FY21 National Budget: A missed opportunity

The government in last year's budget gave priority to several crucial sectors to protect people and their livelihoods amid the pandemic, but it could not achieve the desired results due to the Covid second wave and hurdles in implementing its initiatives.

Finance Minister AHM Mustafa Kamal put the fight against the virus and the economic recovery at the heart of the budget for fiscal 2020-21.

As expected, he gave priority to health, agriculture, social protection, and job creation and retention as the country was facing an unprecedented crisis.

Kamal went for an expansionary budget that would see the deficit go past the comfortable level of 5 percent. Funds were allocated to the ministries and divisions to meet regular and emergency needs so that the country could pull itself out of the crisis.

He also prioritised development projects, closed loss-making jute and sugar mills, and cut non-essential public expenditures to save money for a rainy day.

The economy reopened in the very month he placed the budget after a two-month lockdown. Workers returned to factories. Public movement also increased.

The arrival of the Covid vaccine jabs in January this year, for which the government deserved kudos, fuelled the optimism further.

The people, concerned more about feeding their families than Covid, gradually lowered their guard against the virus.

They cared little about maintaining health protocols amid lax enforcement of rules, creating the ground for the second wave that caught the nation off guard.

It became evident that very little was done in preparing for the worse while the going was good. And valuable time was wasted.

At the height of the crisis last year, poverty doubled, and at least one crore people became new poor. Incomes fell as high as 80 percent.

According to a survey by the Centre for Policy Dialogue, almost all who had lost jobs from April to May last year due to the economic downturn found work by February this year. But 86 percent of those covered by the survey said they were not earning enough to meet their daily necessities.

One of the priorities of the government was to expand the coverage of social safety net programmes to reduce hardships of the poor.

But it could not spend two-thirds of around Tk 25,000 crore aid packages for the poor and vulnerable, frontline health workers and low-income farmers.

In December, a government survey revealed that the social safety net schemes failed to cover millions of urban people facing food insecurity.

The implementation of the schemes gained momentum recently.

Despite attaching the highest priority to the health sector, the government could not rebuild the creaking healthcare system. It could implement only 26 percent of the sector's development budget in the first 10 months of the current fiscal year.

Agriculture did very well as always, helping the country combat the crisis. But the government has failed to build adequate food stock owing to the reluctance of farmers and millers to sell the produce at the government-set rates which were lower than the market prices.

Beefing up the food stock was of paramount importance through early imports because one bad crop can drastically change the situation and compel the government to buy rice at higher prices from the international market.

The fall in revenue expenditure was a welcome development. But the economy didn't benefit due to the inability to speed up spending for development purposes.

The worrying thing is that the ministries, which were instrumental in tackling the pandemic and helping the poor and the vulnerable, were among the worst performers.

Nothing was done for the expatriates who were forced to return home, though they, along with around one crore others who are still toiling on foreign soils, have supported the economy through thick and thin.

Cottage, micro, small and medium enterprises did not get adequate attention despite being the bedrock of the economy.

Also, the failure to maintain a steady supply of Covid vaccines was a major disappointment.

Revenue generation didn't pick up as expected because of the slowdown in economic activities. And the country will surely miss the goal set for fiscal 2020-21, as it did in the previous fiscal year when it posted negative growth in revenue collection for the first time.

The government revised down the GDP growth projection to 6.1 percent from 7.4 percent for 2020-21 as the pandemic continues to batter the economy.

It, however, hit the target in terms of whitening black money. A record Tk 14,295 crore was legalised in the first nine months of fiscal 2020-21 because of the opportunity to disclose untaxed assets by paying only 10 percent penalty, and that too without facing any question about the source of the income -- an unprecedented tax incentive.

Whether the 10 percent tax rate on the undisclosed amount is a penalty or reward is a moot point because the preferential treatment allows the black money holders to pay far less than regular taxpayers who have to pay up to 25 percent tax depending on income.

The government didn't do well in carrying out reforms.

One example is the VAT and Supplementary Act. It was formulated in 2012 but was put into action two years ago in a compromised form.

Yet, the country has not been able to benefit fully from it as the infrastructure that would boost collection of value-added tax is not ready yet.

The government, however, took some measures to encourage business activities and save public money.

In November, parliament passed a law allowing an individual to form a company to give a boost to entrepreneurship, attract investors and support the growth of small and medium enterprises.

The government closed down 25 loss-making jute mills and seven sugar mills to reduce losses. This hinted that it no longer intends to inject funds into unprofitable state-run enterprises.

It also asked state-owned companies like Bangladesh Telecommunications Company Ltd to be self-reliant.

Digitalisation is one area that saw several steps in the right direction.

The social welfare ministry, which spends bulk of the funds under social safety net schemes, and other ministries are working to disburse these funds through mobile financial services (MFS), which will ensure transparency and prevent leakage.

In the past, the government used to channel only the stipends in the education sector through the MFS.

Besides, Bangladesh Bank allowed micro-merchants and underprivileged businesses to open personal retail accounts with MFS providers, allowing them to accept payments digitally.

Throughout the year, the finance minister has been supported by bearable inflation, good harvest of crops, stable exchange rate, moderate exports, record foreign currency reserves, a robust flow of remittance and foreign aid.

Since the Covid outbreak, he did not hesitate to make funds available. Now, he has to get to the root of the problems in implementing the government initiatives and resolve those so that the country does not miss the boat again.