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Budget should support green growth

Suvojrr Chattopadhyay
Bangladesh has sustained a GDP growth rate of more than 6 percent for over a decade. The impending graduation out of the least developed countries category is a remarkable achievement for the country of 160 million people, in its fifth decade as an independent nation.
This growth trajectory has brought in its wake several key challenges on the environment front: unchecked extraction of scarce natural resources, environmental degradation, population pressure, climate-related vulnerabilities, to name a few.
Bangladesh is one of the lowest ranked countries in the global Environmental Performance Index prepared by the Yale Centre for Environmental Law and Policy. The 2018 report ranks Bangladesh 179th out of 180 countries. Studies have shown that Bangladesh loses about 1 percent of its GDP due to the harmful effects of air pollution alone.
This has, in turn, put pressure on policymakers to ensure that growth strategies followed by the country are sustainable. A key element of sustainability is a green growth path, which is not only expected to limit the damage to the environment but also to enhance the productivity of the natural capital stock.
In a country where the poor remain heavily reliant on natural resources, an equitable or inclusive growth agenda needs to take on a
decidedly 'green' hue - following the path of 'green growth'.
In 2014, the government of Bangladesh produced a Climate Fiscal Framework primarily to highlight how the government prioritises climate action in its budgeting and implementation. While Bangladesh has been proactive in highlighting the risks posed by climate change on low-lying areas and is widely recognised as a leading voice of the global, it needs to widen its priorities to include tackling the challenges posed by its environmentally unsustainable growth trajectory.
Opportunities for reform
A concrete step towards recognising the importance of green growth is to begin reflecting it in the way Bangladesh allocates its finances. This essentially refers to reforms to the Public Financial Management (PFM) systems.
Public finances must be managed in a way that ensures more effective and efficient allocation and expenditure on green growth issues. When policy options are being analysed, one should factor in the value of natural capital inputs, and determine how it is factored into the deliberations. Reforming public procurement practices to ensure they reward green business practices is another important aspect
The promotion of green growth through the introduction of green fiscal policies is tools used by both emerging and advanced economies. Many governments have introduced environmental taxes, which charge particular groups to pay for environmental damage, incentivise them to change their behaviour, and also provide additional revenues for the government. Such measures might include fuel or carbon duties, congestion charges, or waste/landfill taxes. These measures focus on the expansion of fiscal space and increasing available resources for environmental
or green growth purposes. In Bangladesh, these options remain underdeveloped, and more work is urgently required so that policymakers have a list of viable policy proposals from which to choose from in the formulation of environmental and fiscal policies.
In our recent paper, "Greening Public Financial Management for Sustainable Development: A Green Fiscal Framework for Bangladesh", authored by Bushra Ferdous Khan, we offer suggestions on how principles of environmental conservation and sustainable use of natural capital can be embedded in, and delivered through Bangladesh's PFM system.
A running theme in any reforms
process is the capacity of those who are responsible for authorising the changes and who are responsible for implementing them. It is critical to ensure that the reform proposals are situated within Bangladesh's broader political priorities. For example, would an agenda that pushes the country to go green succeed if it were positioned against the priorities of wealth creation? The key to this is to avoid the perception of this being a zero-sum game. And indeed, there are long-term benefits from a green economy, as that would mean that natural capital inputs of a higher quality remain available for future generations. Global research that demonstrates this link must be made available to policymakers as they set
reform priorities.
Those responsible for implementing reforms also face constraints in terms of knowledge and skills. This is an area where technical assistance by bilateral or multilateral aid agencies can play a role. Supporting the development of specialised (and localised) technical knowledge and the promotion of international knowledge networks can be a mechanism to help the government.
In conclusion
Development priorities set at the highest levels of the government find their way to the ground through an elaborate administrative apparatus. Therefore, those working on public sector reforms must focus not only on policy commitments but also
(crucially) on the nuts and bolts of governance. The budget cycle of a country is one of the most prominent examples of the latter.
A green PFM system is a long-term goal, but it is a journey that we need to embark on immediately. Whilst it is recognised that there are improvements to be made in the systems that are currently in use, the fundamentals of what makes a system work are known. It is important though for Bangladesh to ensure that the approach taken is highly contextualised - both to the government's overall objectives as well as underlying institutional capacity.
The writer is the country manager of Adam Smith International.