Budget execution faces roadblocks

Bangladesh's external sector came under stress in January after the outbreak of coronavirus disease in China, the country's largest trading partner, slowed global trade, thus impacting the economy to some extent.

The outbreak turned into a full-blown health crisis in Bangladesh and the rest of the world in March after the World Health Organisation labelled it a pandemic.

This prompted the government to impose a countrywide lockdown to limit the spread of the deadly virus, bringing the economy to a screeching halt. 

The lockdown was eased in June, and the economy is said to be on a recovery path although a full revival is still far away. As a result, the budget implementation throughout 2020 has been under challenge.

Official data showed that the revenue collected by the National Board of Revenue (NBR) rose 3.4 per cent in the July-October period against 3.43 per cent a year ago.

The revenue generated by the tax administration is an important indicator of the budget implementation as it accounts for about 85 per cent of all revenues earned by the country in a year and allows the government to implement its plans. 

The decline in the non-NBR tax collection widened to 18.95 per cent during the four-month period compared to 2.39 per cent last year.

Similarly, total expenditure dropped 12.87 per cent in July to October, which was 26.27 per cent in the positive territory in 2019, as the government could not spend much.

The implementation of revenue budget was down 2.52 per cent while it was 20.14 per cent in the positive during July to October in the last fiscal year, finance ministry data showed.

The pandemic also dealt a major blow to the implementation of the annual development programme (ADP). It plunged 35.06 per cent in the four months, whereas it had risen 48.13 per cent during the same period last year.

The budget balance was in surplus of Tk 196 crore from July to October in comparison to a massive deficit of Tk 19,261 crore, year-on-year. 

Total government spending fell 12.87 per cent in the first four months of the fiscal year as the development expenditure declined 34.57 per cent on the back of slow implementation of the development projects due to the Covid-19 pandemic, the finance ministry said in a report.

Zaid Bakht, an economist, said the implementation of the budget and the ADP faced adversaries for most of the year. The execution of the mega projects had witnessed significant slowdown as foreign consultants and engineers returned to their homes because of the coronavirus pandemic.

"The impact of the economic slowdown is petering out. But it remains to be seen how the second wave of coronavirus infections plays out."

Bakht, also the chairman of state-owned Agrani Bank, said the government's borrowing did not go up as it could not spend much. "The spending is picking up now."

The revenue situation has not improved much as the global trade scenario and the economic activities at home have remained subdued. It is expected to see a similar trend in the coming months as well.

"Overall, the government's financing has been facing a tight situation," said Bakht.

"But, if the public borrowing goes up, it will not create much problem for the government as banks are flooded with excess liquidity."

The excess liquidity in the banking sector stood at Tk 160,979 crore as of August, up 105 per cent year-on-year.

Bank borrowing more than halved to Tk 14,008 crore in July to October in FY21 from Tk 33,510 crore a year ago, finance ministry data showed.