Experts say it must also address challenges of achieving revenue target
To revive Bangladesh’s economy, vaccination of citizens by the end of next fiscal year 2021-22 should be the highest priority, experts said during a webinar on Monday.
The proposed budget must also address the challenges of achieving revenue targets, they also said.
Bangladesh is still lagging behind in vaccinating its people in contrast to major trading partners who have already vaccinated a significant portion of the population with the economy returning back to normal trends, said Ahsan H Mansur, executive director of the Policy Research Institute (PRI), during a virtual post-budget discussion by PRI and Metropolitan Chamber of Commerce (MCCI).
The country will need 24 crore doses of vaccines by the end of June next year, he added.
Planning Minister MA Mannan, chief guest of the event, pointed out that developed nations have been playing favourites on vaccine aid, choosing allies over low income countries that really need them.
Moreover, to achieve the 8% growth target of the 8th FYP, fiscal, financial, and trade policy reforms will have to be addressed by future budgets to keep flying the flag of economic achievements, he also said.
The minister added that although supporting policies have been laid out for industrialization, promoting exports of goods and services, huge outlays for the ten megaprojects, and much more will depend on their execution.
According to Zaidi Sattar, chairman of PRI, fiscal budget plans have enabled such growth, and although the predominant narrative in the current budget discussions has tended towards negativity, it is not a one-off policy event.
Priorities are economic recovery from the pandemic, implementing stimulus packages, improvements in health care, education, food security, human resource development, support to SMEs, infrastructure, and a poverty reduction,” said Sattar.
He pointed out that despite the pandemic, the government’s decision to limit the budget deficit to 6.2% of GDP (Tk2.14 trillion) is symptomatic of the preference for fiscal prudence over profligate spending.
Budget deficits create public debt leaving the public debt-to-GDP ratio unchanged, said the PRI chairman.
However, PRI said that a 6% deficit is sustainable. In Bangladesh, fiscal deficits under 5% of GDP from 1991 (-2.2%) through 2019 (-3.9%) were sustainable, which induced a decline in the public debt-GDP ratio from 45% in FY91 to 35% in FY19.
“Only after the inclusion of Covid-19 stimulus packages in FY21 and FY22 budgets do we see a rise in the estimated fiscal deficit to 6% of GDP. Financing the 6.2% deficit will be 45% from external sources-mostly multilateral loans- and 55% from domestic sources such as the banking system and the public,” said Zaidi Sattar.
However, there is a need for a much higher and broader payout of cash support to the poor, whose numbers have risen substantially due to the pandemic, said the MCCI.
The association's president Nihad Kabir, moderating and co-chairing the discussion, pointed out the budget's implementation and quality spending of the allocation would be the major challenges.
Revenue mobilization is going to be tricky, she added.
According to both MCCI and PRI, in the absence of significant tax reforms, tax revenue mobilization has consistently fallen short and has usually held back expenditures that were planned.
Without significant tax reforms, revenue targets will fall short by at least one percent of GDP, considering tax collection is likely to remain subdued because of the pandemic, they observed.
Although MCCI lauded the FY22 budget’s stated goal of bringing back lives and livelihoods to a reasonably stable situation without worrying too much about any deficit and lack of growth, it said the proposed budget has not indicated any specific reform and restructuring of the tax policy and tax administration to enhance its capacity and deliver the right kind of public services.
Experts also pointed out that the FY22 budget could do more for exports.
"Given the target of 8%+ average GDP growth during the next three years of the 8th FYP, every budget should deepen trade and tariff policy reforms to make exports more attractive than domestic sales. Only then can we have traction in export diversification,” Zaidi Sattar stated.
Experts also urged the government to reconsider increasing tax on mobile financial service (MFS) providers, reasoning that it was a rising sector in the country.
Commerce Secretary Tapan Kanti Ghosh, Rupali Chowdhury, president of the Foreign Investors' Chamber of Commerce and Industry, Waseqa Ayesha Khan, chairman of the Parliamentary Standing Committee on the Ministry of Power, Energy and Mineral Resources, Abul Hassan Mahmood Ali, chairman of the Parliamentary Standing Committee of the Ministry of Finance, Adeeb H Khan, chairman of the MCCI's Tariff and Taxation Sub-Committee, and MCCI Vice-President Anis A Khan spoke on the occasion.