This Covid-19 pandemic represents an enormous challenge to us and we still are in the dark about where we are poised on that curve of the pandemic. We may be in the middle of it and have still to go a long way to reach the tipping point. We still barely have any idea about when the economy can actually start running – the government decision to open itself only by 25 percent is just a notion of the whole affair.
And yet, the way Finance Minister AHM Mustafa Kamal rattled off the figures in the proposed budget for FY21 did make one forget that we are in the midst of an uncontrolled pandemic.
His ambition to collect almost nine percent more revenue from this year's revised figure can be questioned on the face of it. The economy is badly dented, exports are depressed and no one knows when the global economy will come out of the depression. So our economy will start humming that quickly to generate his revenue is just an audacious hope.
And if one vital figure goes awry, other figures would come crashing down like a house of cards. It is then that the budget falls flat in terms of the fiscal framework.
His assessment of private sector investment is also absurdly high. This year's private investment figure is shown at a bare 12.7 percent of GDP and that just doubles to 25.3 percent next year.
Even a novice in economics can say it is absurd and unachievable, given that the next year will still be afflicted by the sluggishness of the economy because of the pandemic. Banks also expect little investment demand and matching offtake of credit.
However, the finance ministry believes to the contrary of everybody that private credit will grow by 16.7 percent, almost double of what it is today, during this time of depression.
So if these figures are ambitious, actually more than ambitious, then one can imagine what could happen in reality to the achievement of a 8.2 percent growth in GDP next year.
But throughout his budget speech Kamal had adequately acknowledged the concern about Covid-19 and the impact it will have on the economy and at the onset of the speech has set out his priorities and rightly so – health, agriculture, social safety net and job creation.
However, in his expenditure outlay, the priorities have got all haywire. Health got ninth place in terms of allocation, agriculture eighth, social safety net seventh and summing up the job creation outlay is hard to fathom.
In his own words, the finance minister has acknowledged that the "pandemic has uncovered a number of weaknesses in our health sector". But then the budget speech did not lay out any reform efforts to prop it up on a firm ground. Nor has the spending on health inspired any hope – next year's health spending will be only 5.1 percent of the budget compared to this year's revised figure of 4.7 percent and FY16's highest 5.3 percent.
A sector whose bad health has been made bare so starkly during this pandemic surely deserved more funds. However, the declaration of a research and development fund for health science is a good gesture.
His other priority sector, Agriculture, has received less, 5.3 percent, than this year's 5.4 percent.
However, his commitment to increase agriculture subsidy by over 18 percent is a right step forward and the allocation of Tk5,000 crore for agriculture refinancing scheme is encouraging.
Social safety net allocation has increased by about 2.5 percentage points. But it is still not inspiring if we consider that about 5-6 crore people now need cash support of one kind or other for erosion of income.
And the other priority of education did not touch upon the realities of how the students would be brought back to classrooms and what that would entail in terms of social distancing and keeping a sanitised environment in the classroom and campus.
But probably his biggest stunner was the announcement that black money could be deposited with banks and invested in stocks by paying a 10 percent tax or it could be used to buy property by paying a specific tax. The measure stands on a shaky moral ground because it squarely mocks the honest taxpayers. But at the same time, it could be effective in channeling black money to the banks, improving their liquidity.
The finance minister badly needs that bank money now because his finding the money for the budget will largely be dependent on the shoulders of the banks. More liquidity will bring down deposit rates and so will help borrowers too. A clear AHM Kamal touch can be traced here.
But such facilities must have a time limit, a short one indeed, to make them effective. And the lack of words on fighting corruption makes this offer on a platter to whiten black money ethically and morally questionable.
The proposed income tax measures are mixed in nature. The finance minister has proposed to push up the taxable income limit which is a good step to make the low and middle-income people retain some money and spend it to prop up a depressed economy.
But it makes little sense why the highest rate of 30 percent has been lowered to 25 percent. Why the need to give an unreasonable treat to the rich instead of taxing them more in this time of a pandemic?
However, the proposed budget will go a long way in supporting the private sector.
The budgetary provision of a Tk10,000cr fund for fighting Covid-19 is also a smart and timely move. The block allocation is spendable in many ways but one could only hope it goes to improve the health sector in the fight against the pandemic because that will save lives directly.
One more inexplicable thing in the budget leaves one scratching the head– as the finance minister says rural roads are the main infrastructures on which rural economies circulate, whey then has he allocated so little on it? The allocation increased by less than the projected inflation.
A big reason why the proposed budget does not fully reflect the pandemic time is that it promises no new stimulus than what has already been announced by Prime Minister Sheikh Hasina. There clearly was a need for more imagination and innovation here, which Kamal clearly lacked.
However, he has made quite some efforts for the private sector too starting from the SMEs to export sectors to a few import substitution sectors. But clearly the informal sector needed more if that is where the jobs were to be created.