Salehuddin Ahmed, former governor of Bangladesh Bank, has suggested that the next budget ensure health protection and increase income and employment in order to cope with the impact of the Covid-19 pandemic.
In an interview with The Business Standard, he said, "We need a special budget for a special time, not a budget for mathematical calculations. The next budget should ensure the development of the health sector to protect people from Covid-19."
"We also need to ensure that the general public gets other medical services. As such, the budget allocation for the health sector should be increased," he added.
The economist also emphasised an increase in the government's spending capacity and efficiency.
Salehuddin Ahmed said, "Many people have lost their jobs and become poor due to the economic downturn caused by the pandemic. Creating job opportunities for them will be one of the main goals of the new budget. If we cannot increase people's purchasing power by increasing their income, the economy will not be able to turn around."
The former governor of the central bank said production and investment will increase if demand increases. Besides, trade and commerce will also increase.
He suggested taking up rural infrastructure development projects rather than mega projects to increase people's purchasing power.
He said, "Mega projects provide employment to skilled workers. And the number of skilled workers is very few. However, unskilled workers, as well as women, can be involved in projects like rural road renovation. Such employment will increase the income of the poor and increase demand in the economy."
He said India once had big projects in rural development as part of creating new jobs. These projects have played a direct role in alleviating poverty there. In Bangladesh too, projects like making canals played a role in alleviating poverty.
Salehuddin Ahmed also emphasised increasing the allocation of social security programmes for the poor. He said it is necessary to increase the number of beneficiaries and ensure a timely delivery of assistance to real helpless people.
"Those who are physically able should be allowed to set up small businesses under the social security programme. The forthcoming budget will have to make employment arrangements for returnee migrants," he said.
Dr Salehuddin Ahmed said the domestic industry should be highlighted by reducing import dependence to have the economy recover. "It will also play a role in creating employment. The government should give necessary tax exemptions to expand the domestic industry and increase the sales of products."
Mentioning that at present the Bangladesh tax system is benefiting big industries and rich people, Salehuddin Ahmed said that the tax system should be poor-friendly. "Taxes cannot be imposed in such a way that low-income people are in trouble."
He suggested reducing VAT (value-added tax) to give people relief.
Recommending a continuation of the policy of increasing the flow of money in the economy, he said there is no problem if there is a big deficit in the coming budget. "There is nothing to worry about if the deficit is more than 5 percent of GDP."
The former governor also advised the central bank to continue its expansionary monetary policy to ensure the flow of money. He said the policies of Bangladesh Bank, like those of other central banks in the world, have played a good role in tackling the impact of Covid-19.
However, according to him, one of the reasons for the central bank's problems in implementing various incentive packages is the lack of good governance and efficiency on the part of the banks. "If this does not improve, the central bank will not be able to help the economy recover even if it maintains good policy support," he said.
Salahuddin Ahmed said, "The big industries have got loans on time from the incentives, but the small ones are still not getting them properly. If Covid-19 is to be tackled and the economy is to be kept afloat, the disbursement of credit to small and medium enterprises must be increased as part of boosting investment."
He believes there is still a demand for loans in these sectors. "If the disbursement process can be made easier and faster, the amount of borrowing by small and medium industries will increase."
Mentioning that these industries have played a big role in maintaining employment and demand in the country, he said that special attention should be paid to this issue in the next budget.
Besides, Salehuddin Ahmed stressed keeping necessary reform programmes for banks and the capital market in the forthcoming budget. He said it will not be possible to tackle the crisis without a vibrant financial sector.
Referring to the three driving forces of Bangladesh's economy – exports, remittances and agriculture – he said, "We need to ensure that exports do not decline. To maintain the flow of remittances, special emphasis should be given to increasing the export of skilled manpower. In the agriculture sector, fish farming and animal husbandry should be emphasized."