Inside every finance minister there is a political persona struggling to get out. And once the split personality wins, the fallout is a predictable havoc on resource management. But is that going to be the case this year -- the first one of the BNP-led coalition?

It will take only hours from now, to be exact, at 3:00pm today, for the curious to know if Finance Minister M Saifur Rahman will win, or his split personality will have the last laugh.

Already that political personality is peeking through whatever figures are leaking out from the government. For one, the ADP has already been bloated to Tk 19,200 crore, a big 20 per cent leap from this fiscal's revised Tk 16,000 crore. The reve-

nue expenditure for the next fiscal has been slated for a modest over 4.5 per cent growth. But this is besides the pension fund requirements.

So, the overall budget will be expansionary in nature, be it from political expediency or from the need to spur investment. But it is understandable that being the first year of the government, pressures are high from party lawmakers to allocate more and more funds for projects. After all, the electorate has to be paid back. And that brings to the fore the question of how the resources will be netted in, specially when the foreign financing portion is on the dip.

But above all, the aura of political economy again creeps in prominence in the way that the budget is going to be formed. Of course, the finance minister can put figures, which he deems

fits his desire and gets the eye-catching headlines. But the revised figures never remain close to the original and even worse, the actual figures are never presented to the parliament. And this double standard dubbed political economy is in practice for years without any corrective measures for a transient do-good image of the economy.

Some of it is expected to visit the next year's budget when borrowing from the bank would be shown zero.

As indications go, the government will eye an ambitious 22 per cent plus revenue growth, a figure never achieved in the past -- the closest being in 1992 when the introduction of VAT pushed the revenue growth rate to some 21 per cent.

Certain amount of optimism can be justified to inspire the

taxmen into action, but unrealistic projections are certainly political ploys portraying the image that does not stand the test.

Like it or not, this is the ground reality and the nation will wait till the B-hour to know what trump cards Saifur has hidden up his sleeves.

"In the outgoing fiscal, revenue collection has already been 2.5 per cent short of target till April, which was basically because of import slowdown.

"So, the future import target will be a crucial issue against the backdrop of low foreign exchange reserves," said Dr Debapriya Bhattacharya. "This brings us to the second important issue -- if import remains low, revenue collection has to rely more on internal sector, which comprises internal trade related tax like VAT and direct tax as income tax."

So, a two-pronged tax collection emphasis has to be there to ensure compliance in terms of those who can pay tax, and efficiency of institutions. And addressing only one will not do, said Dr Debapriya.

However, these may not be adequate, thus the budget will have to look for expanding revenue receipts through the non-NBR component of tax envelop and through non-tax revenue receipts. This will mean rationalisation of duties and fees of the government as well as pricing of a number of public sector services such as post, telegraph, railway and stamp duty.

While public expenditure in Bangladesh now at 15 per cent of the GDP is still low compared to other developing countries, still the resource problem is holding back the government to spend more to spur investment demand. The Achilles' heel here is the shrinking foreign financing.

Last year (FY01) saw one of the lowest disbursements of US$1.37 billion in foreign fund. Till March this year, the picture looks marginally brighter as $1.03 billion, 15.4 per cent over the preceding year, has been available.

"But if one looks at the percent-

age of foreign financing against GDP, it transpires that from 4.66 per cent in 1990-91 it has come down to 3.43 per cent in 2000-2001," Dr Debapriya pointed out. "Paradoxically, about 6 billion dollar in aid remains unutilised in the pipeline and Bangladesh has in recent past leaned very heavily on domestic debt creation to finance its development needs."

"In the upcoming budget, while the spirit of self-reliance as espoused by the finance minister is well taken, there will still be some need to make better use of available foreign resources with necessary discretion. The issue will acquire a new dimension as the country completes PRSP exercise and new aid package is negotiated."

Hopefully, the next budget will avoid the much more costlier form of foreign financing which is suppliers' credit.

"Now if we look at the expenditure side, the ideal situation is a zero-based growth, which implies a moratorium in real terms making adjustments for natural increments which are well within inflationary limits."

Last year, revenue expenditure growth was projected at 6.7 per cent.

So, if the government wants to contain it to less than five per cent, given an inflation rate of less than four per cent, then expenditure may experience some pressure if the government wants to programme budget for severance benefits for state-owned enterprises.

Having a high ADP is definitely desirable given the development needs of the country. But its implementation and financing will definitely be a major challenge. If it can be implemented it can provide necessary boost to domestic and linkage industries.

"But we hope that the next ADP will not contain unallocated or nonproject lump sums under various heads. In fact, while doing the revision of this year's ADP, Tk 657 crore was pruned from lump sum," continued Dr. Debapriya.

But what's more worrying is the

absorption capacity of the line ministries.

If we look at the ADP revision, we observe that six large ministries accounted for about two-thirds of the axed amount of Tk 3000 crore. The power division had Tk 340 crore pruned, health Tk 291 crore, education Tk 261 crore, physical infrastructure Tk 255 crore, oil and gas Tk 201 crore and agriculture Tk 200 crore, bringing the total to Tk 1548 crore.

"Without significant administrative and institutional reforms, it will be very difficult for these sectors to spend such a big budget without compromising quality. That's why we need to have a public expenditure review commission and an independent anti-corruption bureau as safeguards," the CPD executive director maintained.

The other big challenge that everyone will eagerly wait to see today is how the finance minister proposes to rein in fiscal deficit. The overall budget deficit was seven per cent in FY00 which remained almost static at 6.91 per cent in FY01 and has been targetted at 6.17 per cent this fiscal. So, bringing it down to below five per cent will require either reduced expenditure or increased earning.

"We don't see expenditure being curtailed and foreign financing is increasing. That leaves us with domestic resource creation either through debt creation or revenue surplus. It is here that the government will have to choose instruments to get money from the market at market rate," concluded Dr Debapriya.

The other innovative way for the government would be to carry out the privatisation programme enabling it to use the proceeds to underwrite the deficit and even to reduce some accumulated debt.

The other is the corporatisation of the autonomous bodies to allow them to raise funds from the market, thus containing the government's expenditure compulsions.