Budget and brutalised public psyche

Finance Minister Saifur Rahman presenting the proposed Budget in the Parlement

Given this poor governance perspective it is not surprising that this year's budget has been scrutinised and criticised very strongly by both the opposition and civil society. The major criticisms against this year's budget were focused on the following issues:

Lack of realism: The capacity to deliver by the existing state machinery has always been questionable. This capacity has been further eroded due to on-going politicisation of administration. The government officials do not want to take any risk given the prevaling political highhandedness. So they are not up and doing for project implementation. Despite this governance weakness the finance minister has planned the largest ever budget for Bangladesh. Mobilisation of both domestic revenue and foreign assistance could be undermined because of the low capacity of the government machinery. The implementation of development projects will be facing similar problem because of the low capacity of the government structure as well. The foreign aid envisaged may not be forthcoming also because of the governance crisis. The conditionalities (i.e. reduction in corruption, containing terror and increased transparency etc.) that are creeping in may pose as a big barrier to the offtake of foreign aid and it may get stuck up in the pipeline which is already greatly bulged. This year's budget has been highly over ambitions both in terms of mobilising resources and utilisation of the same.

Fear of leakage: The critics have been concerned about the scope of leakages of public fund that seems to have been 'deliberately' kept in the budget. The allocations made for Gram Sarker, block grants, local infrastructure under the aegis of Local Government Ministry have been pointed out by them as the potential areas of political patronage distribution and misuse.

Investment stagnation: Definitely there has been stagnation in public investment leading to similar outcome in the private sector as well. Recent squeeze in credit for the private sector to contain pressure on balance of payment by raising interest rate and L.C. margin indicates that the private sector investment too is under pressure. This will have negative impact on both growth and employment.

Faster revenue expenditure: The interest of the government in not cutting the coat according to cloth is an ominous development. The faster growth of revenue expenditure compared to slower pace of ADP implementation speaks volume about the non-productive stance of the budget. The finance minister has not spoken even a word about cutting down of expenditure and wastage which otherwise speaks volume about the 'intention' of the government. No doubt critics have termed this budget as 'election budget' which essentially means distribution of public money to the politically chosen clientele for appeasing them. Some of the critics, therefore, termed this to be a prescription of fiscal indiscipline and disorder.

Paradox: While the national savings is about 26 per cent of GDP and if you add foreign aid with this, the investment rate should have gone much higher than the current figure of 24%. Where is then the money going? In other words, are we squandering our hard earned money for non-productive activities? The budget has not focused its attention on this vital question.

How to implement agricultural subsidy: The agricultural subsidy does not reach the real farmers. Last year this subsidy was Taka 600 crore. Yet the price of fertilizer did not come down during the sowing season. The farmers did not get water from the pump owners at a lower rate either. That means the agricultural subsidy has gone to the middlemen only. Unless we can design a proper delivery mechanism, this kind of subsidy will not reach the poor farmers. No doubt, the agricultural growth rate has been dismal last year.

Apathy to the ICT sector: The taxholiday has been withdrawn from the software industry. Instead ten percent tax has been imposed on its earning. If you are providing incentives to agro-processing, poultry, garments why then the software industry be treated in such a step-motherly manner? This is still a growing industry and deserves to be nurturing. It may not have earned enough export earnings but it is still contributing to our domestic economy. Allow this industry of 21st century to flourish. In the same vein, while fully appreciating the finance minister's concern about high call rates of mobile phones, we feel that the tax imposed on sim card be removed. The former is a governance issue which deserves to be addressed separately. The mobile phones are used by ordinary people as well. The youths are deep into its use. Again, this is also part of the burgeoning IT technology. So the budget should not raise a barrier to its expansion.

Token social safety net: While it is appreciated that the present government has been continuing the social safety net programmes introduced by the earlier government, the amount per capita given to the extreme poor (Taka six only per person per day) is still paltry and tends to be a token. A poor cannot even buy half a kilogram of rice with this money. So there is a point in raising this amount to a respectable level. The number one MDG related to reduction of extreme poverty and removal of hunger cannot be achieved by such a 'token' allocation.

Local government undermined: The implementation level of ADP could have been higher if local government, particularly Union Parishad were given higher level of allocations. They deserve more from the budget. There is an imperative of strengthening the capacity of this LG institution.

Unethical: The whitening of black money paying income tax at a rate 7.5 per cent only income tax while even the lowest tax payer would pay 10 per cent of his/her income as tax sounds unfair and unethical. The black money earners may have political strength but they do not deserve this pat on their backs. This will only encourage corruption and breakdown of norm of social justice. No doubt this proposal of the FM has been criticised most by many. This has given a bad signal to those who are supposed to be chased by law enforcing agencies, particularly the ones engaged in Anti-Corruption Commission.

One can add here many more criticisms of the budget. Unless the Finance Minister is willing to hear what the critics say, particularly in the absence of a vibrant parliament, this year's budget may add more fuel to the on-going political agitation. It is high time that the government takes seriously the points raised by the critics of the budget and address the weaknesses. If the FM can respond positively, some of the frustrations unleashed by the budget may ultimately be modulated and help alleviate the brutalised public psyche.

Atiur Rahman is an economist.