Another national budget got passed amid discussions and debates. Most of the debates and discussions, however, skipped the philosophical content of the budget. Budget philosophy or what may be conveniently termed 'broad guiding principle' does not appear dramatically nor does it get changed every year. It is like a comprehensive framework that guides policy planning at the macro level.
In Bangladesh, the guiding principle of budget originated from the economic philosophy pursued by the country for quite sometime. The market-based or free-market principle is clearly the economic philosophy for the last two decades and more. Development initiatives of the country are very much linked with market-oriented activities. So, over the decades, market-oriented or capitalist mode of development process has been strengthened.
No doubt, liberalisation and deregulation, two crucial factors of market economy, have paid off. Bangladesh started liberalisation process in the mid-1980s but it gained momentum in the early-1990s. Thus, the year 1991 is generally considered as the inception year of uninterrupted liberalisation process. Since then, Bangladesh economy has been moving embracing increasing liberalisation and deregulation. The average economic growth stood at 5.5 per cent during the last two and half decades of market-oriented development move. The average GDP (gross development product) growth rate stood at 6.0 per cent in the last decade. Thus, Bangladesh has been successfully entering a higher growth trajectory almost every decade, though the gains are believed to be well below the potential.
As the economy moves ahead, policymakers feel the necessity of a big push in growth and development. This necessity drives them to go for a bigger push in market-oriented economy known as neo-liberalism. To be precise, neo-liberalism is an approach which strongly supports shifting of the control of economic factors from the public sector to the private sector. It is drawn upon the principles of neoclassical economics and vigorously advocates establishing the rule of market. To do this, the governments should reduce deficit spending, limit subsidies, reform tax law to broaden the tax base, remove fixed exchange rates, open up markets to trade by limiting protectionism, privatise state-run businesses, allow private property, eliminate public good and deregulate almost everything. Thus neo-liberalism as a set of economic policies has become widespread across the world for the last three decades. Over the years, neo-liberalism has become the guiding principle of Bangladesh's national budget.
In fact, the finance minister AMA Muhith unveiled his bias to neo-liberalism in the earlier budgets of FY'10 and FY'11. In the later years, his effort to extending and consolidating neo-liberal agendas are also visible. Annual budget formulation exercise in Bangladesh has now gone under the broader umbrella of 10-year perspective plan which is again divided into two five-year plans (FYP). The Awami League government, after being elected in 2008, recommenced mid-term development planning exercise by discarding short-term poverty reduction strategy (PRS).
The FYPs are designed keeping the neo-liberal framework in mind. The title of the Sixth FYP is 'Accelerating Growth and Reducing Poverty.' But during the five years (2011-15) period of this plan, growth has not accelerated as projected. Attaining average real GDP growth rate of 7.3 per cent per year over the plan period was the first target of the plan. In reality, annual average GDP growth stood at 6.32 per cent in these five years while the annual average growth rate was 6.07 per cent in the previous five years (2006-10).
Setting the tone of development philosophy, the document categorically said: "Bangladesh economy will be managed within the framework of a market economy with appropriate government interventions to correct market distortions, to ensure equality of opportunities, and to ensure equity and social justice for all." In reality, appropriate government interventions to correct market distortions were not so visible in many cases.
In a lighter vein, analysis of the frequency of words and terms of the finance minister's budget speech gives an interesting picture. His speech has about 28,000 words in 96 pages (excluding tables of contents and annexure). Keeping aside the articles, nouns, verbs, conjunctions and prepositions, the most uttered word in the budget speech is 'tax'. 'VAT' has appeared 75 times, 'duty' 69 times and 'revenue' 52 times. Yes, the government needs revenue to run the country and it has to be generated by colleting tax, duty and vat from the people.
But the finance minister's backing out from the proposal of imposing 1.0 per cent source tax on exports earning clearly reflects the neo-liberal agenda of lower or minimal tax on businesses. Finally, 0.6 per cent source tax is applicable for all export earnings in the new fiscal year. Two types of discriminations have been made here. First, the highest incentivised sector (RMG) receives maximum tax support despite its being the highest export earner of the country. Second, all other export-oriented sectors have been put at par with RMG although others do not receive such high and prolonged incentives.
The finance Minister's budget speech has dealt at length with growth. But when growth is very important, what about job creation? The word 'employment' has reappeared 23 times while 'job' only three times. But there is no mention about unemployment situation of the country. Although Bangladesh Labour Force Survey 2015 shows that unemployment rate is now 4.3 per cent, the budget pays little attention in this regard. It, however, mentions several budgetary steps to create employment opportunities which indicate that the government is increasing its reliance on market for job creation. True, the government cannot provide jobs for 2.2 million job entrants annually. Thus, maximum jobs will have to be generated by private sector activities, as proclaimed in neo-liberal principle.
Budgetary focus on education, health and social sector is mixed. Allocation for health sector has declined from 4.4 per cent in FY'15 to 4.3 per cent in FY'16. Lesser allocation hints at adopting market-oriented health-care which is expensive, deregulated and to some extent unreliable. Allocation for the education sector has increased by 2.6 per cent. The education minister himself expressed dissatisfaction about budgetary allocation. Moreover, overall education structure has become questionable during the last few years. Budget for social safety net and welfare sector has increased by 5.7 per cent although proper distribution remains a big challenge.
Ultimate objective of the budget in enhancing the development process is consolidation of neo-liberal agendas in the long run. But keeping income disparities high, bringing lower and middle income people under tax net aggressively, and compelling people to pay higher costs on services may result in unsustainable ventures in uplifting the economy at the desired level.
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