Challenges in implementing the mega budget
Siddique Hayat Khan | Friday, 20 June 2008
THE allocation of Tk. 169.82 billion (16, 982cr) for social safety net in the proposed budget for fiscal 2008-09, which is 48 per cent higher than previous one, will provide cushion to the poor against price-hike of essentials. However, without the involvement of a strong local government, it will be difficult to ensure reaching this large sum of money to the deserving poor, speakers told a seminar on National Budget 2008-09. Among the challenges that the government will face in implementing this mega budget include cooperation of the bureaucracy with the CG (caretaker government) and the post-December election government, achieving ambitious revenue target of Tk. 698.32 billion (69,382cr), and Annual Development Programme (ADP) implementation which remains the government's Achilles' heel.
The seminar, organised by the University of Development Alternative (UODA) on June 15 was chaired by its Vice Chancellor Prof Dr. Emajuddin Ahmed while discussants included Prof Mahboobullah of Dhaka University and Prof Mustafizur Rahman, Dean of Arts faculty and a former VC of Bangladesh Agriculture University.
In his paper presented to the seminar, this writer pointed out that the caretaker government prevented the budget for fiscal 2008-09 after the country experienced two successive floods and a super-cyclone, and in the wake of record global price hike of oil, food and basic materials, and the US going through a recession prompted by subprime mortgage crisis. All these factors made a profound impact on the Bangladesh economy. The proposed budget, the biggest so far, would need nearly Taka one trillion to implement it, with the largest deficit of over Tk. 300 billion. The budget would require the government to rely on borrowing from the financial sector to the tune of Tk. 134.980 billion, about 30 per cent increase over that of the previous year. The businesses fear, such a heavy borrowing could lead to a liquidity crisis in the financial system, causing crowding-out effects for the private sector. Besides, the government would have to pay Tk. 125.57 billion or 12.6 per cent of the budget to pay interest on debts. This shows the pressure on the budget being created by increasing government borrowing. The subsidies have increased to Tk. 67.50 billion or 6.75 per cent of the budget size, indicating the increasing pressure on the government to provide subsidies on food, oil and other commodities.
As a panelist discussant, Prof Mahboobullah pointed out that the tax-GDP ratio in Bangladesh is only 11 per cent, which is very low even compared to those in the neighbouring countries. In Sweden, this ratio is 50 per cent that enables it to provide blanket social security to all citizens. There is no alternative to increasing revenue collection through a series of measures. For the poor, the implementation of ADP, he pointed out, is likely to far below the projection, because of uncertainty over revenue collection and cost escalation of building materials. He suggested a pension or provident fund scheme to cover all citizens of the country, regardless of their profession and income. This will allow everyone, even a rickshaw-puller to get the benefit from the state after active life.
This will have several benefits. Firstly, it will have a non-inflationary role. Secondly, the savings can be channelled by the government to investment through the ADP, and thirdly, the state security will encourage the poor people to have a less number of children. For checking high food prices, he suggested taking up of pro-active measures for increasing production, keeping in mind that food production has become increasingly fuel dependent. He also suggested for the use of alternative sources of fuel like coal.
Dr. Mustafizur Rahman called for making laws to prohibit non-agricultural use of farmland. Every year, he pointed out Bangladesh loses some 10,000 hectares of arable land for industrial and commercial use. He cited the example of West Bengal, which prohibited the use of agricultural land for other purposes. Besides, Bangladesh loses every year sizeable land due to river erosion. No provisions have been made to offset this in the proposed budget, he said and requested the government to allocate substantial fund in the ADP for this. He pointed out that allocation for higher education was meager. Only Tk. an amount of Taka 100 million is available for research, which is too inadequate. He recommended increasing allocation to the universities so that they could undertake research.
A question-and-answer session participated by students and teachers followed.
The seminar, organised by the University of Development Alternative (UODA) on June 15 was chaired by its Vice Chancellor Prof Dr. Emajuddin Ahmed while discussants included Prof Mahboobullah of Dhaka University and Prof Mustafizur Rahman, Dean of Arts faculty and a former VC of Bangladesh Agriculture University.
In his paper presented to the seminar, this writer pointed out that the caretaker government prevented the budget for fiscal 2008-09 after the country experienced two successive floods and a super-cyclone, and in the wake of record global price hike of oil, food and basic materials, and the US going through a recession prompted by subprime mortgage crisis. All these factors made a profound impact on the Bangladesh economy. The proposed budget, the biggest so far, would need nearly Taka one trillion to implement it, with the largest deficit of over Tk. 300 billion. The budget would require the government to rely on borrowing from the financial sector to the tune of Tk. 134.980 billion, about 30 per cent increase over that of the previous year. The businesses fear, such a heavy borrowing could lead to a liquidity crisis in the financial system, causing crowding-out effects for the private sector. Besides, the government would have to pay Tk. 125.57 billion or 12.6 per cent of the budget to pay interest on debts. This shows the pressure on the budget being created by increasing government borrowing. The subsidies have increased to Tk. 67.50 billion or 6.75 per cent of the budget size, indicating the increasing pressure on the government to provide subsidies on food, oil and other commodities.
As a panelist discussant, Prof Mahboobullah pointed out that the tax-GDP ratio in Bangladesh is only 11 per cent, which is very low even compared to those in the neighbouring countries. In Sweden, this ratio is 50 per cent that enables it to provide blanket social security to all citizens. There is no alternative to increasing revenue collection through a series of measures. For the poor, the implementation of ADP, he pointed out, is likely to far below the projection, because of uncertainty over revenue collection and cost escalation of building materials. He suggested a pension or provident fund scheme to cover all citizens of the country, regardless of their profession and income. This will allow everyone, even a rickshaw-puller to get the benefit from the state after active life.
This will have several benefits. Firstly, it will have a non-inflationary role. Secondly, the savings can be channelled by the government to investment through the ADP, and thirdly, the state security will encourage the poor people to have a less number of children. For checking high food prices, he suggested taking up of pro-active measures for increasing production, keeping in mind that food production has become increasingly fuel dependent. He also suggested for the use of alternative sources of fuel like coal.
Dr. Mustafizur Rahman called for making laws to prohibit non-agricultural use of farmland. Every year, he pointed out Bangladesh loses some 10,000 hectares of arable land for industrial and commercial use. He cited the example of West Bengal, which prohibited the use of agricultural land for other purposes. Besides, Bangladesh loses every year sizeable land due to river erosion. No provisions have been made to offset this in the proposed budget, he said and requested the government to allocate substantial fund in the ADP for this. He pointed out that allocation for higher education was meager. Only Tk. an amount of Taka 100 million is available for research, which is too inadequate. He recommended increasing allocation to the universities so that they could undertake research.
A question-and-answer session participated by students and teachers followed.