The economy has been badly disturbed by political turmoil and instability. To cope with the present situation and to put the economy on the right track, the budget for FY 2015-16 needs special attention, extraordinary prudence and professionalism in utilisation of limited resources. Seminars, meetings and discussions are going on. These are being participated by renowned economists and analysts in different parts of the country. It is expected that the authorities responsible for preparation of the national budget would take stock of suggestions and proposals put forward by various organisations.
The major challenge of a national budget of any country is to achieve a targeted GDP (gross domestic product) growth and keep it stable. The current (FY 2014-15) budget forecast GDP growth at 7.3 per cent but the actual achievement was 6.2 per cent. The next year's budget, as reported in the media, would project GDP growth at 6.4 per cent. But enhancing GDP growth won't be possible if the economic sectors that contribute to GDP remain in a shambles.
Real estate, stock markets, financial institutions and private sector industries directly contribute to GDP. But these sectors are not performing well and have failed to contribute enough to the growth. Without improving the situation, it's impossible to enhance GDP growth to the desirable target.
The aims of the fiscal policy should be to create an atmosphere friendly to investment both in private and public sectors. Financial institutions and stock markets play a significant role in investment process in any economy. Both the sectors' present performance is not at all satisfactory. These sectors deserve fiscal support in the upcoming 2015-16 budget in the form of incentives, tax rebates, reduction of registration fees for apartments or land purchase and corporate tax-cut for financial institutions. It's worth mentioning here that the rate of corporate tax in Bangladesh is the highest in Asia, the EU, the US and Canada.
Inflation rate in Bangladesh is high and necessary techniques need to be devised and applied to contain it while preparing the national budget for FY 2015-16. During the FY 2011-12, 2012-13, 2013-14 and 2014-2015, Bangladesh had inflation rates of 10.7 per cent, 6.2 per cent, 7.5 per cent and 7.2 per cent respectively. Huge deficit financing of the budget always spurs inflation. The current (2014-15) budget has undertaken a huge deficit financing, especially borrowing from banks and other sources and affected the inflationary situation in the country. Moreover, repeated price increase of gas, oil and electricity directly has enhanced the inflation rate. If the government wants to control and keep inflation stable, it should not increase gas and electricity prices repeatedly unless there is an abnormal increase of oil price in international markets.
An analysis of the country's national budgets for the last few fiscal years show that the budget financing has always been afflicted with deficit financing. The deficit increased by 23 per cent in FY 2014-15 in comparison to FY 2013-14. Deficit financing in budget matters most as borrowing has a cost to bear.
But most of the countries in the present time try to downsize the fiscal deficit. Finance Minister Carlos Leitao of Quebec (Canada) presented a budget his country without a deficit in seven years. "With this budget, the government is sending all Quebecers a message of confidence: together we are building our economy," he told the National Assembly. The days of paying for services on credit are over, he said, and the dream of a more prosperous Quebec is becoming a reality.
High deficit budget ignores short-term pains of a nation for the longer term. Greece adopted high-deficit financing policy for many years and has ended up with economic and financial crises that were temporarily overcome with the help of the European Union (EU) and the International Monetary Fund (IMF). It is highly desirable that the authorities involved in budget preparation would consider high-deficit financing as a big challenge for the upcoming budget for FY 2015-16. Excessive borrowings from the commercial banks will badly affect private investment and, in turn, affect the GDP growth.
Resources of developing countries like Bangladesh are limited but the national budgetary requirements are limitless. In this economic scenario, it is wise to eliminate wastage in government spending as rigorously as possible. But wastage in government spending is a global problem. If one asks Americans how many cents of every dollar that the federal government spends they believe is wasted, they say Washington is vastly incompetent when it comes to managing taxpayer's money. A 2014 Gallup poll reported that Americans think the federal government wastes 51 cents of every dollar they pay in taxes.
The national budget this year is going to be highly ambitious. The Finance Minister told the media recently that the budget size for the FY 2015-16 would be about Tk 3.0 trillion, 20 per cent more than the size of FY 2014-15. But the size of the budget is of little significance, according to economists, unless the budgeted fund is allocated to the productive sectors that increase production, create employment opportunities and contribute to GDP growth. The challenge lies ahead with the government to spend the hard-earned taxpayers' money in productive sectors, eliminate wastage of budgeted funds through misuse, corrupt practices, false and fabricated projects. Unproductive expenditure needs to be discouraged and in no way the taxpayers' money should be enjoyed by a section of privileged people sitting idle and doing nothing to contribute to the GDP.
Whitening of black money is not a new concept. The practice has been followed in Bangladesh and some other countries for some years. It has given some benefits to the economy of Bangladesh in the form of investment although the concept was discouraged and criticised by some groups. Every practice has some merits and demerits. The Bangladesh economy needs more investment in productive sectors to increase production and create job opportunities. According to economists and analysts, a huge amount of money, especially black money or officially undisclosed money, remains idle and unutilised due to tax provisions and other provisions of laws of the country. There's no economic justification of keeping the money idle. The fiscal policy may encourage the black money holders to invest in some productive sectors by paying a reasonable amount of tax. The productive sectors may include manufacturing industries that can employ maximum number of workers and employees, weak sectors like stock market, real estate, financial institutions, export-oriented trades and so on. Once the black money holders pay tax and come under the tax net, their transactions of money can be traced. But if they remain outside the tax net, they can use the undeclared money in illegal dealings or unproductive sectors inside the country or abroad.
Education is the backbone of a nation. Without it, no nation can develop, prosper and stand on its feet. Illiteracy rate in the country is high much below the desirable level. The education sector deserves to be on the topmost priority list of the upcoming budget. Long, medium and short-term programmes to eradicate illiteracy must be formulated. Accordingly, adequate provision should be made in the national budget for FY 2015-16. Productive sectors of the economy are severely suffering for inadequate and interrupted supply of electricity. Dearth of gas and electricity has been standing as a stumbling block on the way of new investment and expansion of manufacturing industries. It's the responsibility of the government of any country to make infrastructures needed for industrial development. Traditional energy source from fossil fuels needs to be replaced by renewable energy. The national budget must make appropriate allocation for infrastructure development.
Climate change and global warming are direct threats to Bangladesh because of its geographical location. Bangladesh is number one country highly vulnerable to climate change as revealed by various researchers and environmental scientists. To face the crucial climate change effects, adequate allocations need to be made in the national budget for FY 2015-16.
Creation of conditions for job creation for millions of unemployed or underemployed people is important responsibility of any government. Job and investment-friendly budget is sine qua non for Bangladesh. The budgets of the developed economies clearly show the existing unemployment rate and the governments' target to reduce it in the upcoming budgets. But the budget preparation culture in Bangladesh does not present unemployment rate nor does it show the target of reduction. It is expected that the budget will show a clear picture of present unemployment in the country and the budgeted targets for creation of new jobs.
The people of Bangladesh have had many annual national budgets since its independence. Every year a budget is prepared, presented to the parliament and get approved as usual. This country got its independence long time back but still it is far behind in terms of literacy rate, per capita income, per capita electricity consumption, industrial development, health care and employment generation. The whole world is changing, advancing with the passage of time. The national budget for FY 2015-16 needs to be prepared with clear vision and precise focus to bring the country and the nation to the forefronts of developing countries.
The writer is the CFO of a private group of companies. m.jalal.hussain@gmail.com