'Growth-centric' budget fails to reflect reality: CPD

The Centre for Policy Dialogue says the government has mostly opted for a conventional budget for the fiscal 2020-21 when it needed to be more innovative to address the multidimensional challenges presented by the coronavirus crisis.

The think-tank's reaction on Friday came a day after Finance Minister AKM Mustafa Kamal unveiled a Tk 5.68 trillion budget for the upcoming fiscal year.

CPD, in its budget recommendations, had urged the government to prioritise health, social safety net, agriculture and employment generation and it believes the budget has rightly put emphasis on these sectors.

However, its promises and priorities have not been translated into actions through innovative approaches and allocation of adequate resources, according to the think-tank.

The total allocation for the healthcare sector amounts to Tk 292.47 billion in FY21, marking an increase of 14% from FY20, while its development budget allocation rose by only 1.90%, CPD noted in its analysis.

The allocation for the health as a share of the total budget has increased from 4.72% in FY20 to 5.15% in FY21

However, this is lower than the allocation of 6.18% of budget in FY10 when there was no pandemic

The increase in the total budget allocation for health in FY21 therefore followed a linear trend line, indicating that the rise was business-as-usual and nothing out of the ordinary, despite the fact that the healthcare sector is reeling from the shocks of COVID-19, it said.

Allocation for health as a share of the GDP has increased from 0.84% in FY20 to 0.92% in FY21 but it is only marginally higher than the average allocation of 0.82% of the GDP since FY10.

The budget allocation for health has been less than 1% of the GDP for the past 12 years indicating that healthcare was never a priority sector for the government and that has not changed in FY21 even during a pandemic, CPD said.

High out-of-pocket expenditure on health could also push many people into poverty during the crisis as they struggle to bear health-related expenses on their own, it added.

The allocation for social safety net programmes has been increased to Tk 955.74 billion in the proposed from Tk 818.65 billion in the revised budget for FY2019-20.

However, this represents an increase of only 17% which is lower than the average rate of increase of 18% between FY10 and FY21, CPD pointed out.

Overall, the social safety net budget has increased as a percentage of both the budget and the GDP, most of which has been allocated to COVID-19 related programmes, loans, interest payments and subsidies to help the poor and vulnerable groups overcome the impact of the crisis.

The national budget for F2021 has echoed one of CPD’s budget proposals which identified the agriculture sector, reeling from the COVID-19 pandemic and Cyclone Amphan, as one of the priorities.

Poultry, dairy, fishery and livestock sub-sectors have been affected at varying degrees leading to calls for special attention in the national budget.

CPD made a number of monetary, fiscal and sectoral proposals in order to increase acreage of cultivation and attain higher level of  food production. The idea was to create additional employment in agriculture and improve food and nutrition security for the marginalised, it explained.

Allocation for agriculture and allied sectors (AAS) is set to increase by 5.7% to Tk 299.81 billion in FY21. Despite this, the share of AAS in the total budget has experienced a declining trend over the recent past years – from 6.03% in FY19, 5.38% in the revised budget for FY20, to 5.27% in FY21.

The Ministry of Agriculture received the highest share of allocation within the AAS while the ADP allocation under it has also increased by 10%. Despite the higher allocation in the budget, poor budget utilisation capacity of the MoA remains a major concern, according to CPD. It had utilised only 67.9% of its allocated budget during FY18 althout the rate did increase to 87.5% in FY19.

Subsidy and incentives in the agriculture sector will also be increased by 18.7% in FY21 compared to the revised budget for FY20. However, CPD believes that the large amount of unutilised subsidy in past years make it difficult to justify a further rise in subsidy and there may be higher demand for additional allocation in view of COVID-19 epidemic.

The agriculture sector needs to ensure full and proper  utilisation of subsidy during FY2020‐21, according to CPD, which believes it would have been able to better handle the COVID-19 and cyclone crisis if the FY20 budget commitments made had been implemented within the timeline.

According to the think-tank, the budget has not adequately addressed the rising number of newly poor people as well as the increasing income and consumption inequality which required differentiated measures.

It was also critical of the government's 8.2% GDP growth target in the fiscal year 2020-21 which has also been derided by other economists. The budget did not try get out of ‘GDP growth-centric' philosophy, to focus more on poverty, inequality and employment, according to CPD.

"During a crisis such as the COVID-19 pandemic, the main objective should be supporting the poor and affected people, instead of being too concerned with GDP growth. Several countries have been facing negative growth which is natural during a pandemic. The focus should be on coping, adjustment and mitigation with a view to subsequently get on the recovery track."

It also stressed the need for a realistic estimate of the country's economic performance as Bangladesh needs to access COVID-19 related funds from international organisations, particularly when the government is expecting to underwrite a large part of the budget deficit from foreign borrowing.

In light of the evolving COVID-19 crisis, the government should be ready, if required, to revisit the budget and undertake necessary corrective measures to reflect the realities on the ground, said CPD.