DHAKA, June 6, 2024 (BSS) - This year's budget, i.e. the budget for the upcoming financial year 2024-25, has to be analyzed and evaluated differently than usual. We have been saying this time and time again. Because on the one hand, the turbulent state of the global economy due to geopolitical instability, on the other hand, our own macroeconomics is also going through challenging times. After all, this is the first budget of the new government.

Therefore, the budget proposal made in the face of this multifaceted pressure must be judged in the context of a special reality. In that judgment, it must be said at the very outset that this proposed nonsense seems at first glance to be sensitive to reality. At the same time, I would like to say that there is an opportunity to be more welfare-oriented in some areas in this budget. The budget has just been tabled in Parliament. Other participants, including experts, will do a more thorough analysis. There will be further discussion on the proposals here in the budget session of the Great National Parliament. Then more in-depth observation will be available. At first glance, the aspects of the budget proposal that are clear can be highlighted.

From earlier, everyone was thinking that this year's budget will be a bit contractionary compared to the recent trend. Meanwhile, the central bank is proceeding with a contractionary monetary policy. As a result, fiscal policy is also contractionary. Our proposed budget in 2019-20 was Tk 5 lakh 68 thousand crore, which has increased to more than Tk 7 lakh 61 thousand crore in 2023-24. That is, during this period, the size of the budget increased by 7.6 percent annually. The budget for the upcoming fiscal year 2024-25 is also increasing over the current year's proposal. However, the previous rate did not increase. Only 4.6 percent increased to 7 lakh 97 thousand rupees. As a result, budget-makers sensitive to the reality that they want to continue down the path of contraction are visible.

In this year's budget, in view of the reality, it was suggested not to allocate expenditure for more projects in the annual development program or ADP. The size of ADP has grown at an average of about 7 percent per year in the last five fiscal years. But in the ADP of the new financial year, the allocation has been increased by only 2 thousand crore rupees to 2 lakh 65 thousand crore rupees compared to the proposal of the current financial year. That is, next year's ADP allocation has increased by less than 1 percent compared to the current year's proposal. Therefore, it is initially believed that the government is being restrained enough for the coming year while undertaking new development projects.

We are generally in favor of austerity in the budget. However, I think it is beneficial to minimize the impact of these cuts on allocations to social sectors like education and health, allocations to agriculture, and allocations to investment and employment supporting sectors/programmes/projects. Paying attention to how much of the total allocation has gone to which sector, it is seen that the total allocation has been distributed among different sectors in the coming year as in the recent fiscal years. As a result, it can be said that the impact of cuts has fallen equally in all sectors. That is why we think that the budget is realistic but could have been thought of to make it a little more welfare oriented.

Let us first consider allocation in the health sector. As in other years, the budget of the coming financial year has allocated a ratio of around 5 percent of the total budget for this sector (5.2 percent of the total budget). We have long been talking about gradually increasing this ratio to 10 percent. Although there is economic pressure this time, it would be very good if this ratio could be increased. It should be remembered that more than two-thirds of the total health expenditure in the country is paid by the people from their own pockets. About 23 percent of the total health expenditure is executed with the budget given by the government. Therefore, if the health allocation given by the government is increased during inflation, it would be possible to reduce the burden of health expenditure on the poor citizens.

Education and technology have been allocated the highest share of the budget (about 14 percent) as usual. However, if technology is excluded and only the allocation of the two ministries of education is taken into account, this ratio falls below 12 percent. It happens every time. But this time since the size of the budget has not increased at the same rate as before, it means that the allocation for education has not increased at the same rate as before. But the prevailing reality requires special attention to enhance our manpower skills to strengthen investment and increase expatriate income. And for that, it is important to increase the allocation in education, especially in the expansion of technical education. Additional allocation should not be thought of as infrastructure development allocation. Additional allocation for infrastructure comes with the issue of ability to spend it. But we have shortage of qualified teachers. Therefore, if teachers are appointed and given additional allocation for their salaries, it should not be unspent.

Recent trends have also been preserved in the allocation of social safety net programs. For almost a decade, 15-17 percent of our total national budget is going towards social security programs. It is through this continuity of allocation that poverty and extreme poverty rates have been dramatically reduced. This year too, more than 17 percent of the budget has been allocated for social security programs. But here too I expected some growth in allocations to protect citizens from unbridled inflation. As an example, look at the allocation of old age allowance programs. The allocation for this program for the coming year has been increased by 3.4 percent to over Tk 4,300 crore. Since inflation is around 10 percent, if the allocation for this program is increased by at least 10 percent, the beneficiaries of the program would have gained enough strength to cope with inflation.

Many feared that the budget would be heavily burdened with taxes due to increased pressure to collect revenue. However, the budget-makers seem not to have gone that route in the end. Rather, the Finance Minister in his budget speech mentioned some auspicious initiatives to 'increase tax fairness' such as making donations/donations tax free and giving tax exemption to orphanage cars. However, keeping the tax-free income limit unchanged, it can be thought of increasing it a little more in consideration of inflation. That opportunity still comes. The talk of taxing mobile phone calls also deserves reconsideration.

The target of Rs 5 lakh 45 thousand crore for total revenue collection also seems timely. But collecting this tax will be a big challenge. In the current year, which was targeted to collect more than 5 lakh crore rupees, the revised budget shows that only 4 lakh 81 thousand 500 crore rupees have been collected. To achieve the tax collection target in the coming year, the first revenue board will have to focus on capacity building and digitization. Along with this policy should be adopted to encourage new taxpayers to pay tax without imposing more tax burden on those who are paying tax.

All in all, this year's budget should be seen as realistic and timely. However, since many cuts have to be made, implementing this tight budget will require more skill and dedication than ever before. Along with the policy-makers, the field-level officials also have to show maximum activity in this regard.

* The author is Emeritus Professor of Dhaka University and former Governor of Bangladesh Bank.*