Forward-looking but challenging

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Moazzem Hossain
The proposed budget for fiscal 2007-08, to be adopted through an ordinance after consideration of suggestions and recommendations from expert bodies and citizens that will be received up to June 14, 2007, is, on the whole, forward-looking.
While unfolding the proposed budget on behalf of the caretaker government, Finance Adviser Mirza Md Azizul Islam in his budget speech has taken note of the "crises, calamities and malgovernance" that the country faced at times of its history.
He has, at the same, mentioned the remarkable "positive changes" that its economy experienced over time, "despite political instability and administrative snags".
Such changes, as the Adviser stated, "have become possible due to hard work and undaunted spirit to overcome odds and entrepreneurial spirit of our people".
That is how the Finance Adviser has assessed the present state of the economy, while projecting a scenario where "Bangladesh will be able to march forward by competing with the countries in South and South-East Asia" under a favourable environment.
The maintenance of this "favourable environment" will be the main challenge of the government to steer the economy ahead on to a growth trajectory that will make it possible to see expansion of its gross domestic product (GDP) -- the aggregate annual value of goods and services produced in all its (economy's) sectors -- by 7.0 per cent in fiscal 2007-08, as projected by the Finance Adviser in his budget speech. And that growth has to be equitable so that it contributes meaningfully to poverty alleviation.
As far as the macro-economic environment now prevailing in the country is concerned, there are positive points that relate to its foreign exchange reserve, remittance flow, export receipts etc. But the price situation remains a matter of pressing concern in an environment where the global market has witnessed an upsurge in prices of some commodities that have relevance to the import needs of the country. Taming the price pressures will require to draw the priority attention of the government as supporting pro-poor growth will not be possible to achieve anyway without abatement of such pressures.
In his budget speech, the Finance Adviser has rightly stressed the need for having a competitive business environment, coupled with macro-economic stability, for accelerating "pro-poor growth". Here, efforts for reduction of costs of doing business -- including, of course, transaction costs -- will continue to be matters of attention. Without reforms for resolving long-standing governance issues, it will be difficult to reduce such costs and to facilitate the businesses to stay competitive in trade. A road-map with a time-frame for every action will require to be delineated for the purpose so that the process for such reforms can be trigged sooner than later.
The proposed budget for fiscal 2007-2008 has spelt out some areas where the caretaker government would like to see things improve. Such areas include implementation of the Annual Development Programme, reforms of tax administration, formulation of a new law separating tax policy from tax administration, expansion of physical infrastructural facilities etc. These are certainly matters of importance. However, specific time-bound framework for operationalising actions has not been clearly spelt out in many cases which is necessary to ensure delivery of results.
There are some noble aspects of the proposed budget. The move to make the quasi-fiscal deficit of Bangladesh Petroleum Corporation (BPC) and Bangladesh Power Development Board (BPDB) transparent, effect revenue management reforms, convert Bangladesh Biman into a public limited company, develop the bond market through amendment to the guidelines for provident funds, insurance funds and the like, put emphasis on operation and maintenance in the communication sector in the context of fact that "currently in Bangladesh each square kilometre has 0.70 kilometre of road" and expand the social safety net are, thus, moves in the right direction.
Having noted all these, it will be worthwhile to mention here that extra-ordinary efforts will be required to keep the overall budgetary deficit -- keeping the operational losses of the BPC and the BPDB into consideration -- within the target of 5.6 per cent of the GDP in the forthcoming fiscal. Such efforts will essentially relate to government's endeavours to achieve the estimated level of overall revenue collection and to secure disbursement of projected external assistance.
On the whole, the GDP growth target at 7.0 per cent that the proposed budget aims to achieve will require investments, both public and private, to pick up.
Public sector investment through the Annual Development Programme (ADP) have been estimated for the fiscal at Taka 265 billion which is 23 per cent higher than the revised ADP for the outgoing fiscal. The implementation capacity of the line ministries will have to undergo sea changes to ensure such investments that will also have to be qualitatively much better than before.
Private investment, both local and foreign, will be critically contingent upon several factors that essentially concern confidence of the businesses. Here both economic and non-economic factors are decisive for reinforcing and sustaining the confidence of the businesses. (Related editorial on Page 5)