Big budget but some big barriers too

Good and bad news

Finance Minister M Saifur Rahman presented the budget for 2003-04 before the Parliament last Thursday. To our knowledge, this time Mr. Rahman tabled before the parliament the largest budget ever witnessed in Bangladesh. He has, in his bag, the credit of presenting national budget for the highest number of periods. While we should feel no shy in congratulating him and his government in setting records in these fronts, equally, we should feel shocked at the way the country is being run by the present regime. What is rare now is a sign of relief among people. The last observation, possibly, hints that all that glitters is not gold.

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Mirrors and messages

Just scan through the news paper headlines of the day the budget was presented in the parliament. A vernacular daily reported that Chinese engineers working for the construction of Rupsha bridge are being harassed and threatened by local goons for the payment of tolls (Janakantha, 12 June). The brother of the local MP, allegedly, has been leading the team of mastans. As a result, the construction work of the project slowed down and could be at the point of being stalled. The main opposition party Awami League called a countrywide hartal on that particular day to protest against the deteriorating law and order situation in the country. Especially, the party rose in protest of the killing of its ex-MP, reputed social worker and a freedom fighter from Natore who was shot dead in broad day light by terrorists. There is allegation that the top notches of the party in power tame the killers. The number of deaths till the day of the presentation of the budget spanning for a week or so, reportedly again, averaged 10 throughout the country.

These figures, of course, exclude rapes, attacks on minorities and other abuses. On the other hand, already at the top of the list of corrupt countries in the world- corruption has been creeping up and up with no sign of abatement. In Bangladesh, corruption constraints GDP growth rate by about two to three percentage point every year. By and large, the happenings since the government assumed power point to another record being set and that is the worst ever corruption, deterioration of law and order situation and violation of human rights in the country.

Riding on realities

Any Finance Minister should take the above mentioned facts into serious consideration. A budget is neither merely an arithmetic exercise of income and expenditure nor an area of accounting only. Primarily it is economics but the boundary also behoves social and political parameters, which are no less important to determine the fate of a Finance Minister and hence of his budget. The budget has to be based on realities on the ground. If, for example, development works cannot be completed on time due to bureaucratic dilly-dallying or muscle flexing of mastans, there remains little justification for aiming at a big ADP. If markets are controlled by the local mastans and tender copies are snatched away at gunpoint, there remains miniscule meaning of a march towards market economy. If people of the society do not feel secured to exchange commodities and services, speak out against the prevailing odds and write about the reeling realities, there is no meaning in talking tall about democracy and human rights.

U-turn and downturn

I recollect that the present Finance Minister-- immediately after being sworn in -- severely criticised the preceding Awami League government for making a "big" ADP at the last leg of its tenure. His main concern seemed to have been hovering around donors' disgust over the size of the then ADP. The minister and his ministry then attempted to axe it down but finally settled at close to what Awami League government did. The honorable minister also -- from time to time -- unleashed his attacks over donors' dictations and sponsored development. Appreciably, to me, he seemed to have, at that time, become a mini 'swadeshi' to advance development by deploying domestic resources and relying very less on outside help. But suddenly, the tone changed and the present ADP size is reported to have been increased on the basis of assurance of assistance from donors' desks. Again, while he severely criticised the past government for borrowing from banks, this present budget has provisions for doing the same. The U-turns and back gears could indicate to us that all that is said by the Finance Minister is not always sensible. Or it could be so that the Finance Minister does not sometimes say all that seem to be sensible. It could be a good exercise in the field of politics but not for economics. Economics needs coherence, commitments and calculus of relevant variables that affect growth and development.

Another seeming U-turn is in the case of trade liberalisation. The present budget saddles with a volley of supplementary duties on imported items to protect domestic industries or to raise revenue. At this point, we can only remind the honorable finance minister of a remark made by Paul Samuelson -- the first American to win a Nobel Prize in economics. In fact, Samuelson linked protection to venereal disease, which appears even as you treat it.

Defaults and deterrents

Economic growth rate achieved during the last fiscal year was estimated to be 5.3 per cent. It is below the target set at 6 per cent (but possibly rewarding in the face of worldwide recession) and also below the average achieved during the past five years of Awami League rule. In the last decade or so, poverty has been reduced by mere one percentage point each year in the face of a 5 plus percentage GDP growth rate. But the fact is that the economy needs to grow at 7 per cent per annum on a sustained basis to make a dent to the present pervasive poverty situation. In his budget speech, there is very little said and done to meet the challenges of growing globalisation. The textiles sector is awaiting a big hit with the removal of the MFA but nothing seems to be on board to arrest the ailment. Only the provisions of income tax facilities might not cool down the heat The growth of agricultural sector could hardly exceed the rate achieved during the last regime. Foreign direct investment continues to be constricted by the bureaucratic barriers and poor governance.

More importantly, the tasks of strengthening local government institutions- the planks of promoting the development agenda of a Finance Minister -- are faced with ambivalent, and to say the least, annoying power politics within the regime itself. Projects and policies still are being pursued on a top-down approach. Terrorism has already gripped villages and the proposed establishment of gram sarker -- according to experts -- could lead to land it at household level. The separation of the judiciary from the executive seems to be a forlorn hope. All of these were in fact the election pledges of the party now in power. The breach of contract with people on the political side has its adverse impact on the economic side. The U-turns and backgears only help incredibility.

By all indicators, Bangladesh is not progressing at a pace that would ensure a poverty-free society. The government is big, the budget is big but there are big barriers too. The most important barrier is the absence of good governance. With good governance, successive budgets of Finance Ministers should have improved the socio-economic and political indicators of the nation by a factor of 10, if not more. Bangladesh should have turned into a poverty-free country by now! Unfortunately, that does not seem to be the scenario nor is it likely to happen under any other Finance Minister. Because budget should not be taken merely as calculations of income and expenditure but as a statement of fair facts that the country is faced with. Only confessions of failures and commitments to eliminate them might stem the rot a bit.

Appreciably, macro economic stability is there and the forex reserve reached its peak. The concern is that macro stability and high reserves are not being translated into higher levels of growth of the economy. The provision for a handsome amount for agricultural subsidy is a positive proposal in the light of the level of agricultural subsidy prevailing in India. But it should be ensured that the subsidy reaches the needy ones. The increase in allocations in some of the welfare oriented schemes initiated earlier is in the right direction. On the other hand, additional taxes could fuel the inflation rate and make the lives of the middle and poor class more miserable.

One of the disturbing features of budget making in Bangladesh is the provision of supplementary budget. It means that, the exercise is revised through closer scrutiny at the end of the period and subsequent adjustments to income and expenditure are made.

More importantly and frequently, revenue expenditures (unproductive in conventional sense) are found to have risen and development allocations fallen. It was no exception this time and is not likely to be an exception in the next year also. The rise of the revenue expenditure and fall in the development expenditure is, possibly, an indication of growth with poverty. The clarion call of the hour is to lower revenue expenditure, increase development expenditure, lower government size and make a small but efficient budget to achieve what we can actually achieve. The absorptive capacity is a big issue here.

The same last words?

Every Finance Minister in Bangladesh concluded his speech with an assurance of good governance and appeal to all to build consensus for development. The last words are being repeated every year. But in practice, we noticed just the opposite: good governance is never attempted at earnestly and opposition parties are dashed to the sideline. Years after years, we are on the same sand with little scope to lift ourselves out of poverty and hunger. We hope that in his next budget speech, Mr. Finance Minister would apprise the nation of the achievements on account of good governance and participatory approach to development.

To see that the last words last short, the government needs to sit with the opposition parties, value the opinion of the opposition members in the parliament, make the parliamentary standing committees strong and strive at making the country livable and loveable. A small and effective budget is preferable to a big but ineffective ones.

Abdul Bayes is Professor of Economics at Jahangirnagar University.