Economists react to FY22 budget, deficit, implementation to remain top challenges

With the budget for 2021-22 fiscal year finally being passed in the parliament on Wednesday, economists say meeting the deficit and implementation are going to be the main challenges now.

Professor Selim Raihan, executive director of the South Asian Network on Economic Modeling (SANEM) and professor of economics at Dhaka University, said he did not notice anything in this budget that is intended for economic recovery. 

“Overall, it seems to us that this budget has been weakly estimated and the implementation constraints will challenge us,” he added.

Although the budget title talks about life and livelihoods, it has nothing to do with reality, he further said. 

“Since the exact picture of all the issues were not highlighted in the budget, we did not get a solution for the coronavirus situation. However, there was no lack of goodwill on the part of the government.”

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Noting that 75% of the budget was implemented in the last fiscal year, he said the budget for FY22 lacks any plan on how to bolster implementation. 

“The budget should have raised spending on health, education, and social security,” he added.

Economic analyst Nazrul Islam told Dhaka Tribune that a large part of the budget that was allocated last fiscal year could not be implemented because of the pandemic.

Even the health sector could not use large sums of money; but the lessons learned from that experience did not reflect in this budget, he added.

He also noted that a clear projection and an execution plan is missing in the FY22 budget. 

Allocation for vaccination may require more in the coming days. However, getting back to regular economic activity is the biggest challenge, he further said.

“The government has not taken any steps to increase tax collection. We have to be careful to meet the budget deficit or else both investment and employment will be hampered,” Islam added.

Dr Muhammad Shahadat Hossain Siddiquee, professor of the Department of Economics at Dhaka University, said most countries formulate their budget considering the deficit — this is the biggest challenge. 

“Due to Covid-19, earning revenue from savings certificates, and loans from foreign and local sources will be difficult,” he explained.

The International Monetary Fund (IMF), World Bank, and other bodies will not be able to provide such huge sums of money to all those budget deficit-bearing countries, he said. 

Another option for the government would be to print more money, but that might raise inflation, Siddiquee added.

Dr Khondaker Golam Moazzem, research director of the Centre for Policy Dialogue (CPD), said sector-wise budget allocation could have been expanded. 

“Amid the coronavirus crisis, employment generation is focused on the private industry. But many government projects require a bulk of manpower where employment generation should be focused on at this time,” he said.

Vaccination and social safety net sectors require more importance as well, he added.

Citing the money-whitening facility, the economist recommended that an integrated financial system is necessary to stop this. 

Bodies such as the National Board of Revenue and Bangladesh Bank should form a system to stop black money. 

“Providing this [money-whitening] scope only benefits a certain portion, not the whole economy,” he added.

With an outlay of Tk603,681 crore, Finance Minister AHM Mustafa Kamal proposed the national budget for the 2021-22 fiscal year in the parliament on June 3.

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The new budget is about 17.4% of the GDP and around 12% higher than the revised budget of the previous fiscal year.

The size of the total expenditure has been estimated at Tk603,681 crore, which is 17.5% of the GDP.

Total allocation for operating and other expenditures has been set at Tk378,357 crore, while the allocation for the annual development program (ADP) is Tk225,324 crore.

The total revenue collection has fixed at Tk392,490 crore, of which Tk330,078 crore will be raised by the where National Board of Revenue (NBR) Tk16,000 crore will come from the non-NBR sector and Tk43,000 crore will come from non-tax sources.

Besides, Tk3,490 crore will come from foreign aid, grants and loans.

The overall budget deficit for FY2021-22 will be Tk214,681 crore, which is 6.2% of the GDP.