CPD calls for emphasis on health, agriculture in FY21 budget

The Centre for Policy Dialogue (CPD) has urged the government to prioritise the health and agriculture sectors in the national budget for the fiscal year 2020-21 to help Bangladesh bounce back from the economic fallout of the coronavirus pandemic.

The think-tank also called for special focus to given on reviving small and medium enterprises (SMEs) and expanding the social safety net programmes (SSNP) in the upcoming budget as part of its recommendations to mitigate the impacts of the coronavirus crisis on the national economy.

Despite the immense economic and humanitarian costs, CPD believes the government made the right call by enforcing a nationwide shutdown to limit the outbreak but warned that the resumption of economic activities must be informed by health and safety priorities.

In light of the ongoing crisis, public expenditures should be made in a manner that creates employment opportunities without increasing inflationary pressure in the economy, it said.

The health sector should get the priority in the national budget for FY2021 as the scale of the pandemic has proved that there is no way to contain the spread of COVID-19 without the necessary investment, according to the think-tank.

However, investment in the health sector ought to balance the expenditure for short-term emergencies for coronavirus and the long-term needs of the health sector.

The additional allocation for the health sector in FY2021 should not be a 'one-off' but should rather continue in the coming years to address the longstanding demands of the health sector, it said.

Necessary funds should be allocated for the establishment of emergency facilities and procurement of health-related equipment and facilities. In this context, the CPD suggests that the terms and conditions for the procurement of emergency health-related equipment may be made flexible and may be exempted from the taxes.

CPD also suggests offering incentives to doctors, nurses, and other support staff working in private hospitals/clinics with coronavirus patients through a special financial package with a reduced rate of taxes on their income for the first half of FY2021.

"Hospitals, clinics, diagnostics, and laboratory involved in coronavirus-related treatment and research should get a waiver on advance income taxes for the period of first quarter of FY2021."

The economic adversity caused by the COVID-19 crisis has reemphasised the importance of food security through food production and the need for increased public food stockholding, CPD noted.

Given the demand for additional funds, particularly for implementing important priority projects associated with providing food security and creating employment opportunities, CPD recommended raising the allocation for the agriculture sector to at least 3 percent of the total budget in FY2021.

The national budget for FY2021 should allocate at least 3 per cent of the GDP for SSNPs as outlined in the National Social Security Strategy, according to CPD.

It proposed providing Tk 8,000 to low-income households for two months. The total financial requirement for the proposed cash transfer programme is estimated to be between Tk 269.62 billion and Tk 298.52 billion.

However, the programme should not be a replacement of the ongoing general SSNPs but rather a time-bound additional support measure in view of adverse effects of the outbreak.

Domestic small and medium enterprises (SMEs) which account for a majority of economic enterprises, were hit particularly hard by the coronavirus crisis, CPD noted.

The businesses of these enterprises are overwhelmingly dependent on a few important religious and cultural events but the cancellation of the Pohela Baishakh festivities during the lockdown resulted in significant losses to these SMEs.

To compensate for these losses, the national budget for FY2021 should target fiscal policy and sectoral measures with a view to increasing cash flows to the SMEs in the form of working capital and raising their investment capacity, according to CPD.