Challenges before Finance Minister

Finance Minister AMA Muhith presents tomorrow (Thursday) the national budget for the fiscal year (FY), 2014-15, to Jatiya Sangsad (JS). The usual updated statistics, data and figures will be the key features of the budget documents. These are undeniably important to make an overall assessment of the state of the economy and its prospects for further improvements in the near-term. But they will be of least importance for the ordinary citizens.

Already a number of operational aspects of the budget for the forthcoming fiscal that begins on July 01, 2014, its possible expenditure lay-out (covering both current or recurring and developmental ones) as well as the likely fiscal strategy for mobilising resources, have been made public, courtesy of the media, the pre-budget consultations and meetings at various levels, and the Finance Minister's own statements on different occasions, on the eve of the presentation of the budget itself.

However, some last-minute changes or surprises -- pleasant or unpleasant ones -- are not ruled out. If this happens, that will add new elements to what has so far been reported. The national budget does ultimately reflect the trade-offs of politico-economic nature where the government remains the 'arbitrator' to accept or reject the proposals that have come from different sections of people, considering the costs and benefits of the same on the basis of some sound rationale.

So far so good. For the lay public, there are a number of areas that are of critical importance apropos the budgetary proposals that will, under customary practices and constitutional requirements, be debated in parliament before the Finance Bill and the Appropriations Bill are finally endorsed by it. Those areas relate to costs of living and price situation, creation of new job opportunities, income generation and its distribution pattern, quality and standard of services by government and its affiliated bodies or organisations and overall state of governance.

How will the budgetary proposals, to be made for the next fiscal, impact all such areas? That is the prime issue of concern for the common people. It is otherwise a challenging task for the Finance Minister to address such mundane matters of people's concern. Here the new proposals about fiscal measures to provide the wherewithal (in addition to external assistance) for meeting the overall budgetary expenditure outlay, will be one of the key operational aspects about the budget itself. And the expenditure outlay, covering revenue, non-development capital and the development ones, and sectoral resource allocation pattern will be another critical area of consequence.

The size of the aggregate budget, from the fiscal management point of view within a reasonable level of budget deficit, is certainly important. But what is of far greater importance is the quality of overall public expenditure in order to link effectively the inputs with the outputs so that costs and benefits do not run afoul of people's needs and expectations. This issue largely concerns the governance-related factors.

A great deal of hard efforts will be called for, so that the institutional and structural problems -- the problems that have been lingering for long and are no regime-specific ones -- are addressed effectively through hard reforms, matched by strong political will of the government.

Meanwhile, the current investment situation in the country gives a disconcerting picture. The level of private investment remains at a depressed level and the amount of excess liquidity in the banking sector bears out this sluggish trend. Certainly, public investments, particularly in view of their aggregate size and the level of their existing quality, can, under no circumstances, be considered an alternative to private investments.

The main driver of the economy is the private sector and the government's major task is to play a facilitatory role in catalysing private investments that create new jobs, generate incomes and help move the economy forward to a higher growth trajectory.

All concerned will look forward to the budgetary proposals for the forthcoming fiscal year to critically assess and examine how these are going to help spur private investments. A whole range of issues are involved here. Infrastructural deficit, tariff structure, scarcity of land, slow progress in operationalising Special Economic Zones, corporate tax rate, trade policy, effectiveness of regulatory bodies, law and order, policy stability, fears about political uncertainty on real or perceived grounds, governance-related issues etc., can be cited here.

Certainly, the national budget cannot address all such issues. But it can provide some major hints at doing the 'do-ables' within a given time framework while shedding light on how the government itself would like to go ahead effectively with its action plan to help remove the constraints that are responsible for the prevailing situation about private investment.

There is no denying that Bangladesh will continue to face unpropitious prospects for attracting foreign direct investments (FDIs) if the local private investors remain shy about making new investments. This will be so, notwithstanding the fact that the new geo-political and emerging economic realities indicate a greater interest among foreign direct investors to shift their locations or sites away from the erstwhile dominant ones in South East Asia, the Far East and other regions in Asia. Bangladesh is locationally ideal for attracting more FDIs but its investment environment has not unfortunately changed for the better.