What story do key data mismatches tell?

Finance Minister AHM Mustafa Kamal has acknowledged shortage of data in preparing the budget for the next fiscal year as he says "due to the Covid-19 pandemic, we do not have all kinds of data in front of us for this year".

But some data he has come up with in budget documents setting macroeconomic targets for the new financial year suffer from discrepancy.

Take export growth projection, for example.

The budget proposed by the finance minister on Thursday in parliament projected 15% export growth in the coming fiscal year.

But the projection in the 8th Five-Year Plan (8FYP) approved last December after the first wave of the pandemic projected 10.3% growth in the coming year. Even the Five-Year Plan did not raise the bar above 11% up to FY25.

Similar picture is found in the import growth projection.

The proposed budget set a target of 14% import growth in FY22 while the Five-Year Plan projected 10% growth. The Five-Year Plan did not raise the bar above 12% up to FY25.

The biggest discrepancy is found in remittance growth. The revised budget for FY21 projected 35% growth while the proposed budget targeted a 15% growth. The 8FYP prepared by the planning ministry projected only 7% growth for FY22 and the projection remains the same up to FY25.

"It appears that the budgetary framework anticipates most of the macroeconomic correlates to perform better than the targets set in the 8th Five-Year Plan," said the Centre for Policy Dialogue (CPD) in its post-budget analysis.

The revenue growth has been projected at 10% from that in the revised budget, which would be 30.5% higher than the projection of the original budget for the outgoing fiscal year.

"This target is hard to achieve. Given the overall weak macroeconomic situation due to the pandemic, key projections should have been more realistic," CPD Executive Director Dr Fahmida Khatun said in the post-budget briefing on Friday.

The think tank found discrepancy in all key macroeconomic data, except for GDP growth and inflation.

"The macroeconomic framework is largely flawed and far from reality!" said the CPD.

The proposed targets in FY22 budget are far from reality if the most likely actual figures at the end of the ongoing fiscal year are taken into consideration, it said, adding that this has significantly weakened the fiscal framework that forms the FY22 budget.

The GDP growth projection has also a story to tell.

The medium-term macroeconomic policy statement FY22-24 placed in parliament by the finance minister predicts a revised growth of 6.1% in the current fiscal year although the Bangladesh Bureau of Statistics has yet to release a provisional estimate of growth for FY21.

Even the final estimates for FY20 are still unavailable.

The macroeconomic framework takes the revised budget targets, which the CPD believes are unlikely to be achieved as reference points and assumes that most of the macroeconomic correlates would perform better than the targets set in 8th Five-Year Plan. The official growth projection is higher than the latest forecasts of 3.6% by the World Bank and 5% by the International Monetary Fund.

The Asian Development Bank, however, forecasts 6.8% – which is even higher than what the government expects in FY21.

The growth target set by the finance ministry for FY22 is 7.2% and it will gradually rise to 7.6% in FY23 and 8% in FY24, says the statement.

The targets set in the 8th Five-Year Plan, however, are a little different. It projected 8% growth in FY23 and 8.3% in FY24.