The Taka5,68,000 crore national budget for financial year 2020-21 was announced on Friday under unique circumstances. The thin presence of the masked MPs in the House amply focused the unique time when this very budget was presented by an embattled Finance Minster. Unfortunately, not an iota of understanding or appreciation was noted among so called analysts and even some think tanks when they expressed their opinion on next year’s budget. The opposition BNP, as expected, dismissed the event sarcastically as if it was like building castles in the air. They characteristically described the new budget implementation as impossible. Others joined the chorus with enthusiasm.
But the chorus has been the same ever since the then celebrityFinance Minister (FM), M A Muhith, initiated the trend of bigger and bigger budget presentations from financial year 2010-11. In that year the budget’s size was Tk 1,13,819 crore-a big jump from the previous year’s 99,962 crore. It was the biggest ever national budget of the country and there was no looking back for the FM from that period. Thus, the budget’s size increased to 1,32,170 crore in FY 2011-12, Tk 1,63,589 in 2012-13, Tk 1,91,738 crore in 2013-14, Tk 2,22,491 crore in 2014-15 ,Tk 2,95,100 crore in 2015-16 and so on
Of course the above were projected sizes of the annual budgets in thoseyears ; the projections were later scaled down or ‘revised’ as the budget makers say that reflected actual resources mobilized and spent. But the revised budgets were not substantially smaller than the projected ones in terms of resources that were actually available and could be spent. Therefore, the revised budgets, too, tended to be progressively bigger and bigger in size and were seen as reasonably well implemented because the concern expressed every time in the last five years about not collecting additional resources through taxation proved to be wrong. The increased revenue collection each year from FY 2010 did fall short of targets in some years but only by a small margin and in some years even exceeded the targets. Thus, on the whole, the targets of progressively increased collection of tax revenues during the last half a decade were reached or no big deficits were created Indeed, the national budgets–either in proposed form or their revised versions–during the last six years, only reflected substantial increases in their sizes compared to the past.
Increasing the size of the national budget in a country like Bangladesh is like doing what the doctor ordered. Economies of older and developed countries in many cases do not normally require bigger budgets as they have already stretched their economic growth potentials to the margins. The need to only maintain the current level of their economic performance and are not so much faced with the problems of providing jobs for the first time to an ever growing number of unemployed youths. These countries are, thus, expected to make their economies tidy through careful and controlled budgetary expansion in order to guard against inflation, retain currency values and take care of other related needs.
But even among the developed countries and particularly in the by far the country with the biggest economy, the USA, the culture of presenting deficit budgets–keeping an imbalance between actual mobilization of resources from taxation and the real spending–while making up the deficit through borrowing, has been noted for many years. Nonetheless, the system worked and achieved maximum contentment for the biggest number in the population. Only in recent years and as the size of the national debt climbed to worrying levels that the government there has become seriously concerned with preparing budgets with less deficit spending.
Therefore, Bangladesh has done nothing unusually injurious or innovative by attempting to introduce progressively bigger and bigger budgets in recent years and to pass on the benefits of the same to the greatest number in the population through deficit financing like in the USA. Notably in our context, budgetary deficit in the last five years every time remained within 5 per cent or at the easily absorbable or safe level.
Of course, the deficit is projected to be bigger in the coming year and much greater deficit financing must be allowed in view of the corona threat. But is there any alternative to this ? The FM has courageously declared in his budget speech that he will first think of spending enough to save people than earning income . This attitude and intent is realistic and pragmatic. But his realism was met by only scorn as if the naysayers know better or have any better solution to offer.
The FM also underlined in his budget speech that there would be no shortage of money to help people survive through higher allocations for social safety nets, outright cash hand outs and other measures. So, there will be unavoidable monetary expansion on ‘consumption’ amid no short time expectation of economic recovery or investment or growth. This would be a very daunting challenge for any government to face. But as the FM underlined, government would not be printing money freely with great risks of courting hyperinflation in the process. The fiscal year 2020-21 aims to keep inflation limited to 5.4 per cent.
How the financing gap will be bridged safely? The FM was not boasting but pointed to fall back strategies like limited utilizingof the country’s substantial foreign exchange reserve, pruning unnecessary public expenditures, transferring limited resources from the Annual Development Plan (ADP), etc. as ways of bridging the gap between expenditures and revenue receipts without opting for the extremely risky path of just printing money. Besides , it is sensed that the domestic demand situation is strong and internal production and supply situation may be expected to bounce back if the corona pandemic shows a downward trend a few months from now. Already exports are seen to be surging up after the very big slump in April. From these and other hopeful developments in the coming months, revenue generation could significantly increase in the course of FY 2020 to much reduce deficit financing. A greater silver lining is seenfrom funds committed by the donors namely the World Bank (WB), Asian Development Bank (ADB) and others as budget support to Bangladesh during the Corona threat.
It appears credibly that National Board of Revenue (NBR) has its plan fine tuned to meet the unique taxation challenges of the next year. It has already reformed its tax structure to that end. Only consistent and innovative adjustments and adaptation during FY 2020 will bring us out of the woods.
