Economists back Bangladesh budget reboot for coronavirus recovery

Economists say the government needs to rework the 2020-21 budget to help Bangladesh recover from the economic and fiscal damages caused by the coronavirus crisis instead of focusing on development.

It should draw up plans for a new financial blueprint to develop the health sector, broaden the tax net and reduce income inequality for the recovery, they suggested.

The budget session of parliament is set to begin on Jun 11 with a massive deficit in revenue earnings in the outgoing financial year mostly due to the pandemic.

Moreover, the World Bank has predicted only 2-3 percent GDP growth while the target was 8.2 percent.

But Finance Minister AHM Mustafa Kamal believes that Bangladesh will finally be able to post over 6 percent growth. The economy grew by less than 6 percent for the last time in 2009-10.

“Recovery should get more importance than development,” said Zaid Bakht, a researcher at Bangladesh Institute of Development Studies.

The government should also prioritise the sectors related to health and small and medium enterprises, the Agrani Bank chairman said.

“Infrastructure development can wait. For now, at least for a year, we need to focus on taking the economy back to its normal self,” he added.

Economist Qazi Kholiquzzaman Ahmad said development of the health sector should get the highest priority now.

“We need to invest in hospitals, recruitment of doctors and nurses, and whatever is required to be safe from the virus,” he said.

Kholiquzzaman also emphasised social safety net and food security and suggested expanding cash aid programmes further, which he said will lead to a rise in consumption and production as well.

In the budget for 2019-20, the highest allocation of 18.5 percent was proposed for public administration. Health sector received 4.9 percent while social safety and welfare got 5.6 percent.

Associate Professor AKM Nazrul Islam of Dhaka School of Economics said it will be a big challenge for the government to tailor the budget.

The government must raise fundings for health, agriculture, and social safety and welfare while revenue will shrink alongside exports, he pointed out.

He suggested bringing more citizens under the tax net to increase revenue.

Nazrul also believes the government should focus on closing income inequality.

“Reduction of dependency on VAT can help cut inequality because the rich and the poor pay the same amounts of VAT. A well-thought property tax system can also be useful,” he said.

Bangladesh’s Gini coefficient, an index that is used to describe economic equality, rose to 0.483 in 2016 from 0.458 in 2010.