A budget for election season

There is nothing wrong with a budget for the penultimate year to the next election being oriented to polls, provided, of course, it's the whole electorate and its collective interest that are sought to be served. In theory, the BNP-led coalition government must be aiming to endear itself with as many voters as possible eyeing beyond their traditional vote banks. But in practice, given the public spending pattern being envisaged with non-development expenditure projected at an all time high level of Tk 38,082 crore compared with development expenditure at Tk 26,554 crore, a spoil system could set in irreversibly. That's where, ironically, a budget intended to serve the electoral agenda of a ruling party might well recoil on it.

The budget is almost pipe-dreamlike ambitious. Knowing full well that revenue collection grew by 11 percent in the outgoing financial year falling way short of the targeted 17 percent, the finance minister has still set the target for the forthcoming fiscal year at 17 percent itself. In a pre-election year this could be a tough ask, all the more because the revenue collection machinery remains as deficient as before. To finance the ADP our reliance on foreign aid is estimated to be at 48 percent which somewhat explodes the myth that our dependence on external assistance is 'decreasing'. Foreign aid disbursements to back up the budget and as balance of payment support, from IDA and IMF respectively, are linked to conditionalities which are likely to become tougher in future on current reckoning.

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The increased allocations to education, health and agriculture sectors are welcome, especially having regard to the fact that the thrust has been given on development of rural Bangladesh. One would expect that a modicum of reduction in urban-rural income gap will be flagged off.

The proposed support measures for agriculture sector, such as, the doubling of subsidy on fertiliser, free distribution of fertiliser and seeds to flood-affected farmers and extension of bank credit to farmers at low interest rate, deserve special mention.

It is the Tk 46 billion worth of social safety net that is the hallmark of the budgetary dispensation. The Tk 500 million fund for the rehab of seasonally employed, Tk one billion special fund for employment generation among the hard core are proposals that should be adopted in toto. The other employment generation provisions of the budget like those for urban infrastructure development initiative and massive rural road construction project will engage a lot of people in gainful activities. In the absence of a strong local government system it would be difficult to ensure a wholly non-partisan utilisation of the funds and allocations.

The proposed income tax rebate on donations for educational institutions and public welfare institutions which is in vogue in many countries of the world is a significant decision in that it will create a space for corporate social responsibility of the private sector to come into play. Consequently, the prospect for endowment fund for research and educational institutions will grow.

In the context of the global free trade regime, further reduction in import duty on raw materials which the BGMEA and chamber bodies have already moved for may be considered favourably before the budget is passed. Together with the export subsidy, this could help the industries cushion off shocks in the competitive trade environment.

There have been two surprise elements in the budget: the continuation of tax holiday and the extended offer of amnesty to black money-holders allowing them to whiten their undeclared earnings in another year's time on payment of 7.5 percent tax on them. One is likely to surmise that some such money could come of use in the next general election. Honest businessmen and industrialists might well despair of such legitimisation of black money asking themselves what incentive they have to pay 32-40 percent in corporate income tax when possessors of undeclared incomes can hold their head high by paying 7.5 percent tax on their accumulated black money!

The budget proposals per se do not guarantee quality public spending, so that institutional levers and corruption fighting apparatuses will have to be fully employed to ensure that there are cross-party beneficiaries of the budgetary allocations.

The bottom-line is good governance again.