The proposed Taka 2.95 trillion national budget for the forthcoming fiscal year (FY), 2015-16, that Finance Minister AMA Muhith presented last Thursday before parliament, has little surprises. Its size -- in terms of aggregate government expenditure -- reflects about a 23 per cent rise over that of the revised budget for the outgoing fiscal (2014-15); it is also about 56.8% higher than the actual figure for the previous one -- FY 2013-14. Whether funding the proposed overall public expenditure in the incoming fiscal in a business-as-usual way is feasible or not is a pertinent issue. It merits an objective and dispassionate scrutiny and analysis. However, there were enough indications, prior to its unfurling, about its likely size at the level or even slightly more than what has now been announced. That is preciously the reason why its proposed size has not come as a surprise.
The estimated size of the annual expenditure of the government through the national budget for FY 2015-16 will be around 17.2% of the country’s gross domestic product (GDP). From a wider perspective, the GDP-government expenditure ratio in Bangladesh is still lower than many of its comparator and other countries. This must, however, be interpreted quite cautiously. The outcomes and quality of public expenditure are matters of far greater consequence here. How far the increases in aggregate public expenditure over the years have contributed to efficiency and quality of services or works that are rendered or done by Government, is the moot point for consideration. This holds true for both current (non-development) and development expenditures of Government in Bangladesh. The non-development public expenditure includes the wages and salaries bill and all other recurring-type spending. Under the proposed budget for fiscal 2015-16, such non-development expenditure will account for 11.5% of the country’s GDP compared to 10.7% (of the GDP) in the outgoing one. In absolute terms, government’s non-development spending will rise to Taka 1.98 trillion in FY 2015-16 from Taka 1.61 trillion under the revised budget for the outgoing fiscal. Revision of pay scale and fringe benefits for public employees as well as payments of enhanced pensions and gratuities for the retired public servants will account for a substantial part of this proposed additional non-development expenditure.
The size of government expenditure relative to GDP apart, what has these days come into a sharp focus is the value that the ordinary citizens or taxpayers get in return. And all concerned do know what the public feeling in the country, on real or perceived grounds, is about this, going by the value-for-money principle. For non-development or current public expenditure to become cost effective, hard efforts for a quantum leap in public service delivery system assume critical importance. All successive governments never been found wanting in admitting this. But they have hardly moved into action to help improve things.
On the development side, the proposed budget for fiscal 2015-16 has allocated Taka 970 billion for funding the Annual Development Programme (ADP). This marks an increase of Taka 22 billion over the revised ADP of Taka 750 billion for the outgoing fiscal. However, all available indicators, as of now, would tend to suggest that the actual utilisation of the funds even under the revised ADP for FY 2014-15 would witness a notable shortfall. This will be obviously so, in terms of matching physical progress about implementation of development projects included in it. However, this has not been an unusual picture over the years in an uninterrupted sequence.
The development expenditure under the proposed budget for fiscal 2015-16, plus the additional amount of money that the autonomous bodies will spend on some of their respective projects under self-financing scheme, has been proposed to be raised to 11.6 per cent of the country’s GDP. If that can be realised at the end of the next fiscal, it will be a ‘quantum leap’ in ADP implementation capacity in a single year. This is because the share of development expenditure, taking with the revised ADP and self-financed projects of autonomous bodies into consideration, stands at 5.1% of GDP in the outgoing fiscal. From this point of view, the projected level of development expenditure in the forthcoming fiscal is obviously quite ambitious unless some ‘miracle’ happens about project implementation performance.
In his budget speech, the Finance Minister has been frank enough to admit the problems that have been impending the progress about implementation of ADP projects. Such problems are well-known for long and have been dragging on, without being addressed properly. This has been taking a heavy toll on the economy’s overall performance. Mr. Muhith has, again, hinted at taking some pro-active steps to unknot the tangles including those relating to the much-hyped-about public-private partnership (PPP) projects in the forthcoming fiscal. This is a daunting challenge before the government to redeem its promises on this particular front. This is particularly more so, because the forthcoming fiscal will be the launching year of the new Seventh Five Year Plan period. The score-card on the Sixth Five Year Plan period that terminates on June 30, 2015, is not savoury on several counts, for a variety of factors. In his budget speech, the Finance Minister has mentioned a number of such missing links between performance and projection.
To what extent the afore-mentioned ‘quantum leap’ in budget implementation capacity is feasible or possible under the country’s given situation is certainly debatable. This is more so in the absence of any visible progress witnessed so far in areas of hard and deep-seated institutional and other structural reforms. The government must demonstrate its ‘strong political will’ in carrying out such reforms to help strengthen governance in general and economic governance, in particular. It is now otherwise relatively better placed to be pro-active about it, not being hamstrung, at least for the immediate future by political adversities. The macro-economic fundamentals are also comfortable, measured by the variables that indicate their relative strengths or weaknesses. This should, therefore, provide it the opportunities for actions that are needed to move the economy on a steady and accelerated growth path with its benefits reaching the people at the grassroots. The current global economic situation, particularly that about oil and commodity prices, is another plus factor here. The budget speech of the Finance Minister takes note of all these factors. Its semantics, rhetoric, platitudes and repetitive verbiage must not make noise only. Rather, it is time for the government for actions.
Having noted this, it must be stated that the proposed national budget for fiscal 2015-16 faces its most challenging task in fulfilling the revenue collection target. The National Board of Revenue (NBR) has been given a target of realising Taka 1.76 trillion as taxes for FY 2015-16 under the proposed budget. Such a target, in the backdrop of a shortfall of Taka 190 billion under the revised budget for fiscal 2014-15 in relation to the original one for the year, will involve a Herculean task in areas of expansion of tax network in particular. Its performance will depend not only on its stepped-up drive for revenue collection but also on the momentum of overall economic activities, mostly in the private sector.
The proposed budget for the forthcoming fiscal projects the economy’s growth rate at 7.0% and sets the inflation target at 6.2%. Growth will critically hinge on the level of investment in the private sector. Maintaining the inflation target will call for appropriate, effective and concerted reflex actions by the fiscal management authorities and the monetary watchdog. Any discordant trend about fiscal developments and monetary management policies will make it difficult to keep the price level within the projected level. Last but not the least, boosting private sector investment activities that have remained stagnant for a considerable period of time will in no way be influenced by anyone’s wish-lest. There is no push-button arrangement. For this to happen, the factors that have deterred such investment will need to be addressed, very carefully and seriously, on a priority basis. That is also critical to enable the Bangladesh economy to come out of, what the Finance Minister said, ‘6.0 pc growth trap’ and to move on to a higher growth trajectory.
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