Monday | 13 January 2025 | Reg No- 06
বাংলা
   
Monday | 13 January 2025 | Epaper

No harm having budget deficit: life and livelihood come first

Published : Wednesday, 13 May, 2020 at 12:00 AM  Count : 576
Haradhan Ganguly
Our bankers are suspecting their loan disbursement would be left non-cooperated by takers taking the present context of uncertainty. So they are panicky and already windowed their concern recently. But it is too early to be panicked. The scenario and contents present difference in between the non-performing loan culture of the past pre-corona era and the present state of the right mix of containment and mitigation policies of the government. Bankers must go with the bailout programmes of the government that must see the invigorating of the effective demand and market dynamism. So the moral question of the present that bankers must shore up policies set to boost consumer spending, support failing industries, revamp agriculture and increase investment to stave off economic pandemic with agility and without irregularities.   

Krishnamurti the loftiest ICT mentor of INFOSYS said that more people will die of hunger in lockdown than the death by COVID-19. This prophecy brings round to the thought of urgency of the World people to attack hunger. That is, protecting Life and protecting livelihood connote the same weight coming fast before us particularly today the stage at which the World of CORONA has taken us to. We need not to understand Krishnamurti's.

Harsh reality and the situation that are in the offing in this planet prove it that the supply chain of goods and services for protecting life and digging grave for dead are to be done parallel. So for dead has only one answer that is to take it to cemetery with utmost rapidity. Since dead has no problem, it creates problems for others living if delayed. So we are for life.

There is no denying, world economy is rolling in discernable depression. It is a clear cut indication. Depressed demand due to fall in employment and on the other production failure and retarded supply chain for goods and services and resource mobilization to sectors newly determined to fight corona onslaught will enhance and deepen depressionary pressure. The Great Depression of the 1930s left its mark on every society and changed the way we think about life.

The Great recession, which started in 2008 with the collapse of Lehman Brothers, one of the most famous investment firms on Wall street with a 158 year old history, marked another milestone that brought about phenomenal changes of the global landscape, particularly the US economy. Now there is increasing fear that the deadly corona virus pandemic might be leading to another depression due to above causes we are coming across. So massive round of readjustment of World economy is being thought of. Bangladesh has also taken steps to be thought worthy for her.

Before coming to the efficacy of the packages, we say a few on depression that already starts. It is a trend that shows a prolonged period of abnormally low economic activity and abnormally high unemployment. This is often accompanied by a tendency for prices to fall or at least to rise more slowly than usual and by a fall in the relative prices of primary products as compared with those of industrial products.

Depression or slump even is more injurious to the economy than inflation. Notwithstanding both are evils. But prolong depression brings in changes in political dimension. As this is believed 1930 Great Depression to have contributed to the rise of Hitler to power in Germany and thus to the Second World War. Post covit-19 World will see also much polarization in political scenario of the World.

Among others, the tasks of national governments during depression are to activate markets of both producers and consumers by boosting the continuity of supply chain both internal and external and accordingly enhancing injecting money into the economy. On the other side governments have to head of protecting the affected and disadvantaged in various social groups. As we see our second stimulus package declared by Prime Minister on 5th April covers four areas and amounts to TK 67,750 crore to overcome the economic losses by corona virus and earlier on March 25 government declared the first stimulus package amounting to TK 5000 crore for the export oriented sectors. Thus, the total size of the stimulus packages stands at TK 72,750 crore, which is about 2.5 percent of our GDP.

All countries developed and developing to fight corona and economic slump in a way took resort to stimulus package. US central bank, the Federal Reserve, rolled out its third emergency credit programme in two days, aimed at keeping the USD 3.8 trillion money market mutual fund industry functioning. Bank of England cut interest rates to 0.1 percent, its second emergency rate cut in just over a week. Likewise the European central bank, Canada, South Korea, South Africa, Australia and Saudi Arabia among other nations have also slashed their interest rates for stimulating more money to be pump primped into the economy. India kept huge amount of money aside to boost supply chain and took policy support for wheels of industries running. State governments are coming forward to support central government digging in political differences.

Now let us see our packages to be thought from targeted functional point of view. We know government's declaration of stimulus package need a huge amount of money to fight the economic crisis. It is no denying, this crisis will be harsher because of the return of lakhs of workers from Middle East who lost jobs there. No task is easy now to provide them in internal job markets. It is a trouble upon trouble when it would get mingled with internally growing joblessness due to corona menace. It would weaken external source of income and on the other inflated unemployed manpower with their family members would jointly trigger a huge crisis of effective demand - the main driver of our market dynamism and development.

What is our thought to say, it is proved always in our economic and social structure and it is more proved in crisis management due to Covid-19 that there is no alternative to public spending and government initiatives. We think four areas need to be taken urgent now. Health, food security, agriculture and normalization of the economy.

It is fact no government in the world, rich and powerful it is, is not prepared to face pandemic unknown to it. It is true to us too. But surprisingly it is also true that in the last two decades, public expenditure on health as a proportion of GDP in Bangladesh has remained at 0.5 percent which has declined over time.

In food security and agriculture government is on right track still now. But if Covid-19 persists for long time and changes its dreaded shape, only Almighty knows what might have happened. But we are brave to fight it. Our mind is far off fear. Economists suggest, success of stimulus package depends on three things (a) financing, (b) management and (c) monitoring.

We think four possible sources of financing this huge amount for package could be contemplated. First to suspend unnecessary or less important projects, second borrowing from International organizations such as the World Bank, IMF and ADB, Third borrowing from banking sector with caution judging the prevailing crisis in this sector. If these three options are becoming non-functional I must say government must go for printing money. It is debated we know. Some would say, our internal resource mobilization by NBR and present steps of some fiscal measures would be sufficient to stave off resource deficit. But sorry to say our internal resource mobilization particularly by NBR is bleak and still at sorry state always remaining far behind of target.

Our last but not the least argument is we must be prepared to accept the reality if we have a huge amount of budget deficit. We don't need to panic much about the budget deficit at this moment. 5 percent budget deficit that we always have is acceptable in normal time. In contrary to that, finance minister may think about a budget deficit of up to 10 percent.

Let us wait for 11th June, the day of new budget announcement.

Writer is former professor, now secretary, United Nations Association of Bangladesh (UNAB)





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