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Budget under strained economy

Dhiraj Kumar Nath
IT is difficult to forecast whether the caretaker government. for the second time, will present an over-ambitious budget or just the right one in size under a strained economy. Obviously, this time, the budget of 2008-2009 will be prepared in a challenging environment, where global price hikes have inflated the import bill and natural disasters have threatened the economy.
The strategic discussion on die fixing of priorities of the budget has already started, with invitation of views from the trade community and the participation of a cross section of people.
In any case, the budget must fulfill economic promises and reflect the goals of the government. The budget must provide perspective visions, and immediate remedies addressing the core problems of the economy that might halt or hinder progress and affect our fight against poverty.
The economy is, at present, bearing the brunt of an increase in
prices of rice, edible oil and fuel in the global market. The people, by and large, are scared, and are expressing resentment since their family budget is being being battered by the continuing price hike. People, in general, spend almost 65% of their income in purchasing food and essential items and, therefore, face difficulties in balancing their budgets.
Keeping the price of fuel, fertiliser and food at a desired level might need a subsidy of Tk 6,000 crores. It is apprehended that the total subsidy, this time, might be around Tk. 12.000crores.
Cyclone Sidr and two rounds of floods have caused a loss to industry, commerce and tourism to the extent of Tk. 7,590 crores, as revealed by the recent reports of the joint mission of donor agencies. In almost all the 12 districts affected by the cyclone, about 27,000 small and medium scale industries and establishments of entrepreneurs were badly damaged. forcing 1.41,000 persons out of their jobs.
The strain on the economy due
to an unexpected disaster like avian flu calls for further subsidy to this growing sector. Bird flu has badly hit the rural-based investment of about Tk. 15, 000 crores and caused a loss over Tk. 4, 100 crore so far, as estimated by a recent survey conducted by the Bangladesh Poultry Industries Coordination Committee.
The poultry sector, a growing economic field employing a huge number of women and operating with micro-credit involving about Tk. 50 lakhs, is in great distress now.
One of the important tasks of the budget of 2008-2009, apart from containing price spiral and generating economic activities, should be to make sufficient allocation to meet the expenditure for the election of national assembly and local government institutions during this fiscal year. A significant amount of money must be earmarked for the election, including finalisation of the electoral roll, use of transparent ballot boxes, mobilisation of manpower etc.
Interestingly, the political parties, this time, are demanding grants from the government to meet their election expenditure.
Another important feature of the budget of 2008-2009 is that an elected political government will implement the 3rd and 4th quarters of the budget. The govern ment in the second half will have its own political priorities and commitments and might go ahead with substantial changes while revising the ADP.
As regards resource mobilisation, there are different schools of thought. Most of the experts are in favour of sacrificing pomp and pleasure and maintaining austerity. instead of depending on the World Bank or co-financiers for their assistance with stringent conditions.
Most members of the Economic Association of Bangladesh feel very strongly that the need for external support could be reduced dramatically with the elimination of corruption in the drawing and disbursement of funds, and prudent utilisation of resources. Even now, more than 67% of the budget requirement is financed from our domestic resources.
There is enough scope for expansion of the tax network, with revenue earnings from direct and indirect taxes. A significant drive.
A half-full cart is all anyone can afford, with attractive return package and adequate service facilities, can substantially increase the amount of internal resources within a short period of time.
Besides, the inflow of remittances from abroad, increasing at around 25%, can contribute significantly to the financial strength of the exchequer. Last year, about 8,00,000 workers went abroad,
and a few thousand are waiting with permits to depart shortly, indicating a remarkable increase in remittances in future.
Progress was remarkable in the export sector, with two major exports, knitwear and woven garments, recovering strongly and, in some cases, increasing by 40% over the corresponding period of July and December 2006.
Many of our non-traditional items are gaining popularity in international markets, and are competing with traditional exporters.
There is an urgent need to consolidate our initiatives in the export trade, and develop outsourcing capabilities by availing the opportunities of the external markets. Besides, there should be reforms in domestic trade prac-
tices and share markets to encourage investors in small and medium scale industries and allow companies to develop a corporate culture.
The Securities and Exchange Commission recently issued instructions that public limited companies with paid up capital of Tk. 50 crores or more in commer cial operation must go for initial Public Offerings (IPO) within a year. Equally, private limited companies should be made to follow the trade rules of the country.
The schedule banks should be asked to play a positive role in encouraging the banking habit and bridging the gap between rate of interest on bank loan and return of deposit. Banks and financial institutions were asked to develop a women-friendly atmosphere in their premises.
Taking into account the strengths and weaknesses of our economy, the budget should envision a self-reliant financial system to address the challenges of the time. We believe it will be possible to present a prudent and investor-friendly budget under a strained economy to meet the expectation of the people in gen-
Dhraj Kumar Nath is a former Secretary
***In any case, the budget must fulfill economic promises and reflect the goals of the government. The budget must provide perspective visions, and immediate remedies addressing the core problems of the economy that might halt or hinder progress and affect our fight against poverty.***