Targeted use of scarce resources
Sunday, 1 March 2009
The world economy is going through one of its worst times. Many major banks and financial institutions in the developed world have collapsed and many more survived with the government doles. The demand for goods and services has dropped significantly in these countries, resulting in shedding of hundreds of thousands of jobs by industries, banks and business firms. It is not that the developed world is the only victim of the ongoing global financial meltdown, considered to be the worst since the Great Depression of the 1930s, others, including the emerging economies such as China and India, and the poor developing countries are also feeling the heat of the downturn. The governments of the USA, UK and other major economies have been announcing financial stimulus packages for the distressed banks, financial institutions and industries. Yet the prospect of the global economy picking up soon remains highly uncertain.
Bangladesh's lesser integration into the global financial system has proved to be a blessing in disguise. This has left the country's banking system and the stock market insulated from the global meltdown shock. But it is hard for any country to escape the ill-effects of an all engulfing economic crisis. One way or the other it would have to bear the burnt of the meltdown. Fall in export and remittance incomes, it seems, would be hurting the country more than anything else. The effects of the negative development in the areas of external trade and remittance income may be visible in a limited form in the remaining months of the current fiscal year but those might turn rather nasty in the next fiscal. So, handling of the economy during the next fiscal would be crucial in the face of tougher external conditions. The government is yet come up with a concrete plan to deal with a crisis which is still unfolding.
However, pieces of advice have come aplenty from local and domestic sources on ways to handle the crisis better, the latest being from a top World Bank official. The official talking to a group of local journalists the other day advised Bangladesh government to create additional fiscal 'space' focusing on employment generation on a priority basis. He felt that the government should re-prioritise its spending so that increased resources could be diverted to farming, infrastructure building and social safety net programmes. In Bangladesh, there are a few sceptics who are prone to finding faults with every action or suggestion of the multilateral lending agencies. Even these people are likely to contest the observation of the WB official, who is a Bangladeshi national, that what Bangladesh does need now more than anything is else is the creation of a substantial number of additional jobs. Since the global recession has started leaving its impact on manufacturing and services sectors, the best way of generating additional jobs would be to invest more in infrastructures, agriculture and employment-oriented safety net programmes for the poor, including the 100-day work programme.
However, the creation of an additional fiscal space would not be that easy for the government. The National Board of Revenue (NBR) is already facing an uphill task in achieving the tax revenue target set for the current fiscal year. It would not be easy in the next fiscal either. Much would depend on the prudent use of resources in the national budget for the next fiscal when the country might be experiencing some balance of payments (BoP) pressure for the first time in many years. So, the basic aim of the developmental allocations in the next budget ought to be creation of a maximum number of jobs, permanent or temporary. This would largely help ease off the pressure the economy might be facing due to the global recession and meet, to some extent, the much-touted objective of poverty reduction.
Bangladesh's lesser integration into the global financial system has proved to be a blessing in disguise. This has left the country's banking system and the stock market insulated from the global meltdown shock. But it is hard for any country to escape the ill-effects of an all engulfing economic crisis. One way or the other it would have to bear the burnt of the meltdown. Fall in export and remittance incomes, it seems, would be hurting the country more than anything else. The effects of the negative development in the areas of external trade and remittance income may be visible in a limited form in the remaining months of the current fiscal year but those might turn rather nasty in the next fiscal. So, handling of the economy during the next fiscal would be crucial in the face of tougher external conditions. The government is yet come up with a concrete plan to deal with a crisis which is still unfolding.
However, pieces of advice have come aplenty from local and domestic sources on ways to handle the crisis better, the latest being from a top World Bank official. The official talking to a group of local journalists the other day advised Bangladesh government to create additional fiscal 'space' focusing on employment generation on a priority basis. He felt that the government should re-prioritise its spending so that increased resources could be diverted to farming, infrastructure building and social safety net programmes. In Bangladesh, there are a few sceptics who are prone to finding faults with every action or suggestion of the multilateral lending agencies. Even these people are likely to contest the observation of the WB official, who is a Bangladeshi national, that what Bangladesh does need now more than anything is else is the creation of a substantial number of additional jobs. Since the global recession has started leaving its impact on manufacturing and services sectors, the best way of generating additional jobs would be to invest more in infrastructures, agriculture and employment-oriented safety net programmes for the poor, including the 100-day work programme.
However, the creation of an additional fiscal space would not be that easy for the government. The National Board of Revenue (NBR) is already facing an uphill task in achieving the tax revenue target set for the current fiscal year. It would not be easy in the next fiscal either. Much would depend on the prudent use of resources in the national budget for the next fiscal when the country might be experiencing some balance of payments (BoP) pressure for the first time in many years. So, the basic aim of the developmental allocations in the next budget ought to be creation of a maximum number of jobs, permanent or temporary. This would largely help ease off the pressure the economy might be facing due to the global recession and meet, to some extent, the much-touted objective of poverty reduction.