Published : Tuesday, 12 June, 2018 at 12:00 AM
Bangladesh is moving towards a very eventful upcoming 12 months as the budget has been announced for the fiscal year 2018-19 on 7th June. This particular fiscal year is very important because it will create an impact on the outcomes of the 11th national elections and with the new government irrespective of Awami League, BNP, Jatiya Party or any other entity in power, the policies and philosophies of the proposed budget will face severe challenges while the budget itself is expected to create a lot of challenges.
Finance Minister AMA Muhith unveiled a budget of Tk 4,645.73 billion for the upcoming year which is 16.07 per cent higher than that of the outgoing year. With continuous average growth of around 17 per cent for the last 10 years, the national budget seems to be highly ambitious for the next fiscal year. Along with that, the growing budget deficit year after year has brought serious concern over the justification of such an ambitious budget. Yet, there are some viewpoints that we need to consider and some pitfalls are required to be identified.
Even a ‘devil’s advocate’ cannot deny the fact that Bangladesh has moved forward a lot in the last decade with so many courageous development projects initiated by the Bangladesh government along with improvement in several human indexes under the leadership and guidance of Bangladeshi Prime Minister Sheikh Hasina. Bangladesh has become a symbol of development throughout the world. Without effective budget allocation through different sectors, this marching forward would have halted. Hence, other than criticizing the budget and its size, we should appreciate our highly ambitious attitude reflected through it which has been the story of Bangladesh’s development over the last decade.
It is justified to allow a large budget given a proper plan of using that budget which will bring significant benefits for the people even if the deficit is covered through loans from the foreign or domestic entities. Here the concern is if the budget is opening the doors for further corruption which is biting our nation like a snake. It is alarming that, we have failed to complete any development projects within the projected and allocated budget. This inefficiency is completely contributed by the huge corruption as well as lack of management skills. If it was possible to cover the total corruption in public works, that would have exceeded the huge budget deficit figure of each year. But our budget needs to accommodate this extra cost which with some good intent can be completely eliminated.
In the budget of 2018-19, the total deficit is calculated at Tk 1252.93 billion, which is around 27 per cent of the total budget. In 2017-18, it was Tk 1, 067.72 billion, around 27 per cent of that year’s total budget also. We are constantly practicing to accommodate a deficit while ignoring the importance of exercising efficiency in budget allocation and management. We will not be able to ensure better future of our citizens unless we declare a war on corruption, especially in public works. This hopefully was the last presented budget of Bangladeshi veteran Finance Minister AMA Muhith, who despite being aggressive on some instances as well as somewhat living in the past when he said the price of no products increased in the last 10 years has done a wonderful job in assisting PM Hasina to take the country forward in the last decade.
Other than proving a highly ambitious budget, there are some areas of this budget which demands justification like; a cut in corporate tax for listed banks and financial institutions by 2.5 per cent in the next fiscal year. That is, during 2018-19, the corporate tax rate for non-publicly traded banks, insurance and financial institutions would be 40 per cent while for publicly traded such firms, it will be 37.5 per cent. This decision is calculated to cost a revenue loss of around Tk 1,000 crore.
While the corporate tax rates for all other sectors are kept unchanged, this special treatment for the financial sector was defended by the finance minister on the ground of its higher corporate tax rates than the other sectors acknowledging the loss of tax revenue from this sector. But here the concern is the whole idea behind corporate tax cut is to make the investment climate in Bangladesh competitive in terms of global perspective while this particular sector being already saturated meaning unlikely to draw any foreign investment and being tangled with so many scams will not actually help the depositors or loan takers. It will not at all help the citizens as the banks are not going to change their interest rate rather will only help the owners of these banks who already stays in the high income group of the country.
Here it is mentionable that, the corporate tax rate in Bangladesh is much higher than the Asian average of 21 per cent and the global average of 24 per cent. Bangladesh’s tax rates for companies are also higher than that of Vietnam, Thailand, Malaysia, China, Indonesia, Sri Lanka and Pakistan. Vietnam and Thailand charge 20 per cent tax and it is 24 per cent in Malaysia and 25 per cent in Indonesia for companies. In this scenario, supporting the banking and financial sector further while few provisions were already allowed earlier this year is not very logical considering the banking sector’s ill health due to wrongly allocated and poorly managed loans.
Another concern of this huge budget is decreasing per centage of budget allocation for the education sector. While in the budget of 2017-18, the budget allocation for this sector was 12.6 per cent of the total budget, in 2018-19 it has gone down to 11.4 per cent as an amount of Tk 530.54 billion was announced for education sector. Considering the trend of last 10 years, the budget allocation remained almost same for this sector constraining the scope of investment on quality education. Despite continuous growth of around 17 per cent in national budget for the last 10 years, education sector’s share in the total budget has been decreasing over the last few years.
To go forward as a nation, there is no way out of educating our people and by educating we do not mean only teaching them how to put signature. PM Sheikh Hasina committed towards hundred per cent education rates several years back and we are still standing far behind. The rate of education that we portray is full of tricks and this status will someday pull us behind. If our people are not developing in quality as our nation is developing, then it will be hard to create an environment of sustainable development and we will not be able to accomplish the goals of SDG, Vision 2021 and 2041.
The current quality of our education is under severe question as it has been subjected to utmost corruption involving officials from top to bottom. Our teachers are on the streets for days after days in demand of inclusion in ‘Monthly Pay Order’ (MPO). There are thousands of Rohingyas, who might become a complete burden on our shoulder if they are not served with proper education. Hence, we need renewed focus on the education sector. It was reported that, the budget allocated for education sector in the previous years were not completely utilized and that is just not justified when teachers are unpaid and students are not receiving quality education. To save the future of this country, we must provide utmost importance to this sector and the budget should also reflect the same commitment.
Health sector is also somewhat neglected in the budget of 2018-19. Expensive treatments leave the poor people in financial hardship. According to Bangladesh National Health Accounts 1997-2015, out of pocket (OOP) health expenditure that is private spending in Bangladesh is 67 per cent, which is more than double the global average of 32 per cent. This even pushes four to five million Bangladeshis into poverty every year. Not only the poor people, but also middle income group is suffering from this increasing medical expenditures. With the environmental context and food hazards, this expenditure is undoubtedly going to increase in the upcoming years.
Finance Minister Muhith did not provide any specific plan to address this high expenditure issue. He spoke of building new hospitals, medical colleges and recruitment of doctors, nurses and midwives. He proposed allocating Tk 23,383 crore for the health sector, up by Tk 2,704 crore from that of the current fiscal year though its share has decreased from current year’s 5.39 per cent to 5 per cent next year compared to the total budget. Out of Tk 23,383 crore, the annual development budget is Tk 9,041 crore and the rest is revenue budget meant for salaries and benefits of public servants. This scenario clearly depicts the little scope of improvement in terms of medical facilities in the upcoming fiscal year in Bangladesh as World Health Organization (WHO) recommends budget for this sector to be 15 per cent of the total budget.
There are many pros and cons of the proposed budget of 2018-19 but it is not something to be very depressed about. But it raises question over managing the quality of human resources of Bangladesh without proper emphasis on education and health. The greatest concern though lies with the proper utilization of the budget. If the budget can be used as per plan eliminating corruption in different sectors, a great result can come out for Bangladesh. We will look forward to the Prime Minister Sheikh Hasina to drive her team towards a corruption free and effective utilization of this budget so that our journey upwards can remain undaunted.
The writer is Chief Editor at Mohammadi News Agency (MNA) and Vice-Chairman, Democracy Research Center (DRC)