A mixed bag of worries and pragmatism

---

Shamsul Huq Zahid
The proposed national budget announced by Finance Adviser Mirza Azizul Islam Thursday for the fiscal 2007-08 appears to be a blend of boldness and pragmatism, amid worries.
The finance adviser has preferred to deviate from the traditional way of budget-making for the sake of, what he said, transparency, and take a few risks so far as budget deficit is concerned.
While admitting the government's failure to rein in the rising prices of commodities, mainly due to external factors, in the outgoing fiscal 2006-07, the finance adviser has incorporated a few fiscal measures in the proposed budget for the next year to mitigate the sufferings of the poor consumers. Those will be in addition to the government's market intervention mechanism and the expanded social safety net programmes on a limited scale within the resource constraints for poor and destitute people.
The finance adviser proposed complete withdrawal of customs duty on crude edible oils, lentils along with continuation of the duty free benefit for import of essential commodities such as rice, wheat, onion, matar dal and chola dal.
The proposal to increase the rate of specific duty on raw sugar by Tk. 1750 a metric tonne does not, however, fit in with the government's efforts to bring down the soaring prices of commodities. However, taking into consideration the prevailing sugar prices at the retail level, the consumers may not grumble much provided the possible hike in sugar goes in line with that of duty rate.
Inclusion of quasi-fiscal costs for losses incurred by the Bangladesh Petroleum Corporation (BPC) and the Power Development Board (PDB) for going by the government administered prices for fuel oils and power tariff respectively in the next budget and provision for subsidy to farmers hit by the hike in diesel price in the proposed budget for next fiscal can be considered bold steps. But such steps are fraught with risks, considering its possible adverse impact on fiscal deficit, particularly in the event of shortfall in revenue collection and projected external aid flow.
Inclusion of hidden costs, according to the finance adviser, would push the budget deficit up to 5.6 per cent next fiscal, the highest in recent years, leading to increased borrowing by the government. Any shortfall in revenue mobilisation, particularly by the national board of revenue (NBR), may put the government in real trouble. This may also be true in case of foreign aid flow.
But the fact remains that it is a case of Hobson's choice for the government so far as the burden of accumulated liabilities of BPC and PDB is concerned. After dilly-dallying in the past government had to shoulder the burden of the liabilities of these state-owned entities. But those had never been reflected in the budget.
Everybody would love to see the assurance given by the finance adviser in his budget speech that the higher budget deficit would not hinder the flow of credit to the private sector or create any negative impact on the economy to come true.
The allocation of Tk. 7.5 billion in the proposed budget to subsidise the additional cost that the farmers would be bearing on account of the rise in diesel prices is yet another bold step. The finance adviser said only the cardholder farmers would be entitled to receive the subsidy. But disbursement of the said subsidy on an extended scale will be, no doubt, a challenging job and the government would have to evolve an appropriate mechanism to ensure that the benefit reaches the deserving ones.
If one goes by the trend in tax revenue mobilisation in the outgoing fiscal, a 17 per cent growth in tax revenue in the next fiscal over the revised revenue target for the fiscal 2006-07 might appear rather ambitious to many. However, the ongoing drive against corruption and tax evasion coupled with measures to end procedural complexities generally experienced by the taxpayers and to bring in more taxpayers under the tax net might have encouraged the finance adviser to set such a target.
The approach proposed by the finance adviser so far as implementation of the annual development programme (ADP) for the next fiscal year is concerned also appears to be pragmatic.
According to the finance adviser, only pro-poor and growth-enhancing projects would be taken up for implementation and the process of discarding unnecessary projects has already begun. In addition, the size of the block allocation that had been a subject of much hullabaloo in recent years will be at a lower level in the next fiscal-only 5.0 per cent as against 16 per cent in the budget for the outgoing fiscal.
The finance adviser has followed the strategy that has been in place in recent years to offer help to the poor and socially disadvantaged people under the social empowerment and safety net programmes except for the introduction of a pilot programme under which 45000 poor lactating mothers in 3000 unions, for the first time, will be getting a monthly allowance of Tk. 300 each in the next fiscal.
But the prevailing situation calls for immediate strengthening of vulnerable group feeding (VGF), test relief (TR), food for work programme (FWP) etc., for the hardcore rural poor who are finding it really hard to survive due to escalating prices of essentials. Budget, ADP and related projections and promises are alien subjects to them. What is important for them is survival.