The entire budget exercise for the next fiscal is likely to be a tough one, given the current state of the economy
There is nothing called a budget for poor people, nor a budget to kill poor people.
Budget, as taught in our economics class, is no more all about numbers either. It is also supposed to be a strong philosophical tool for the governments to take the country forward, drive growth, ensure equitable distribution (along with growing national wealth), make adequate investment in education and health infrastructure, and, most importantly, ensure food and energy security and thereby social harmony with clear visibility about the future.
A question may arise: Is there any way to make a drastic “quality shift” in the process used for formulating and implementing the budget? Having seen the development planning models in Bangladesh in hindsight, I would expect the budget document to reflect serious background research on certain issues.
Some of these issues include the growth-inflation relationship, education or health subsidy impact on growth, the impact of electricity generation on growth, growth-warranting electricity generation, effective land management in view of land loss to manufacturing and infrastructure, the impact of private as well as public investment on growth, the size and impact of the informal economy on growth, and the possibility of mainstreaming the black or informal economy.
In addition, it also needs to include ways to ensure food security for the increasing population, effective handling of the entire subsidy architecture, the effect of public sector economics on the entire economy, and finally, on how 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 needed even more 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 driven by opinion or emotion.
The next budget
My critic friends are saying this is not going to be great in any way -- just an expansion on the same philosophical platform or political direction.
The revenue is estimated to increase by about 20-22%, expenditure by 18-20%, and Annual Development Program (ADP) will be increased by 15-20%, with every anticipation of cutting its size at the end of the fiscal.
Our finance minister has already mentioned that the budget would aim at realizing the election pledges of the present government. Added to that, there would be priority focus on tackling the Rohingya crisis, crop insurance, stressed assets management, synergizing the bond market to finance long-term infrastructure development, and developing a national pension fund.
Reports say that 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.
From what we know about our new finance minister, he may not differ much with the suggestions put forward by economists.
However, he is supposedly looking at a revenue-led budget instead of an expenditure-led budget. His focus is also on tackling the staggering rise in non-performing loans and low revenue earnings. Taking a clue from what is happening, and particularly being cognizant of the serious “capacity disconnects” among the regulatory and implementing agencies, there are doubts whether the finance minister will be able to materialize many of the electoral pledges that the ruling alliance had made before the election.
However, the fascination towards a large budget despite a large deficit or earnings gap at the end of the year is also likely to continue.
On the inflation front, the challenge is likely to be more than what is estimated, and I will not be surprised if we get to see international oil and food prices continue to dictate 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 the management of budget deficit, as well as of subsidies, more or less a struggle.
Therefore, the entire budget exercise for the next fiscal is likely to be a tough one, given the current state of the economy, and challenging global scenarios like China-US tensions.
Crude oil prices in the international market are already up, and predictions say that the price level is likely to maintain an upward trend, and thereby warranting a local price adjustment.
The obvious question would be: While the government is likely to be too busy tackling the current issues like subsidies, fuel price adjustment, inflation, and other important political developments, where is the time to think about the future, do the necessary homework to launch an inclusive growth plan, and thereby take the country towards a sustainable development path?
A lot of the analysts feel it is going to be a tough task, and may become tougher, if we -- policy planners, politicians, the private sector, development partners, civil society, and other important stakeholders -- do not get into a “fair game.”
Ensuring a fair game warrants strong minds at the top along with a focused finance minister. We are waiting to see some changes.
Mamun Rashid is an economic analyst