Muhith presents no-ripples budget

With no major initiatives, the present government's last full budget is apparently focussed on carrying forward the ongoing programmes, writes Tanim Ahmed

Tanim Ahmed

Dhaka, Jun 7 (bdnews24.com)—Finance Minister A M A Muhith played it safe in unveiling the budget on Thursday, pledging reforms but setting only modest targets for trimming a ballooning fiscal deficit amid cooling economic growth.

With no major initiatives, effectively the present government's last full budget appears to be almost exclusively focussed on continuing with the ongoing programmes.

The government aims to cut spending growth as well as tries to keep a lid on swelling subsidies and bring more services under the tax umbrella as it attempts to shrink a gaping deficit and get back onto a path of fiscal consolidation.

Muhith's Tk 1.91-trillion budget at 18.41 percent of the national economy is marginally up from 17.62 percent of GDP last year. Revenues grew from about 74 percent of this year's total outlay to 76 percent for next year. Deficit remains at the prescribed level of five percent of GDP.

Two challenging targets that the Finance Minister set for the next year are a GDP growth of 7.2 percent, up from the current 6.3, as he sought to shake off the negative sentiment surrounding the economy, and pegging inflation at 7.5 percent, which averaged in the double digits over the last 10 months.

Inasmuch as everyone wanted a path-breaking budget, political-economic factors such as placating different interest groups mean the Finance Minister's hands are tied behind his back.

The Annual Development Programme of about Tk 550 billion, accounting for about 29 percent of the outlay, would prove to be another daunting task given the government's poor performance of ADP implementation.

Early on, in his three-and-half-an-hour budget speech, the Finance Minister touched upon the issue of high bank borrowing. He noted that in his previous budget he had mentioned that in order to cope with the pressure of rising fuel prices, the government might have to tighten the purse strings.

He said the first-half of the current fiscal saw a record rise in public expenditure. "It was mainly due to the subsidy liabilities of agriculture, energy and power sectors."

As an immediate fallout of such a situation, government borrowing from the banking system surged with resultant rise in interest rates, he said. "This further led to decline in private sector credit flow to some extent. It also created pressures on foreign currency and made exchange rate unstable."

Next year, the Finance Minister said, the government would keep its spending under control and "keep its bank borrowing to a minimum". Bank borrowing reached Tk 290 billion, up from a projected Tk 185 billion this year. For the next year, it has been set at Tk 230 billion at about 12 percent of the outlay.

Power

Trotting up the government's projects in improving the power situation, Muhith admitted quite openly, "Despite all these efforts, due to load-shedding, people in Dhaka and elsewhere have been suffering a great deal."

He said, "A question, then, might be asked: what is the result of all these initiatives?"

Muhith reasoned that some of those activities had lagged effect and their impact became visible only after a certain period. "I am confident that the results of our endeavours will become visible by 2013."

He mentioned that the government had at its disposal 33 power plants that had grown to 79. "However, because of accelerated demand, power shortage is being strongly felt."

The minister said the agreements to install 52 power plants had already been signed and installation of another 30 power plants was underway. These will kick into operation within the next two years. Power and energy allocation account for five percent of the outlay.

Food security

The most notable initiative in what had been the ruling Awami League's most significant election pledge is to increase the government's food storage capacity from 1.65 million tonnes to almost 1.9 million tonnes of food grain.

The overall allocation for agriculture with Tk 89 billion and its subsidies for fertiliser and irrigation make up for some 7.5 percent of the outlay.

Muhith highlighted a 'National Agricultural Policy, 2011', the 'Country Investment Plan for Food Security' and 'National Food Policy Plan of Action', and mentioned they were already being implemented.

Health

The Finance Minister mentioned the government's plan to build 13,500 new community clinics across Bangladesh and noted that 11,409 had already been built.

He hoped that remainder would be built and made operational by the end of the next year. The 'National Health Policy, 2011' and the 'National Drug Policy, 2005' had already started yielding results, said Muhith.

Public Welfare

The inclusion of transgender, gypsy and Harijan communities in the social safety net for the first time, albeit with a meagre allocation, marks a positive change and also serves another purpose of granting these communities a certain degree of recognition.

Other than that, the Tk 230-billion welfare fund would provide for the regular fare of VGF, VGD, poor freedom fighters, destitute women, old widows, lactating mothers and the elderly. Some of the programmes will see their allocations rise while others would see the number of beneficiaries increase.

Others

Debt servicing with an allocation of 12.2 percent of the overall expenditure, along with public administration with 12.6, and education and IT with 11.5 percent, continue to remain as the top sectors.

Military contractors seeking deals in Bangladesh will keep an eye on capital expenditure in defence. With 6.7 percent of the budget, it is likely to see a significant portion being spent on military hardware including fighter jets.

Starting next week, parliament will debate the budget proposals outlined on Thursday. By this month, lawmakers will vote to formally adopt a budget.

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