Covid crisis felt in speech, not in allocations: CPD

The new budget proposed for the next fiscal year reflects more clarity of thinking about the Covid-19 crisis and its management compared to the one for the fiscal 2020-21, but allocations and measures are inconsistent, especially in health, agriculture, and employment generation, says the Centre for Policy Dialogue (CPD).

It says the macroeconomic framework for the proposed budget does not match the reality while a lot of information is inconsistent with the ongoing Eighth Five-Year Plan.

At a post-budget press briefing at a hotel in the capital on Friday, the CPD said reforms in various sectors of the economy had become urgent during the pandemic, but no effective announcement to this end was made in the budget for the fiscal 2021-22.

Although medium- and long-term plans are needed to recover from the economic losses caused by the pandemic, the budget does not specify what initiatives will be taken in the next three to four years in this regard, it said.

Presenting the keynote, Dr Fahmida Khatun, executive director of the CPD, said, "The finance minister said in his budget speech that health, agriculture, and employment generation will be prioritised, but the actual allocations do not reflect these promises."

She said these three priority sectors had not been allocated adequate resources.

Prof Mustafizur Rahman, distinguished fellow of the CPD, said if the finance minister had not mentioned it in his speech, it would not have been clear from the allocations that the budget was made considering the Covid-19 crisis.

Describing various facilities announced for the private sector in the budget as positive for the economy, he said these would help businesses turn around and would facilitate new investment as well.

Dr Fahmida said in her keynote, increasing the VAT-free turnover limit, tax exemption for the information technology and some other sectors would help to increase the investment.

She praised tax exemption in the health sector, especially in importing PPE, testing kit and some other coronavirus-related materials, as a positive initiative and also the tax waiver in locally producing material for active pharmaceutical ingredients (API).

She said the cost for treatment is high in Bangladesh due to the high price of medicines. Lower cost API will make it possible to manufacture medicine at lower prices in the country.

The CPD also welcomed tax exemptions for small and medium enterprises. Dr Fahmida said, the SME sectors contributing about 22% of the GDP in Bangladesh and medium term tax exemption would help the sector to grow by 32% of the GDP target set by the government.

She also said, the proposed budget emphasised on export diversifications and manufacturing of import subsidized products, which would boost for the made in Bangladesh products. The initiative would help to increase export and reduce dependency on import.

She said the proper utilisation of exemption would bring down revenue collection in the short run, but there would be long-term benefits through increasing investment, production, income and revenue of the government.

The think tank called for protesting the misuse of the exemption to ensure highest benefit.

The CPD expressed concern over the absence of proper reforms initiatives in the proposed budget as reforms are more essential and easier in a pandemic period.

Fahmida Khatun said, the National Board of Revenue needs key reforms, including technological ones.

She said reforms and accountability in evaluating the government's development projects should be increased.

Mustafizur said allocation in the health sector is low and the ability to spend the allocation in this sector is less as well. "Efficient spending by allocating enough money in this sector will help develop a good healthcare system after the pandemic ends."

He suggested ensuring the modernisation of 16,000 community clinics to decentralise the healthcare system.

A large number of people lost their jobs due to Covid-19, he said. "Despite some recovery in employment, people's earnings are yet to recover. Covid-19 worsened poverty and inequality."

"But the finance minister did not propose any allocation for social safety net programmes for the new poor. He did not offer any new project or programme to protect jobs or create new employment," he added.

Mustafiz also said despite the comfort situation in some fields like food security, lower inflation, stable exchange rate, reserve of the foreign currency, the government prepared the budget on weak assumptions.

He said the base of the proposed budget is the revised budget of the current fiscal year. Lower implementation of the current budget would make a larger difference in the target of the next fiscal.

Fahmida said social security allocation had increased marginally in the new budget, but the net allocation, excluding pensions, remained at 2.4% of GDP.

She said many who deserve this assistance are not getting it due to the lack of a proper list of beneficiaries while many of the rich are taking advantage of it.

The CPD said there was no major leap in agriculture despite increased allocation, adding that allocations in terms of GDP had actually declined.

It said despite efforts to ensure job opportunities in industries by offering a variety of benefits, direct allocations for employment generation had fallen.

She said the government should increase allocation for the education sector as teaching activities had remained almost closed for more than a year due to the pandemic.

"The increase in allocation for the education sector was nominal. In terms of GDP, the allocation is the same as that in the current fiscal year," she added.

"The government considered the allocation for the Rooppur Nuclear Power Plant with the education, that is the allocation for the sector seems too high," she said and identified it unethical.

Dr Khondoker Golam Moazzem, research director of the CPD said, "We have expectations of higher employment through increasing investment, but we did not find it."

"There would be lots of employment after the project to set up several Bangladesh Small and Cottage Industries Corporation (BSCIC) industrial estates was finished, but allocations for such projects had decreased.

"When it comes to creating direct employment, three of the four ministries have seen their allocations decrease," she said.

He also said that tax exemption is not sufficient for the CMSMEs as they have no money on their hands to invest. They have no capability to repay any loan. The government should transfer some money from fiscal measures instead of loan support, he explained.

Towfiqul Islam Khan, senior research fellow of the CPD said at the event, the budgetary allocation of the several sectors does not reflects the attitude of the finance ministry.

The ministry did not consider the current situation of the economy when formulating the budget.