Putting the fight against Covid at the heart of the budget: economists
Rapid coronavirus vaccination, upgrading the creaking health system and expanding social protection should be the focus of the next budget to bring the crisis under control, economists said.
“Immunization should be the number one priority,” said Zahid Hussain, former senior economist at the World Bank’s Dhaka office.
“We must get rid of the coronavirus at all costs. Otherwise, there will be wave after wave of infections and the entire fiscal year will be spent managing the crisis,” said Ahsan H Mansur, executive director of the Policy Research Institute from Bangladesh, a think tank.
The caution of economists has come as Bangladesh crosses the second wave of Covid-19 with an increase in infections and deaths from the rogue pathogen, which is ravaging India and many other countries.
Finance Minister AHM Mustafa Kamal is expected to unveil his third budget on June 3.
“We are already seeing in India how devastating the pandemic could be. There is no alternative for us. We must focus on fighting the coronavirus,” said Mansur, also a former head of the International Monetary Fund. .
Zahid Hussain recommended that the budget focus on crisis management, prioritizing health spending and targeting tax support to struggling families and businesses.
It must also restore the functionality of education and build on the resilience demonstrated by agriculture while keeping an eye on income.
“A business-as-usual budget like last year will miss the boat again,” Hussain said.
In the current state of the economy, there is little scope to stimulate revenue collection by increasing tax rates. And officials have said the government may keep its tax collection target unchanged for the National Revenue Council over the next fiscal year due to the devastating effect of the coronavirus pandemic on the economy.
Raising tax revenue will depend on streamlining tariffs and administrative improvements through digitization, Hussain said.
“We need to move towards simpler rate structures in customs, VAT and corporate tax regimes. Efforts must continue to focus on limiting capital flight, tax evasion and tax evasion. tax evasion.”
Mansur said the budget should be prepared in line with the current situation.
“This means that it would not be wise to unveil an ambitious income generation target because it will not be met.”
He said the entire population should be subjected to the coronavirus vaccination campaign as quickly as possible. For this there should be a budget allocation.
“Vaccinating three lakh a day will not work. We have to increase it 10 times. If we can do it, we will be able to get the situation under control.”
“It is worth spending because it would take the virus out of the country. The return can be up to 100 times higher if we compare the price of a dose of vaccine with the loss of production that the country has been through. witness.”
Bangladesh’s health system has always been weak, and the coronavirus has shown it again.
“We couldn’t use last year to rebuild the health system. But we can’t afford to waste another year,” said PRI’s executive director.
“If the government urgently modernizes the hospital system, it will be a permanent improvement and will serve the nation for years to come. This investment will not be wasted.”
Economists have focused on expanding government social protection programs to cover both the old poor and the new poor during the pandemic.
Social protection programs do not cover the new poor and those who have lost their jobs.
“If we spend to protect the poor and immunize people, it will protect them from the pandemic and redirect the economy to a higher growth path.”
More should be done for small and medium-sized businesses in terms of monetary policy and fiscal measures, said Mansur, also chairman of Brac Bank, an SME-focused lender.
There are hundreds of thousands of SMEs that have received nothing from the government’s stimulus plan. There must be a major loan protection system for financial institutions so that they can lend without any reluctance, he said.
Bangladesh faces daunting challenges in creating jobs. And Mansur said the challenge could not be overcome by creating jobs in the public sector.
“The solution lies in the private sector. The government must create a favorable climate for investment.”
There should be more emphasis on social protection and employment than on economic growth, said Mustafizur Rahman, senior member of the Center for Policy Dialogue.
The health sector must be given priority. “The allocation has not increased as planned in the 2020-21 budget. Spending has also been far too low.”
Cash transfers have proven effective in stimulating aggregate demand and multiplying positive effects on the economy, leading Rahman to call on the government to expand social safety net coverage to support the old and new poor.
There should be a change in the fee structure to support SMEs and domestically oriented industries, he said.
He called on the government to use more aid money to finance the budget deficit.
“This will help the country as sales of high-cost domestic savings certificates have increased. Higher sales of savings instruments can create over-indebtedness.”
He called on the government to set aside funds to increase food stocks, which have been falling from a comfortable level.
The price of rice has increased by 20 percent, hitting low-income people. Rice represents 30 to 35 percent of the market basket for this group of people.
“The stability of the price of rice is very important,” Rahman said, calling for maintaining incentives for the export and remittance sectors.
Rahman and his CPD think tank have always opposed the installation of black money laundering.
“The government could say that it raised a lot of money through the facility. But, the point is, there are no statistics on how many honest taxpayers are discouraged because of it.”
“Scope sends the wrong signal from a governance perspective. Therefore, scope should be dropped.”
Monzur Hossain, research director of the Bangladesh Institute of Development Studies, said the government may need to unveil an ambitious budget to support people and the economy. But it can push the budget deficit up to 10 percent of gross domestic product.
“But the government shouldn’t be worried about the increasing deficit because there is unused money in the banking system.”
Bangladesh has received record budget support from multilateral partners since the pandemic hit the country. Funding for the vaccination campaign has also poured in.
Hossain called on the government to increase the number of cash assistance recipients to at least 50 lakh and support them at least four times a year until the impact of the coronavirus wears off.
The government should use microfinance institutions to channel stimulus packages to small businesses because they do not have access to banks, he said.
An increase in the allocation for the infrastructure sector will accelerate economic development and create temporary jobs, Hossain added.