Budget FY14: Why call it ambitious and unrealistic?

Abul Basher The story goes like this. There was very social and amicable rabbit in a forest. She never failed to exchange greetings whoever she meets, known or unknown, while roaming around in the forest. But in one morning she was running so fast that she did not have time even to look at other animals she met. This was very uncharacteristic of her. An old friend of her, a dog, followed and stopped her. The dog asked the rabbit why she was running so fast, and why she was looking so worried and afraid. The rabbit took a long and deep breath. Then she replied, "The Government decided to cut one leg of the rabbits that have five legs instead of four. A team has already entered into the forest to complete this mission. I am running for a safe place to hide so that the team cannot find or catch me." The dog was little baffled because his friend had four regular legs and therefore should have no reason to be afraid of the team. He asked the rabbit, "But my friend, what are you afraid of? You have four legs and therefore should not worry at all." The rabbit said, "The problem is the team is composed of economists only. As you know, economists usually start working on the basis of assumption rather than facts. The team cut the leg of every rabbit they can catch on the assumption that each rabbit has five legs. Then they count how many legs that rabbit actually had. That is the reason why I am so worried and running away to stay safe from that team of economists". The story is supposed to be a joke about the economists. For last couple of days, both electronic and print media have been swamped by expert opinions of many economists, economic think tanks and commentators on the just-announced budget of the country. Their prophecies based on dogma rather than numbers implies that this story is not merely a joke rather reflects the economic wisdom of many economic commentators and economists in Bangladesh. There is something called political business cycle in economic textbooks. It means government undertakes an expansionary expenditure policy before the election to mitigate the anti-incumbency sentiment of the voters. Probably guided by this textbook conjecture, many economists and commentators characterised the just-announced budget as too large, ambitious and unrealistic. 'Ambitious' and 'unrealistic' have probably become the most pronounced words in Bangladesh in last couple of days. But there was another economic wisdom that needs to be combined in analysing political business cycle, which our economic commentators failed to do. It is well known from empirical economic analysis that it takes more or less one year for the benefits of any public spending to be accrued to people and become visible to influence the voter. So, if a government wants to win over the mind of the voter by increasing public spending, it must undertake an expansionary spending policy at least one year ahead of the election. The proposed budget for FY14, having been announced only six months before the election, in no way can help the government to benefit from what the economic textbooks say 'political business cycle'. Therefore, what is the actual nature of the budget has to be evaluated by looking at the actual size and composition not by any textbook rhetoric. What does the actual number say about the size of the budget? In the light of the trend growth of the size, the just-announced budget is an ordinary one. Instead of being ambitious it completely lacks any ambition. Consider the growth of size of the previous budgets given by the current government (Graph 1). In the first year of the current government, the size of the budget grew by about 14 per cent vis-à-vis the previous year. During the following three financial years, FY11, FY12, and FY13, the size of the budget grew by 16, 24 and 17 per cent respectively.