Saving lives, tackling inequality must be budget priorities

Budget 2021

Dhaka, May 31 – The national budget for the fiscal year 2021-22 should focus more on tackling inequality through redistribution and saving lives amid the pandemic, rather than economic growth, according to the Centre for Policy Dialogue (CPD).
Finance Minister AHM Kamal is expected to present a Taka 6.03 trillion budget in Parliament on June 3, a day after the budget session began.
The budget should set targets on employment and growth in income at the household level rather than GDP growth or per capita income.
Institutional weaknesses and the inability to implement the reform agenda have undermined Covid responses in FY2021.
While the government did come up with several initiatives to mitigate the sufferings of the people and overcome the adverse effects on the economy because of the pandemic, the much-expected turnaround is still not there.
A large portion of people, who are poor and in dire need, did not receive any form of support from the government – whether in the form of relief items, liquidity support or fiscal stimulus.
Stimulus packages provided through banks created new avenues for corruption and malpractices. Liquidity support and fiscal stimulus packages rolled out without prior assessment of the ground realities may not be able to address the needs of the most vulnerable people in society.
Inherent weaknesses in the banking sector are undermining the government's efforts to trigger economic recovery through bank-dependent stimulus packages.
Attempts to trigger private sector investment through subsidies, incentives and working capital support have been unable to compensate for the inherent challenges that continue to undermine the competitiveness of the private enterprises.
Generating domestic resources to underwrite the needed resources has been weakened in the absence of the much needed fiscal reforms.
Revenue generation figures remain way below the targets, and redistributive functions of fiscal policies cannot be activated because of the low enforcement capacities and failure to implement long-awaited fiscal reforms.
FY2021 export growth remains way below target. Even during the pandemic, the much needed expansionary fiscal-budgetary policies could not be implemented because of continuing and endemic weaknesses of implementing agencies and line ministries. No tangible change could be brought in terms of the capacity to both earn and to spend.
Although positive developments were observed in cases of export earnings, remittance inflow and foreign exchange reserves, disquieting trends were evident as regards overseas migration, import of capital machinery and FDI inflow.
Instead of designing a Covid-specific budget, the government largely opted for a business-as-usual one in 2020. The assumption was that managing the fallout from Covid-19 will be easy, and the economy will bounce back within a short period in FY21.
Recovery from the entire fallout will take much longer than expected – susceptible to changes like Covid-19 and the availability and effectiveness of vaccines. The government needs to formulate a medium-term recovery plan.
The observations came up at the virtual briefing organised by CPD on "The State of the Bangladesh Economy in FY2020-21" Monday, organised ahead of the budget to be announced this week.
CPD also called for a focus on the formulation of a medium-term recovery plan, pursuance of expansionary fiscal policy; putting supportive macroeconomic and sectoral policy measures in place and enhancing institutional capacity and collaborative efforts.
From the public expenditure side, priority has been urged for social safety net expenditure, health and education, and Cottage, Micro and Small Enterprise-oriented investment-augmenting measures.
The transparency and accountability of Bangladesh's Covid-19 stimulus plan will be key to its successful operationalisation and implementation, CPD said. - UNB