The common people across the globe are spending their days in anxieties and uncertainties in the midst of Covid-19 pandemic, which is now racing towards a peak in Bangladesh. The world is also gripped by an unprecedented recession and nobody knows where the economies are headed to or how long it will take to restore normalcy.
In this difficult and dystopian setting, the country's finance minister has presented a budget that does not take into cognizance the socio-economic-cum-statistical realities in Bangladesh. As one commentator puts it, he has remained stuck in a maze of make-believe figures and convenient statistics, including a ludicrous GDP (gross domestic product) growth estimate for the upcoming fiscal year. The GDP figures are all the more unacceptable as the most productive quarter of the year (April-June) has been hijacked by Covid-19.
Although government revenue and private investments have taken a big hit due to the pandemic, only nominal changes have been brought to the revised budget for 2019-20. More surprisingly, the finance minister has proposed a massive Tk 5.68 trillion budget for 2020-21 based on earlier trends.
The minister has assumed that Covid-19 would evaporate very soon, and the external demand for the country's readymade garments would rise swiftly as the global recession would become a thing of the past soon. The expatriate workers would quickly get back their jobs abroad; consumption demand would rise as the people would have sufficient money for spending; and no workers including the informal ones would lose jobs, their salaries remaining at the same level as in the past. And miraculously, the private investments would soar to 25.3 per cent of GDP from the current year's 12.7 per cent, whereas there had been only 1.38 per cent private investment growth in previous nine years.
It should be noted that private investment-GDP ratio has fallen alarmingly this year from 23.54 per cent in the previous fiscal. Experts think, based on the investment-GDP ratio, the projected growth rate might have actually been 1.0 per cent.
But, whereas the GDP growth estimates by international agencies like the IMF and World Bank hovered around 2.0 per cent for the current fiscal year, the finance minister's claim of a 5.2 per cent growth based on earlier projections and his growth target of 8.2 per cent for the next year would seem incredible to many observers. It appears that politicisation of GDP figures and aberrations in official statistics have crossed the limit in Bangladesh in the past decade. Notably, IMF has brought down its GDP growth projection for the next fiscal year to 6.0 per cent in line with recent trends.
Provisions for social safety net in line with the previous year and below 1.0 per cent of GDP allocation for the health sector appear quite inadequate for dealing with the pandemic and post-pandemic situations. The target of meeting 62 per cent of deficits through bank borrowing would undoubtedly put excessive pressure on banks. Besides, almost 50 per cent (49 per cent) growth target for revenue earnings does not appear to be realistic, and provision of unfettered scope for whitening black money would only encourage the corrupt and demoralise the honest taxpayers.
The anti-corruption watchdog Transparency International Bangladesh (TIB) has stated that good governance, corruption-prevention, transparency and accountability should have been raised to an even higher level compared to normal times in order to effectively tackle the pandemic situation. But sadly, the proposed budget has taken a supportive stance towards the scourge of corruption. Provisions have been incorporated this time to allow whitening of undisclosed money through buying lands and investing in the capital market, apart from investing in the housing sector, by paying 10 per cent tax.
And none including the Anti Corruption Commission can now raise questions regarding the sources of that money, thereby condoning the corrupt practices that eat away the vitals of our society. It may be recalled that no tangible benefits could be obtained by extending this facility year after year. It discriminates against the honest citizens and goes counter to Article 20 (2) of the country's constitution.
Similar questions have also been raised about the opportunity to get official endorsement for money laundering through under and over-invoicing by paying penal taxes. The government has in fact acknowledged these dishonest practices by proposing this provision. Besides, does Bangladesh have the skilled and dedicated manpower required for tracing and proving money laundering?
The Financial Intelligence Unit of Bangladesh Bank is vested with the responsibility of looking after this malady. But it has failed to play any distinctive role in containing money laundering since its launch in 2001. Therefore, the provision would only legalise laundered money, which goes against the rule of law. Sadly, these two provisions would endorse corrupt practices at two stages of the production cycle - process and output, which cannot augur well for anti-corruption efforts in the country.
Despite these contradictions, the finance minister appeared very upbeat during the post-budget press conference when he said, "We are hopeful that the corona will not linger for many days. We have faith that the Tk 5.68 triillion budget is implementable." He clarified, "The budget had to be prepared this time at an abnormal juncture while we were standing on an altered path. We shall see later where the money comes from. We want to spend first. We don't worry about the sources of money. People have to be saved, employments have to be generated. New life has to be infused in the macro-economy including the rural economy. Whatever money is required, will be mobilised."
However, despite these apparently inconsistent utterances, the finance minister's budget proposals contain many positive elements as well. These include 2.5 per cent reduction in corporate tax rate, raising the level of tax-free income to Tk 300,000, decreasing the tax at source for exporters to 0.5 per cent from 1.0 per cent, incentives for local industries, duty waivers for a number of essential commodities including disinfectants and personal protective equipment, and waiver of VAT (value added tax) for agricultural machineries.
Dr. Helal Uddin Ahmed is a retired Additional Secretary and former Editor of Bangladesh Quarterly.