Bangladesh faces a budget black hole as lockdown costs billions in lost revenue

Bangladesh rang in the 2019-20 fiscal year aiming to rake in Tk 3.25 trillion in revenues, but the coronavirus crisis is going to catch the government short by no less than Tk 1 trillion, according to estimates.

Abdur Rahim Badal Chief Economics Correspondentbdnews24.com
Published : 3 May 2020, 11:07 PM
Updated : 3 May 2020, 11:07 PM

With less than two months left of the financial year, an official says they need to sit and talk but they cannot do that because of the lockdown that is set to wipe out a big chunk of revenue.

A researcher estimates the government will miss the target by a staggering Tk 1.15 trillion.

“We can’t even hold discussions amid the COVID-19 panic. Everything has to be done via phone calls, emails. Where is the scope to discuss, review and analyse freely? But we have no other way. We must make a budget,” said an exasperated Shamsul Alam who is a member of the Planning Commission’s General Economics Division.

Finance Minister AHM Mustafa Kamal, who was stricken by dengue fever while presenting his first national budget last year, is going to place that fiscal plan in parliament on June 11.

In the last budget, he gave the National Board of Revenue the target of over Tk 3.25 trillion, more than 62 percent of the total outlay he set out.

The NBR has already missed the July-March target of Tk 2.21 trillion by around Tk 561.4 billion.

Motijheel, the commercial hub of Dhaka, is empty with all offices shut. Photo: Mostafigur Rahman

The average growth in revenue in the last five fiscal years was 13.16 percent, but this year economists doubt whether the government can post even 1 or 2 percent growth on revenue. Because the coronavirus has put brakes on the collection since March, when the monthly revenue dropped by 2.73 percent year-on-year.

It’s been a slow grind for Bangladesh’s economy in terms of growth since the beginning of the fiscal year, with all the factors, except remittance, in the negative zone, impacting revenue.

The COVID-19 pandemic will eventually cost the country Tk 200 billion in lost revenue, according to the researcher Ahsan H Mansur.

“The rest of the deficit of Tk 1.15 trillion will be caused by the slow economy and ambitious target,” he said. He believes it was in no way prudent to target a 45 percent growth in revenue for the current fiscal year.

The executive director at the Policy Research Institute recommended the government cobble together a budget for six months to December focused on livelihoods and rehabilitation.

And even if the government goes for a budget for the entire fiscal year, it should not exceed Tk 3 trillion in size, much smaller than the last budget of Tk 5.23 trillion.

The Planning Commission’s Shamsul agrees. The revenue target for the next fiscal year should be low, he says, considering the colossal deficit the government will be left with this financial year.  

Mohakhali Flyover and Airport road have fallen silent. Photo: Saad Abdullah

According to him, they were eyeing an 8.2 percent growth for the next budget. “That’s not happening now. Eventually the budget may be 2.5-3 percent bigger than the previous one,” he said.   

An official with the NBR’s Income Tax Department, speaking on condition of anonymity, said they were struggling to set the outlays.

“We don’t understand how much growth should be targeted sector-wise,” the official said.