Every year a national budget is prepared. From an accounting point of view, it is a statement of income and expenditure to be incurred in a financial year. From the point of view of an economist or a planner, the budget should have some socio-economic targets and strategies and modalities for achieving those targets. These targets are set as per demands or requirements for socio-economic development of the country. Moreover, planners on the government side are supposed to give attention to mid-term plan (usually five years) and the perspective (long-term) plan in the exercise of budget preparation. Some assumptions are also required in such an exercise.
Today, Bangladesh has a rising economy. It is no more a basket case. The expectation is that the country will be graduated to a middle-income country by 2020. The budget, therefore, should be prepared and administered keeping this vision in view. In conformity with the Five-Year Plan and Vision 2021, the budget for fiscal year (FY) 2014-15 should have the following objectives: Higher GDP (gross domestic product) growth, higher rate of social progress, poverty reduction and sustainable development.
In order to achieve these objectives, the following assumptions will have to be made by the planners: (a) There is political stability in the country, (b) there is congenial law and order situation, (c) projected investment will come to a reality, (d) all-pervasive perception of corruption will disappear, (e) the government has the institutional capacity to implement budget and (f) necessary infrastructure facilities are made available for industrialisation and free passages of goods and services and (g) trade , investment , tariff and monetary policy are cohesive and supportive to achieving the objectives.
The growth of real GDP is an important parameter for economic progress or development. The government set estimated real GDP growth at 7.0 per cent for 2009-10, showing escalation to 8.0 per cent in the FY 2014-15. The estimated GDP growth rate was 7.6 per cent for the FY 2013-14. During the budget speech, it was projected at 7.2 per cent. All circumstances show that it would not exceed 6 per cent.
The Finance Minister disclosed in some pre-budget meetings that the size of the budget for FY 2014-15 would be Tk. 2.50 trillion. The current fiscal year's budget is of the size of Tk. 2.22 trillion. The Finance Minister, we guess, will repeat the GDP growth rate to be 7.2 per cent again for FY 2014-15, although the projected growth rate in the Mid-Term Budgetary Framework was set at 8.0 per cent. Ceteris paribus, with the proposed outlay of Tk. 2.5 trillion, arithmetic suggests that national revenue should grow at 18 per cent of GDP of which tax revenue should account for 16 per cent. The share of investment should be 31 per cent.
On the other hand, given the economic activities in Bangladesh, in order to achieve 7.0 per cent growth rate and above the three broad sectors of the economy, namely agriculture, industry and service sector must grow at least at 4.0 per cent, 12 per cent and more than 12 per cent respectively. Of these three sectors, only service sector may render good performance.
In agriculture sector, setting aside natural calamities, attention should be given to research and development, most efficient utilisation of the country's limited land and soil resources, multiple cropping, prevention of land from salinity as well as desertification, conservation of water, navigability of rivers and canals and protection of them from pollution. This demands necessary and fruitful allocation of funds in the budget. Then one can expect the required growth in agriculture sector.
The industrial sector deserves serious attention in the budget and the plan. Transformation into an industrial society is important for generation of employment and for export. The existing industries and factories, first of all, should get congenial environment for their efficient operation. There are regular complaints of non-availability of gas and electricity.
For a long time, for example, the industries of Chittagong are not getting gas connections. In other areas of country including Dhaka, factories are not getting regular gas supply causing production disruption including exportables. Supply of gas should be an important agenda in the budget. The authority claims that there is proven unspent reserve of more than 16 trillion cft of gas in Bangladesh. The present demand for gas for whole year is said to be about 1,000 billion cft. The supply is about 750 billion cft. This suggests inclusion of a project or projects in the annual development plan for extraction and supply of gas.
There is a gap between installed capacity of power generation and its actual production and supply. According to government statistics, about 1,000 megawatt installed capacity remains idle mainly for saving fuel costs. The supply lines are also inefficient. Here is a good avenue for undertaking projects to utilise the installed capacity and ensuring efficient supply of electricity. In the medium and long-terms, separate options are available. Coal-generated power plants and gas-run power plants should be installed. Bangladesh has enough reserves of coal. Co-operation and joint ventures with neighbouring countries like Bhutan, India, Myanmar and Nepal will usher in a new era in meeting progressive demand of electricity. Many experts opine that atomic power plants are not suitable for Bangladesh for environment reasons. Furthermore, boosting up renewable energy programme (solar, wind power and biofuel) can add to power generation.
The budget should also make provision for the SMEs (small and medium enterprises) which are the life-line of the Bangladesh economy. The relative share of SMEs in manufacturing value added to GDP is almost 30 per cent. It employs about 55 per cent of working labour force in the manufacturing sector. This sector, however, continues to suffer from a multiple of constraints and challenges. An enabling policy environment and institutional infrastructure is indispensable for accelerated and dynamic SME growth. A policy statement is expected to take place in the next budget speech.
The industrialisation of Bangladesh also demands creation of a large number of economic zones with all facilities. The upcoming budget should allocate funds for creating at least 7 economic zones (as already disclosed by the Finance Minister) during FY 2014-15. This has become a necessity for the relocation of garment factories already threatened after the inspection of Accord, an association of European garment buyers.
Industrialisation is also imperative for creation of employment. Around 2.2 million people enter the job market annually. Only one million get jobs. Export sectors and overseas migration can ease unemployment problem. The government has a duty to explore and help creation of labour markets providing facilities for skills development.
Though the national head count rate of poverty has been decreasing in Bangladesh, still one-fourth of the population is under the poverty line and out of them 26 million people are hardcore poor. In terms of family size, the hardcore poor constitute about 5.2 million families. The target in the annual budget should be to get one million families out of hardcore poverty. Projects and programmes should be undertaken under social protection policy for which a strong national monitoring body should be formed. Though Bangladesh has achieved a lot in socio-economic front, one should not boast of it. Social progress has many ingredients like citizens' access to education, health services, water and sanitation power and energy, housing availability of employment, safety of life, liberty and wealth. Education and health services are costly for the common people. A chaotic situation exists in hospitals and clinics. More than 40 per cent of population lacks sanitation facilities and do not have access to electricity. Safe drinking water is scarce. Rivers are being polluted and encroached. Abductions and killings have become the order of the day. Against this backdrop, the Finance Minister must bring some concrete proposals in the budget for real social progress.
Local government institutions deserve due attention in the budget. Allocation of funds should be enhanced for these institutions with an effective mechanism of accountability. There are some other issues like corruption, governance and institutional capacity which should be focussed in the budget speech. Whitening of black money should not be allowed.
Last but not least, political stability is an issue which the Finance Minister cannot ignore. Without political stability, economic development is not possible and the budget cannot be implemented. The January 05, 2014 parliamentary election did not bring political stability. Rather overall politico-socio-economic conditions of the country reveal bankruptcy of governance.
That is why all stake-holders are now in a wait-and-see mood. A government becomes popular and strong only when it comes to power through an inclusive and popular mandate. Otherwise, stability will always be at stake. The budget then will remain just a paper work with its effects failing to trickle down to the grassroots.
The writer is an economist and former Planning Secretary.
chowdhuryjafar@ymail.com
National budget: The issue of political stability
Jafar Ahmed Chowdhury | Published: May 17, 2014 00:00:00 | Updated: November 30, 2026 06:01:00
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