National Budget 2018-19: Unsurprisingly Unsurprising

Mohammad Nazmul Avi Hossain ​

​​The National Budget has always been a center of attention during the beginning of a fiscal year in Bangladesh. Due to the rise of social media and awareness among citizens on their citizens’ rights, in recent days the eve of budget speech at the National Parliament has become an “Economic Festival” for us. Businessmen, economists, policymakers, researchers, academicians, journalists, civil societies, mass people and media personnel all sorts of professionals run and feel they have something to say about the national budget. This year’s national budget was no exception to that unprecedented interest by the “aware” citizens.

The national budget is a document that might be discussed over 50 pages in details or maybe more than that (the budget speech is usually more than a 120-page document). However, in this article, I am not going to discuss each and every detail of the budget with mind-boggling numbers, digits, percentages and all. As I personally believe, following many policymakers and economists, that end of the day the economic and political spirit of a budget is more important. In addition, after few weeks we are already overloaded by a lot of number stunts those are over discussed in many forms of media by many specialists and non-specialists.

​How do we see this budget? In one line we can answer it, “A monotonous budget with strong targets and lack of commitments”. Let’s start explaining why.
On the numbers front, the proposed size of the budget, BDT 4,64,573 crore, is over ambitious and the most alarming factor from the learning of previous 5-6 budgets is that the Government ends up not spending more than 70-80% of its expenditure budget including a random forceful expense from ADP in last few months of the financial year. 

Now the question is holding business as usual for last few years we have seen that Bangladesh has been achieving its targeted GDP growth rate without even implementing the budget fully. So, the question arises that what is the necessity of successfully implementing the proposed budget if it does not affect the growth rate targeted by the Government? Maybe it gives the Government a wrong signal to sit back and “do nothing”,  but again it’s not all about GDP growth rate that reflects the success of a well implemented and planned budget. The budget aims to improve fiscal performance by highlighting the need for sustainable policies, exposing the full cost of public interventions, emphasizing collective responsibility for sectoral interests, and raising the cost of deviating from stated fiscal objectives.
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The proposed budget for physical infrastructure for FY2018-2019 is 143,982 crore taka, which is 30.99% of GDP. The increase in budget allocation for physical infrastructure for FY2018-2019 compared to FY2017-2018 is 13%. In numbers, it sounds promising, but the question is what signals the efficiency in implementing this allocation with tangible results. How are projects under this physical infrastructure feasible in due time? Often for this sort of budget allocation, we forget a high school economic concept, “opportunity cost”; in this case, it is related to time dimensionality of projects and their social costs. Moreover, the usual delays before making a project fully operational incur a big private cost and social cost too. Time dimensionality often is measured by withering net present value (best practice) or internal rate of return (second best), however, both of the tools can be manipulated showing low base operational costs. What are the methods to measure benefits from these projects and what are the estimated returns against allocated budget could give a clear idea to the citizens on how they are going to be benefitted. Electricity, power, water, rail, metro rail etc. are major components under physical infrastructure where there are certain targets to be achieved but are they even tangible keeping business as usual or some policy reforms are required? These are questions one may seek to get direction from this budget. Unfortunately, there is no such indication and economic philosophy behind this budget. 
 
Among the Mega Projects of Government, establishing 100 economic zones by 2030 is a major focus. Only a few of them are operating and most of them are in signing stages or/and very preliminary stage. Now the question comes, is it too necessary to plan 100 sizes and allocate resources, those are limited, under the weak capacity of the institutions? Or, could it be done that planning 30 SEZs with quick implementation and operational feasibility would have given us quick, better, tangible and efficient results? Maybe focusing on 30 SEZs could have saved more time and money and extract better results more quickly. Eight of the nine fast track (Padma Bridge, metro rail, ruppur etc.) projects had got an allocation of Tk 30,929 crore in the budget for the fiscal year 2017-18. Most of the projects are way behind few years behind the schedule, including the flagship Padma Bridge which encountered an increase in cost twice and was raised to Tk 28,793 crore from the last revised amount of Tk 20,507 crore. Weak institutions and lack of reward and punishment in project management cause this kind of time delay and wrong cost estimations. Moreover, weak accountability results in further losses to the resources involved in these crucial projects. The previous experiences say that Government has only been able to spend 50-55% of its budget on physical infrastructure. Hence, the private and social opportunity cost is too high for not being able to utilize the allocated budget in developing physical infrastructures.
 
Another big problem that the budget always encounters is the super ambitious tax revenue collection target. With a current Tax-GDP ratio of around 10 % and no policy reforms in tax collection and revenue generation methods, it is highly impossible to meet the target of tax revenue collection. Hence, where do we get necessary allocation increase if the Government fails to collect taxes? With 2.2% of government expenditure as a share of GDP on education and 0.7% of expenditure on health as a share of GDP, it is true that the country cannot progress towards achieving SDGs. However, it is also true that with existing weak capacity of increasing the Tax-GDP ratio or increasing the tax revenue collection it is also difficult for the government to allocate more in important sectors like education and health. The government could not raise the tax-GDP ratio, which currently stands at nearly 10%, even by 1% in the last 10 fiscal years. Therefore, it can barely be expected that soon the allocation in education and health will increase. Moreover, the collapse of the banking sector is making it hard for the government to collect revenues and bring the investors’ confidence back. The amount of non-performing loans (NPL) by the defaulters was recorded almost close to 13-14% of the GDP in last two years which is a big massacre in the financial market. Still, this budget addressed nothing on these issues and neither did it suggest any policy reforms for the financial market. 
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Lastly, I want to mention the labor market contexts of the country and how does this budget respond to that. In the budget speech, there is not a single word as “Youth Development” despite the fact the country is suffering from a “jobless growth” with approximately 20 million inactive/discouraged youth in the labor market. Though, the budget focuses on primary and secondary education but nothing on tertiary levels of education. The budget highlights technical and vocational education by focusing on establishing more training centers at Upazilla levels and more training programs those exclusive deals with the supply side of the labor market. What about the demand side? Where are jobs (formal) for the trained youth? Without having formal jobs available training centers and programs will increase expectations of the trained youth and they will eventually stop participating in the labor force and become discouraged, which will result in slow labor force mobility in the economy. Making classrooms digital with projectors and making “model schools/madrasas” are not going to converge in the creation of employment.  No specific programs, projects are mentioned in the budget to address this issue and on top of that training centers and TVET focus more on sending workers abroad, but what about creating domestic jobs?
 
It is inevitable that budget needs a fair broader point of view of assessment and discussion. However, the other facts regarding this budget have been discussed a lot during past few weeks. I, therefore, tried to give an essence of political and economic philosophy that is required behind the construction of a national budget which in the case of 2018-19’s budget is fairly missing. Hopefully, in upcoming years, the budgets will come as more precise macroeconomic policy direction with necessary tools in them.  
 

Mohammad Nazmul Avi Hossain ​

Senior Research Associate, SANEM and a Former Development Practitioner 
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