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Monday | 13 January 2025 | Epaper

Covid-19 and Budget 2020-21

Would it be hard to remain steadfast?

Published : Sunday, 26 July, 2020 at 12:00 AM  Count : 578
Haradhan Ganguly
July starts with a new budget in new experiences. The raging Covid-19 threw the entire economic world in the ocean of uncertainty. There is nobody to say how far Bangladesh could stick to targeted resource allocation for letting the wheels of economic activities oiled for growth achievement. Corona might mess up all targets compelling the planning commission to turn away resources to save lives which might be of growth compromising. So, traditional macro-economic articulation, relating to fiscal and monetary measures, has lost its base at this moment due to Covid-19 pandemic.

Then what to do now if Corona pandemic prolongs at least for three to four months or more? So allocation or priorities were kept on in flexible basket. That means at acute emergency, to fight Corona pandemic and protect vulnerability, funds availability could not have questioned. If curve falls flat resources ready to plug pandemic could have turned away to project implementation and normalize economic activities that is working for budget implementation.

In mid-June, the IMF in a country report on Bangladesh said that the economic impact of Covid-19 has most notable been felt in three main areas, a fall in remittances, a decline in RMG exports and a drop in domestic economic activities. But miraculously this forecasting is not true totally. Even migrant workers have had their lives turned upside down by the pandemic, remittances are showing rising instead of falling and the same is true for RMG. Market potentiality is becoming unearthed in a wider spectrum for diversified products of RMG if efficient exploration is carried on.

But at this moment, activating internal economy, creating employment avenues and putting a brake on declining internal consumption are the panaceas to a functional economy--a base to fight prolonged Corona pandemic. An operative agriculture is the answer just at this juncture.

Achieving food self-sufficiency is our one of glaring success stories. But it does not mean it would ensure food security and food availability for all. Even food equity and inclusiveness do not have ensured at this. One data shows Bangladesh still lags behind in the Global Food Index. In 2019 Bangladesh was ranked 83rd position out of 113 countries in the Global Food Security Index. Bangladesh's ranking is the lowest among the South Asian countries. This information creates a dilemma for Bangladesh.

Since food sufficiency and fragile food security are parallel running into contrary. From producer to ultimate consumer so many rent seekers and unearned income earners exist in between two. They are distorting market mechanism. Their maneuvering deceives both producers and consumers. Rent seekers manipulate food market due to lack in overseeing and failure of regulatory bodies making market inoperative. A rational reform is warranted which was due for long.

The agriculture in Bangladesh is seeing other changes. It is the expansion of the food processing sector. This has been also a source of employment. With further technological upgradation food processing can be further increased. This is the potential to improve food availability.

But it is noteworthy that Bangladesh agriculture has turned into being an important catalyst for poverty reduction through employment generation and food consumption. The value chains created within the sector such as through poultry and fishery sub-sectors have also helped the poor to improve their condition.

That is a sequential effect is sought about to fight Corona pandemic if it goes for a prolonged razing. First we need to build inclusive food systems. It is more important than ever before. This is to ensure the marginalized people enjoy the benefits of an inclusive food system. But don't misunderstand that inclusive food system is effective only on charity as a part of social safety net programmers of the government. No. A wide internal consumption as an effect of enhanced purchasing power of people is the real answer of inclusive food system. And that depended onto large employment opportunity.

And that employment opportunity would be stemming from dynamic internal economy ensured by up to the mark internal investment both from public and private depending upon a vibrant internal market operation. At this moment our agriculture and its sub-sectors is the best suited for. Agriculture gives food security, it can ensure employment opportunityfor rural people and particularly deported man power from abroad, it could facilitate creating wide internal consumption both in rural and urban areas and last but not the least it could create a field for a viable market in compliance with varied regulatory framing.

Ongoing budgetary framework starting from 1st July must have required flexibility of resource transfer amid different sectors. Government need not be much concerned about deficit. Since, for live and livelihood at this moment growth illusion is not our central theme of activities. So for investment more in health sector, government has had many avenues for resource mobilization without disturbing private investment to be crowded out.

For instance, government's debt burden on domestic and foreign sources, as argued by economists, are not big enough to create problems of fiscal sustainability. So government can resort to more deficits financing particularly considering the present crisis period where more government spending is warranted. Secondly, government reliance on bank money bridging 45 percent budget deficit incites critics to go for old fashion. That it would crowd out private investment from getting bank money. We disagree.

Private sector will likely to remain stymied depending on the extent of economic recovery. And also because of the private sector enterprises will be able to access subsidized bank credit through the refinancing facilities from Bangladesh Bank. They will get it as part of the government's economic stimulus packages. So, public demand for bank credit will not turn down private sectors' credit demand in this way.

So, government is not in short of money if she looks at saving lives and protecting and expanding their livelihood as the key priority, bypassing projects considered to be below cost effective and cost overruns. We know the budget has had to be framed under severe resource constraints. The target of revenue collection at about 12 per cent of projected GDP is likely to be achieved, given the economic downturn and uncertainty of recovery.

History witnesses, from long past we have had no sound fiscal system. Say from 1793 during Lord Cornwallis of East India Company rule introduced permanent settlement of land revenue in Bengal Presidency. There we see peasantry was the victim of discriminatory fiscal system which was regressive in character. That means, more wealth will have less tax burden and vice versa.

Even at the face of nonfulfillment of target for resources, government has another breathing space. 9 billion US dollars loan as commitment by International donor agencies is still left unrealized.

The writer is a freelance contributor, a retired professor and secretary of the United Nations Association of Bangladesh





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