The estimated figures in the budget for FY24 have fallen into a vicious cycle, driven by political ambitions ahead of next year's general elections, said Debapriya Bhattacharya, convener, Citizen's Platform for SDGs, Bangladesh, and distinguished fellow of the Centre for Policy Dialogue (CPD) on Wednesday.
This has severely compromised the credibility of various estimates, such as inflation, exchange rates and others, he observed.
He was speaking on Wednesday at a discussion, titled “National Budgets in Bangladesh - Myths and Realities”, jointly organized by the CPD and Citizen's Platform for SDGs, Bangladesh, in collaboration with the European Union.
Sultana Kamal, member of the CPD Board of Trustees; and former adviser to a caretaker government, said in her introductory speech: “By analyzing this year's budget, it seems to me that the poor and marginalized people of the country are invisible.”
Debapriya, in his keynote presentation, said that Bangladesh's growth is no longer a matter of statistics, but an expression of political ambition.
"For the upcoming FY24 budget, the gross domestic product (GDP) target set at 7.5% is purely political ambition, because according to the FY23 latest outcome, it is just 6%, which is not at all consistent with our macroeconomic reality. It seems to have been prepared for political ambition ahead of next year's elections."
On the other hand, regarding inflation, the presentation stated that as per Bangladesh Bureau of Statistics (BBS), the country's average inflation reached 8.8% at the end of May, when the Ministry of Finance in its budget estimated this rate at 6% for FY24.
"Markets will be bullish if there is any doubt about the inflationary target as it is a very fundamental target. We are worried about that. Not only the budget implementation, the government was also unable to fulfill the monetary policy," Debapriya also said.
It set the exchange rate at Tk104 in the FY24 budget but it is already Tk108 now.
Asked where the macroeconomic targets in the budget for FY24 made sense, Debapriya said: "There is a lot of difference between the estimate and reality as you see. How will these figures be reconciled? The numbers have fallen into a vicious cycle and as a result, the credibility of the statistics is being eroded.”
The presentation also noted that investment figures presented in the budget were different from the BBS provisional estimates for FY23.
“Journalists calculate the budget as lakhs of taka but we economists count it as a proportion of the size of the economy. Now the question is, as the economy has grown, has our budget really grown? According to the statistics in 2006 we were number 38 out of 100 countries, now the figure has reached number 95,” he added.
These statistics do not count as macroeconomic policy; it is a matter of whether the budget is given on time, whether documents are available, whether there is the participation of common people and how efficient they are in terms of implementation of the budget.
“Bangladesh has lost its rank in this budget process. We are 95 where the international average is 45 and according to South Asian countries, this average is 38. That means other South Asian countries are more efficient than us regarding budget implementation.”
Regarding poverty and income inequality, he said that It is undeniable that the number of poor people in Bangladesh is gradually decreasing. Though the rate of poverty is decreasing, the rate of inequality is rising.
This applies not only to income but also to consumption but more than that, wealth inequality has increased. This may be seen when the household survey of 2022 is published.
In response to a query, Debapriya stated that the government is short on funds, which is why it is working hard to boost revenue.
Moreover, the IMF has also given instructions on increasing revenue collection by 0.5% every year. The budget, however, could not provide any indications.
The rate of poor people is higher in villages but the rate of asset inequality is higher in cities, the presentation also shows.
Regarding the private sector, Asif Ibrahim, a core member of the Citizen's Platform and president of the CSE, said that businesses are facing crises like continuous hikes in the price of fuel, the depreciation of the Taka against the dollar, supply chain disruptions, inflation and Russia-Ukraine war.
The budget should focus on measures to control inflation. In the proposed budget, the initiatives regarding stability in the supply and reducing the pressure on the demand were noticeable, he added.
However, the corporate taxes for the businesses remain unchanged in the proposed budget.
Moreover, despite demands from the BGMEA and other trade bodies, the proposed budget kept the source tax unchanged at 1%.
The budget set a 27.5% private investment target to generate more employment.
To make sure it happens, infrastructural development, the improvement of the ease of doing business and digitization of the NBR is a must, but there weren't any specific indications regarding this,” he added.
It is also important to address the complexities in public investment, corruption and others, he added.
“Political stability is also important to create an investment-friendly atmosphere,” he added.
He also said that there was not a single word regarding the stock market in the full budget speech but there is no alternative to the stock market for long-term development.
The negative impact of bank-dependent long-term is explicit as a culture of loan default has been created already, he added saying that the stock market should be prioritized for future financing.
Professor Mustafizur Rahman, distinguished fellow of the CPD, said that the collection and proper spending of money is important.
The budget and the ongoing crises are interrelated. There is room for discussion on whether it is a development budget or not. There are 1,250 running projects in the country of which 878 are scheduled to be finished by 2024 – some of them are expected and some of them are the result of the carryover, he added.
Among the carryover projects, 288 are taking more time than average project timing (4.9 years).
In the expenditure of the budget, a huge portion is expenditure for the carryover projects, he added saying that this expenditure creates pressure on the common people.
He suggested decentralizing the monitoring agencies to observe project delays and also suggested increasing the social monitoring of the projects.
