IRBD research team.
The event began with introductory remarks by Fahmida Khatun, executive director of CPD.
She noted that the study has focused on analyzing the state of the macroeconomy and highlighted two specific sectors because of the ongoing pandemic — food price volatility during the Covid-19 pandemic and the banking sector.
CPD Distinguished Fellow Professor Mustafizur Rahman and Research Director Khondaker Golam Moazzem also shared their views at the briefing. Senior Research Associates of CPD Md Al-Hasan and Syed Yusuf Saadat were also present at the event.
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.
From the approach to the design of budget for FY22, stress has been given on 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.
Adequately, affordability and price stability have been prioritized in the discussion as regards food items. Towards this, fiscal measures, timely import, and food stock management has been stressed.
In terms of reform measures, setting up a Banking Commission, Agriculture Price Commission, Competition Commission, and fiscal reforms have been emphasized by the CPD to create the foundations of a good-governed and well-functioning economy that will help to recover from the pandemic and build back better.
The CPD presentation noted that, although growth in revenue mobilization started to pick up, the 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 machinery, and FDI inflow.
Instead of designing a COVID-specific budget, the CPD said the government largely opted for a business-as-usual one in 2020. The 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 like COVID-19 and the availability and effectiveness of vaccines. The government needs to formulate a medium-term recovery plan,” added CPD.
The CPD said they revealed the state of the Bangladesh economy, at a time when it is poised for the announcement of the FY2022 Budget, transmits some signals. While the government did come up with several initiatives to mitigate the sufferings of the people and overcome the adverse effects on the economy given the pandemic, the much-expected turnaround is still not there fully.
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It said attempts to trigger private sector investment through subsidies; incentives and working capital support are not being able to compensate for the inherent challenges that continue to undermine the competitiveness of the private enterprises.
Reaching the marginal groups and those who are left behind is proving to be difficult in the absence of effective local-level institutions and access to real-time data. Generating domestic resources to underwrite the needed resources has been weakened in the absence of the much-needed fiscal reforms.
The net outcome of the above has been that private sector investment has been below the targets set out in the plans and budget and as manifested in the negative growth of capital goods and term loan uptake and that of FDI.
The think tank said revenue generation figures remain way below the targets, and redistributive functions of fiscal policies cannot be excluded because of the enforcement capacities and failure to implement long-awaited fiscal reforms.
