FY 2022-23 budget must address prospective future threats

Published : Tuesday, 31 May, 2022 at 12:00 AM

Finance Minister AHM Mustafa Kamal is expected to place the national budget for FY2022-23 of Bangladesh in the parliament on June 5, 2022 as the budget session is set to start on the same day. The initial size of the budget is set at Tk.677,864crore and the target for revenue income is Tk.431,657 crore. The country is currently going through high level of infrastructural development and despite the critical impact of COVID-19 pandemic, our economy has performed steady. But the ongoing high inflation and prospective higher inflation considering the Russia-Ukraine war and associated global politics as well as the upcoming national election is creating strong economic challenge for the country. This budget is very critical for the people of Bangladesh and it requires special considerations in different aspects.

The budget for FY2022-23 has to address a number of ongoing and emerging challenges while striving to move forward with speed and quality. Since the outbreak of the pandemic, the need for a robust fiscal framework has been felt greatly. The Russia-Ukraine war and the global politics around this war is creating huge additional challenge. Moreover, the next general election of Bangladesh itself may create vulnerability, which may impose new economic threats. Hence, this budget needs to address and accommodate these prospective challenges. Policymakers should not lose sight of reforms of the tax system and public institutions while designing the budget for survival.

Different issues need to be focused in this budget. The growth in government expenditure will have to take the inflationary pressure into account. Hence, the budget deficit will need to be lowered slightly than that of FY2021-22, which is set at 6.2 percent of GDP. Of course, due to the low expenditure capacity of the government, the budget deficit has usually been lower than the projection. As per data from the central bank, during July-September of FY2021-22, the budget deficit was lower by Tk.4,428crore, compared to that of the same period in FY2020-21.

Whenever the budget is discussed, the first issue that comes to everyone’s mind is taxation. The budget is about mobilization of resources through various ways, the most important of which is tax on people’s income. Unfortunately, tax effort has been substandard in Bangladesh and continues to fail to reach its potential. The tax-GDP ratio is only about 9.5 percent. Budgetary targets of tax collection are never met. The budget speech of the finance minister refers to several measures but we do not see any substantial follow up.

Certainly, we need to know the accurate number of eligible taxpayers. This is not a difficult task, and the National Board of Revenue (NBR) may conduct a study to identify and estimate the number of eligible taxpayers. They can create awareness among the new taxpayers. The prospective taxpayers can also be mentally ready when they learn about their tax-related responsibilities. Our higher income group often finds out ways to avoid taxes. As their income is huge, they must properly pay their taxes and NBR has to ensure that. In the current context, pressure of taxation should be reduced for the lower and middle-income group and the higher income group should take higher load of tax payment for the sake of the country.

The upcoming budget for fiscal year 2022-23 should focus on controlling inflation to give relief to the poor, lower middle and middle-income people. The government should shift its key target of achieving higher GDP growth rates to control inflation. The lower and middle-income families are facing problems for high market prices of essential commodities. To keep market prices of essential commodities at a tolerable level, the government should raise the budget deficit in food and energy.

In the present economic situation, the government should contain the import of goods which are of low necessity. This year the government can keep a higher budget deficit to check inflationary pressure on the masses. Non-performing loans should also be brought under control and to do so, the government needs to take exemplary legal steps. Moreover, specific sector-wise focus is highly required in today’s context to keep the economy undaunted. Most importantly, the budget should adopt processes to trace out and heal the holes in our system.

The government should formulate the budget for fiscal 2022-23, focusing on how to keep rising inflation in check with less emphasis on GDP growth. For that, subsidies on gas, electricity and agriculture must go on. But the amount of revenue we are collecting now is not enough to continue subsidies and bear other expenditures. It is not possible to boost revenue mobilization overnight. So, the government has to rely on alternative sources to meet additional expenses. Nevertheless, there is no denying the fact that we have to continue our emphasis on increasing revenue.

Those having expertise in revenue should be given the responsibility of the tax commission. If the government works according to what the commission will recommend, revenue collection can be multiplied. The government has already decided that it will continue subsidies in the forthcoming budget. The allocation for social safety programs is increasing. There is also an initiative to hike power tariffs, but that will be completely unwise considering given the present situation. Rather than, the government must focus of controlling wastage and corruption at the power sector.

The government is committed to using the long-overdue National Household Database (NHD) from the next fiscal year to better target the social safety net programs, in a development that can infuse dynamism in the flat scheme. The NHD, which is expected to serve as a poverty registry, is expected to be ready soon. Also from next fiscal year, all the elderly and the disabled people as well as the widows, deserted and destitute women in another 100 upazilas would be brought under the coverage of the safety net schemes.
With this, 362 of the 495 upazilas would get full coverage of the social safety net schemes. As a result, the government’s allocation for social safety net schemes would increase by about 23 percent in the upcoming budget from this year’s Tk.107,614crore. Yet, it would hover in the neighborhood of 3.1 percent of GDP.

As for sectoral allocations, higher allocations are needed in a few sectors on a priority basis. Investment for the health sector is a high priority not only for dealing with the ongoing pandemic, but also for the overall strengthening of the health ecosystem in the country. Besides, recovering learning loss due to the pandemic, improvement of the education quality and skills development will also require more resources. Among others, rural infrastructure and social protection also deserve bigger allocations.

While budget for FY2022-23 must focus on creating employment as well as facilitating entrepreneurship, agriculture must receive the greatest support and even stimulus considering the prospective food crisis in the upcoming years due to the ongoing Russia-Ukraine war.

The government has decided to increase fertilizer subsidy to Tk.15,000 crore in the upcoming budget for fiscal year (FY) 2022-23, aiming to boost domestic food production. Despite a 58% hike in fertilizer price in the global market, the government wants to avoid price hikes as a stimulus to the farmer to ensure more crop production and control the price of food items in the local market. Along with this, the government must take policies and allocate resources to control the market as well as to ease access of the producers to market. Ensuring food security is the greatest challenge of the upcoming years and the new budget must address that challenge.

We are now living with several economic threats. While the development of the country is necessary, inflation and lower and middle-income group’s inability to meet their basic needs is taking away the benefits of the government’s good works. The upcoming years can become far more challenging, especially with the next general election. Hence, this budget is very crucial and it must be fully people-oriented. If the ordinary people are in stress, no development can be sustained and so, the budget must be for the mass. We hope, the budget for FY2022-23 will provide us a clear guideline to move forward ensuring people’s welfare.

The writer is Chief Editor at Mohammadi News Agency (MNA), Editor at Kishore Bangla and Chief Patron, Bangabandhu Shishu Kishore Mela

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