What should be the focus of the upcoming budget?
The country's economy has been severely affected by the Covid-19 pandemic. To face the pandemic, strengthening healthcare and the social safety net are the immediate challenges.
In the health sector, there is deficiency in all aspects, including testing facilities, infrastructure, equipment and trained human resources. Budget allocation for the health sector is very low, only 0.9% of GDP.
So there is no alternative to increasing the allocation for tackling the coronavirus health risks. For the next few budgets, the government should keep big allocations for the sector.
Through reallocation, the sector should be on the frontline and proper utilization of funds should be ensured.
The future of our economy will be uncertain if we cannot improve the management system related to stopping the spread of coronavirus and if we cannot ensure a planned reopening.
On the other hand, the government should keep track of non-corona diseases, an area which remains unfocused and is at risk now.
On top of that, the government also has to give priority to reopening education institutions by ensuring social distance and safety measures. As a result, this sector needs more allocation than in previous times.
How should we address the social safety net?
Production in manufacturing as well as small and cottage industries were hit the worst amid the pandemic. On the other hand, the informal sector is at high risk, rendering tens of thousands of workers unemployed.
As a result, poverty is set to rise as a good number of people, mostly those who are jobless, will go below the poverty line.
In the given context, there will be an additional four crore poor people pushing the number to eight crore. For this group, the government needs new allocation to provide cash assistance to feed them.
How can we ensure food security?
As per the forecast of the World Food Organization (FAO), there may be a global food crisis at the end of this year.
Amid this crisis, food-exporting countries have become selfish and conservative. So, Bangladesh has to ensure its food security from its internal sources.
Agriculture should remain in focus in allocating enough funds in the budget to subsidize farmers and to keep the supply chain functional.
It is not only production. The government has to ensure harvesting, storage and marketing, while during cultivation and harvesting it needs to guide farmers in maintaining social distance amid Covid-19.
Non-state actors such as NGOs have to participate in the process to help the farmers as they have networks at the rural level.
How can Bangladesh generate revenue amid huge waivers?
There is no scope of increasing the tax rate at a time when business people are struggling and individual incomes are falling. On the other hand, a rise in VAT (Value Added Tax) will be a burden for the poor.
Rather, the government has to waive taxes or exempt them considering the survival of the business community as their incomes will fall due to the outbreak of coronavirus.
The only way to prevent the fall in revenue generation is to stop evasion and leakage in depositing collected taxes to the government. To this end, the government has to increase administrative efficiency and go for automation, especially in the large tax units (LTUs) and in payment systems.
Bangladesh needs huge resources to meet its budget deficit. What are the possible sources?
As the expenses will increase due to the bailout packages for combating the coronavirus fallout, the budget deficit will go up. Even if the budget deficit goes up to 8%, there is nothing to be worried about at this moment.
Bangladesh's debt to GDP ratio is low and it will not create problems if the country maintains a high budget deficit for the next two to three years in order to rebound from the crisis.
There are new windows for Bangladesh for funds as the World Bank, the International Monetary Fund, IDA, and the Asian Development Bank have all come up with huge funds at low interest rates to provide financial support in fighting Covid-19. From these sources, there is a possibility of getting $3.5 billion to $4 billion, though the need is more than that.
For this Bangladesh needs to prepare programs not only for the health sector but also for creating livelihoods for its poor people.
In case of bank borrowing, the government should keep private sector cash flow unhurt but this year the demand is expected to be slow as the economy is not in a good condition.
What is your suggestion on export-oriented industries?
Exports of traditional goods are going through a period of uncertainty, as global trade has been disrupted and is not about to turn around any time soon.
In the present context, offering incentives and allocation for these industries is a waste of money. Right now, we should focus on new avenues such as pharmaceuticals, personal protective equipment (PPEs), masks, etc, which have already opened due to coronavirus, and provide policy and fiscal support.
When demand for traditional goods returns, we can revise the policy.
On top of that, a stimulus package can be offered for the local consumption based industry so that we can meet demands and also create jobs.
Small and cottage industries should get priority as they are creating jobs and at the same time have been hit hard by the pandemic.
