Our finance minister has proposed a mega budget of Tk 4,00,266 crore for FY2017-18, of which Tk 1,53,331 crore is earmarked for Annual Development Programme (ADP). The projected revenue income against the budget has been set at Tk 2,87,991 crore, increasing the budget deficit to Tk 1,12,276 crore or five percent of Gross Domestic Product (GDP). This deficit will be financed by borrowing Tk 28,203 crore from banks, Tk 32,149 crore from non-bank sources and Tk 51,924 crore from foreign sources (which will include a small amount of foreign aid). That is, about a fourth of the budget will be financed by loans from domestic and external sources. It should be noted that a large proportion of the ADP will be spent on six big priority projects of the government.
A budget normally has three features. First, it represents a list of all possible sources of income and expenditures. Second, it reflects the sector-wise priority of the government. Finally, it is the means of implementing the political commitment of the ruling party. The last two features give the budget a philosophical basis.
The proposed budget is undoubtedly a list of all projected income and expenditure sources for the coming year. However, it does not seem to clearly reflect the government's priority to any particular sector. For example, about two-thirds of Bangladesh's population is youth, creating a “demographic dividend” for us, which will not last forever. To take advantage of this opportunity, the finance minister could have made special allocations for quality education and healthcare for the youth and for tools to equip them with necessary skills. We could make investments to prepare our youth for the future rather than trying to create the desired future for them. In that case, they would be able to make use of the opportunities offered by globalisation and create employment for themselves. The finance minister could have also given priority to employment creation, in which we are doing very badly.
In addition, we will lose concessional market access for our exports when we reach upper middle-income status. The geopolitical conditions are also changing fast, for which we must be prepared. For this, we will have to encourage the “sun-rise industries” and discourage the “sun-set industries”. The famous Austrian economist, Joseph Schumpter, long time ago reminded us that industrialisation is a process of “creative destruction,” in which resources continuously get reallocated from less prospective to more prospective industries. Therefore, if we are to use budget as an effective tool for economic management, we must regularly and courageously rework our priorities and the incentive structure. However, in our country, the budget appears to be on autopilot for the last few years, with allocations being increased and decreased based on thinking within the box.
The proposed budget also does not appear to reflect the political commitment of the ruling party. Before the 9th Parliament election, Awami League published in its election manifesto, Dinbodolar Sanad, an eight-point vision for 2021 with the purpose of “solving the crisis and creating a prosperous future,” which includes: (i) Caretaker government, democracy and effective Parliament; (ii) Political structure, decentralisation of power and mass participation; (iii) Rule of law and resisting politicisation to ensure good governance; (iv) Changing the political culture; (v) Creating a corruption-free society; (vi) Women's empowerment and creating equal rights; (vii) Economic development and initiatives; and (viii) Bangladesh in the world arena. Thus, before the election of 2008, the present ruling party clearly made commitments to both development and democratic governance.
Furthermore, in the election manifesto published before the 2014 election, the ruling Awami League made three clear commitments: democratisation, good governance and decentralisation. Unfortunately, in the present context, democratic governance has been sacrificed in the name of development. It is not therefore surprising that there is no visible initiative in the new budget to curb corruption. Rather through his statement in the after-budget news conference that there is corruption in the banking sector of other countries, the finance minister indirectly condoned the continued plundering of our financial sector. There is also no visible sense of direction for decentralisation in the budget. It is thus clear that the proposed budget does not reflect the political commitments of the ruling Awami League.
Rather what can be observed in the new budget is the tendency to recklessly increase spending. Even though the revised budget for FY2016-17 was slashed by Tk 23,000 crore or 6.9 percent, the proposed budget for FY2017-18 will be Tk 83,092 crore or 26.2 percent higher. We cannot fathom the reason for such an increase. The ADP in the proposed budget will also increase by Tk 42,631 crore or 38.5 percent, whose justification further defies us. We are not sure from where the capability for effectively spending such huge ADP will come.
The targets that the finance minister has set to finance the new budget appears to be totally unrealistic. Although the revenue income from the original FY2016-17 budget was slashed by Tk 24,252 crore or 10 percent in the revised budget, in the proposed FY2017-18 budget, projected revenue will increase by 69,491 crore or 31.8 percent. We do not understand how NBR will be able meet such an unrealistic target. The only way we could possibly reach such a target is to appreciate the value of taka, which could open the floodgate of imports, although it will mortally hurt our exports, especially of garments. In the same way, inflows from foreign aid and loans are projected to increase by Tk 23,153 crore or 80.5 percent, even though such inflows were reduced by Tk 7,534 crore or 20.8 percent in revising the FY2016-17 budget.
It is clear that there is no realistic basis for the proposed mega budget for FY2017-18. It appears that our finance minister has, like a magician, picked from his hat the number of Tk 4,00,266 crore as his spending target, and then arbitrarily set the targets for income sources, for which we find no justification. We also find no philosophical basis for budgetary allocations. Thus, the proposed budget is arbitrary at best. What is most frightening is that through this arbitrary budget, projects like Rooppur Nuclear Power Plant will be financed, which will place the future of our entire nation at serious risk.
The writer is Secretary, SHUJAN: Citizens for Good Governance.
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