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‘Govt has set unrealistic targets in FY21 budget’

  • Published at 04:32 pm June 11th, 2020
parliament National BUdget FY2020-21_11.06.2020
File photo of a session underway in Bangladesh Parliament PID

Experts express heavy scepticism over the proposed national budget for fiscal 20-21

Reacting to the proposed budget for the 2020-21 financial year, economists have said that the government has bet on unrealistic projections of revenue generation to meet the expenses and also an unachievable GDP growth.

In addition, the Social Safety Net Program and allocation are not designed with the needs of the people, especially for the new poor created by nationwide shutdown aimed to tackle the Covid-19 pandemic, they said.

These are reactions after Finance Minister AHM Mustafa Kamal proposed a Tk568,000 crore national budget for FY21 in parliament on Thursday.

Amid the uncertainty over economic recovery, the government has set an 8.2% GDP growth for FY2020-21 and a revenue target of Tk378,000 crore — at a time when business activities are stagnant because of the pandemic.

“The revenue target set by the government to implement the budget is not realistic and collecting the revenue will be very tough for the next fiscal year,” Ahsan H Mansur, executive director of Policy Research Institute, told Dhaka Tribune in his instant reaction.

On the other hand, taking such a big amount from the banking channel is not possible, and that would further deepen the private sector credit growth, said the economist.

The government will have to seek an additional source of revenue, especially external sources, as it will have a shortfall of at least Tk80,000 crore in revenue, Ahsan said.

The revenue collection target for FY21 is Tk378,000 crore, of which Tk330,000 crore will come via NBR. The Non-NBR revenue collection target has been set at Tk15,000 crore, while the non-tax revenue collection target is set at Tk33,000 crore.

When Covid-19 infections are on the rise and economic activities are stagnant, an 8.2% GDP growth is not achievable, Ahsan said. “In addition, amid the health crisis, there will be no new investment from home and abroad.”

Meanwhile, the budget did not properly address other concerns, especially the social safety net is not designed with the needs of the time, it is rather focused on existing programs.

“The country is passing through some risks in major areas, such as health, economical, social and humanitarian. But the proposed budget did not address these concerns properly,”' said Mustafizur Rahman, distinguished fellow of CPD.

In addition, he said, there is a strong need for more allocations in the social safety net to reduce inequality and poverty as the Covid-19 pandemic has sharply pushed the poverty curve up.

New issues ignored

Under the social safety net, the government did not focus on the new issues, rather it gave importance on excising, said Ahsan H Mansur. “There should be a cash transfer fund for the new poor for a certain period.”

The poverty rate may go up to 35% from existing 20.50%, with the new poor being in a crunch as they have lost their income, he said referring to a CPD report.

CPD observed that the government is moving forward with a weak revenue collection structure.

“We think that not more than Tk250,000 crore will be collected this year given the ongoing situation. Besides, it's thought that we will overcome the pandemic’s impact within a short time. As the health risks are increasing day by day in the country, we don’t think that the situation will be normal soon enough. The country’s economy is at risk too,” Mustafizur said.

He added that it is not clear how any money will be saved from the Annual Development Programme (ADP) to meet the budget deficit, which is Tk190,000 crore or 6% of the GDP.

Meanwhile, research organization South Asian Network on Economic Modelling (Sanem) also opined that the revenue target is unrealistic.

SANEM Executive Director Selim Raihan said: “Targeting an 8.2% GDP growth rate for FY21 raises the question whether it has been assumed that economic activities will return to normal shortly and economic growth will resume its previous trend.”

“This assumption means economic activities will quickly pick up the normal pace and the economy will experience a ‘V-shaped recovery’,” he added.

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