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Pro-people and investment-friendly budget

A.B.M.S. Zahur
LAST year, we passed through one of the most critical years for our economy due to repeated natural disasters, rising energy and food prices in the international market, political restlessness, and rampant corruption. This resulted in the inability to fulfill many commitments made by government during the last fiscal year. The confidence of the business community has been only partly restored, inflation has not been contained, and there is no visible improvement in the power sector. Poverty level has gone up and economic growth has gone down.
Some analysts regard the proposed budget of 2008-09 as too ambitious (around Taka one hundred thousand crore). It is true that Bangladesh needs a big budget, because a sizeable pan of the allocation will have to be invested in the neglected sectors (e.g. subsidies on food grains, research and extension. extending social safety-nets etc.).
Common people are more wor ried about management of budgetary resources than its size. We should see whether the budget can improve our well being or not.
The broad objectives of the proposed budget of 2008 09 are maintaining macro-economic stability, accelerating growth, and reducing poverty Priority has been given to maintaining the price level of essentials within tolerable limits, generating employment, widening and deepening social safety-net programs, reducing regional disparity, increasing agricultural production. ensuring food security, increasing power generation, and accelerating the overall development of the communication network. including information tech-nology.
Allocation for ADP has been determined on the basis of national priorities and availability of resources. Greater attention has been given to selection of quality
projects and their speedy execution. The size of ADP has been kept small due to low utilisation (about 80%) during the last few years.
The agriculture sector will receive an allocation of 29.7%, power and energy' sector 15.7%, education sector 12.8%, transportation sector 12.7% and health sector 8.9% of the proposed ADP outlay. By increasing allocation against the projects being implemented in Rajshahi, Khulna and Barisal divisions, the government has shown its commitment toward ensuring regional parity.
To provide social security to the poor and the lower-middle class, the government has planned to widen and deepen social safety-net programs by increasing the total number of beneficiaries and increasing the rate of subventions, spending Tkl6, 392 crore (2.8% of GDP) in the next fiscal year. The amount is 48% higher than the revised allocation ofTkl 1,467 crore (2.1% of GDP). To enhance the purchasing power of the ultra-poor, rural lower-middle and middle-class, an allocation of Tk2,000 crore has been proposed for the next fiscal year. To generate 50,000 jobs annually in 1,926 unions, a program known as Rural Employment and Road Maintenance Program (RERMP), with an estimated cost of Tk943 crore, is to be launched from next year. Other programs, such as Rural Employment Opportunities for Public Assets (REOPA), Maternal Health Voucher Scheme (MHVS), and Community Nutrition Programs (CNP) will be further strengthened.
The proposal for a 38% increase in non-devclopment expenditure and 21% in revenue expenditure is due to huge increase in subsidy. Because the budget is expansionary, revenue target has been pushed up to Tk69,362 crore.
For a large deficit of Tk30,580 crore, the government will borrow Tkl3,498 crore from the banking system. This may, it is apprehended, squeeze out the private sector from die credit market. It may affect bank interest rates and hamper normal growth in the industrial sector.
According to economist Dr. Wahiduddin Mahmud, the budget responds to a situation of widespread food security and an envi-ronment of political and economic uncertainty. He states: "Part of the budget is economic populism, but the rest of it needs to be based on objective assessment and relative social benefits arising from the subsidies and development spend-
ing in different sectors. Our budget management largely lacks the capability of* such an analytical approach to determining the actual trade-offs involved. "
He further added that given the uncertain environment surrounding
implementation of the proposed budget, it would be vital to rethink many aspects of the fiscal policy on the basis of evolving circumstances.
The budget in brief, is ambitious, if not over-ambitious. Its successful implementation appears to be uncer-tain. In analysing the budget. Prof. Rehman Sobhan, economist and political thinker, rightly pointed out certain lapses. They are:
• CTGwill remain in office for only the first half of the life of the budget and the next half will be implemented by an elected government;
• Very little of the ADP may be utilised dunngfirsthalf of the budget,
• Change of regime during the budget and attendant political uncertainties normally inhibit development activity, and
• No consultation was held with political parties before presentation of the budget. Discussions with only economists and businessmen are not enough.
In his efforts, the finance adviser may have committed lapses here and there. There is still time left for CTG to discuss with the political parties about how the positive components of the budget can be carried forward after assumption of power by the elected government
Broadly speaking, the finance adviser has tried to accommodate the demands of various groups and sectors as much as possible. We commend his effort for presenting a pro-people and investment friendly budget