If we consider the increasing size of our economy, urbanisation, increase in per capita income and rise of newer pockets of "capital accumulation," a budget of Tk2.225tn is not much. In a developing country like ours, an annual budget could be 20% of the total gross domestic product (GDP), while our one stands at 16% of GDP. The total earning expectation of Tk1.74tn is also not that much, provided we could ensure proper delegation of authority for revenue collectors, befitting incentives and more importantly no interference from political seniors. Life would have been much easier if the courts were working properly and dispute settlement was prompt.
A budget deficit of five percent of GDP is also quite standard and acceptable to development partners. This time the number is Tk550bn. Out of this, Tk257bn is expected to come from bank borrowing, Tk210bn from foreign sources and rest from the sale of national savings instruments. Questions have been raised about the scenario where foreign sources don’t generate Tk210bn and, as has happened recently, the government is unable to sell off adequate planned savings instruments, and as a result, government borrowing from the banking sector raises the cost of private sector credit. While I do agree that money available from foreign sources may fall short of the target; an interest rate increase for national savings instruments in a falling market interest rate scenario, and more importantly huge excess liquidity in the banks, may help avoid the past scenario.
Another question has been raised, raising the issue of the amount potentially allocated for Padma Bridge, which is to be self-financed. I subscribe to the logic that implementing a large project with an almost $3bn equivalent expenditure outlay, should ideally involve development partners and internationally renowned contractors, and I am rather dismayed that the government has not even appointed a project director for this purpose. Appointment of a project director and selection of a globally recognized consultant or adviser could have attracted similar contractors or designers as we had for Jamuna bridge and other large infrastructure projects.
The budget was supposed to be proposed in line with the sixth five-year plan, and more importantly, in line with our expectation to become a middle-income country by 2021.
For that we needed massive investment in labour intensive industries with large public sector spending. Investment is quite sluggish with power shortages, very high interest rates, poor governance as well as almost stagnant foreign direct investment. Private sector credit during first nine months of the outgoing fiscal went down significantly, while we all agree the private sector led growth in our country. A fall in capital machinery import, with reduced import of industrial raw materials, turbulence in our industries, and weak or misguided trade union movements don’t offer much hope either.
Last but not the least, a justified question has been raised about whether the ruling political regime, with an extremely politicised civil bureaucracy, and an unruly as well as ill-prepared local government, can actually implement a budget of this size. I also have my doubts – especially in view of the anticipated "political fallout," in this election year.
Government for known reasons has included many tiny and not so important projects in the development program, these projects if they are implemented, will not matter much. We seem to be stuck with plus-minus six percent GDP growth. Unless we can change the way we undertake economic planning, select effective and high-impact development projects, and more importantly drive cohesive implementation, we can’t expect the situation to change dramatically, no matter who is in command.
Mamun Rashid is an economic analyst and Vice Chairman, Financial Excellence Ltd.