Social safety nets, farm economy to take centre stage in fiscal 2020-21 budget

Social safety net schemes and the farm sector are set to get prime focus in next fiscal year's budget as the government looks to mop up the destruction of the global coronavirus pandemic, which stands to wipe off the gains Bangladesh made in poverty reduction over the past decade.

Millions of people have lost jobs owing to the countrywide general shutdown announced from March 26 to flatten the curve on coronavirus.

The measure has left the economy in a state of induced coma, so next fiscal year's budget, expected to be presented on June 11, would look to bring it back to life.

The finance division is aiming to finish its budget preparation by May.

Finance Secretary Abdur Rouf Talukder has written to more than 50 noted economists of the country and think-tanks requesting them to send in recommendations about the upcoming budget through email by May 5, as pre-budget discussions can't take place because of the countrywide lockdown and the need for social distancing.

He sought the recommendations on how to tackle the economic risks brought on by the coronavirus pandemic and keep up the higher economic growth trajectory and development.

"But everything would depend on how the pandemic plays out," said a finance ministry official.

The budget would incorporate the spending the government would have to incur to implement the Tk 95,619 crore stimulus packages, which is equivalent to 3.3 per cent of the country's gross domestic product (GDP).

The stimulus packages aim at mobilising working capital for the export-oriented industries, affected industrial and service sector firms, micro and SMEs, incentives for health professionals, distributing food for free and reduced prices, cash support for the poor who were rendered jobless, widening social safety nets, agriculture subsidy, farm mechanisation and farm loans.

The health sector, which has come under huge pressure because of the outbreak of the deadly pathogen, would get a major allocation in fiscal 2020-21 as the COVID-19 has unmasked the serious shortcoming the sector faces.

Beyond the domestic impact of the health crisis, the two main channels through which the Bangladesh economy will be impacted are remittance and export of garments, both of which rake in the lion's share of foreign currency. 

The subsidy allocation for the export-oriented industries, which have been witnessing plunge in incomes because of coronavirus-induced demand collapse in the export destinations, and remitters, who have been struggling in their host countries as many of them have lost jobs, would increase.

This year, Kamal had set aside Tk 3,060 crore for providing 2 per cent cash incentive to remitters. The export subsidy currently stands at Tk 6,000 crore.

The government usually sets aside Tk 9,000 crore in subsidy for the agriculture, but in fiscal 2020-21 it is likely to be Tk 10,000 crore for fiscal 2020-21. Farm mechanisation would receive Tk 4,000 crore.

The total subsidy for the current fiscal year stands at Tk 47,000 crore.    

The budget deficit is on course to hit 6 per cent of GDP this fiscal year, which is above the recommended 5 per cent. In fiscal 2020-21 it may go up to 7 per cent in because of the heightened expenditure to counter the rampage of coronavirus and sluggish revenue generation.

Initially, the government thought that the collection from the National Board of Revenue would fall short by Tk 52,000 crore this fiscal year. But now it seems the deficit may be Tk 100,000 crore.

Finance Minister AHM Mustafa Kamal would also look to cut expenditure through, for example, slashing the allocation for foreign tours.

So, the budget size would be between Tk 550,000 crore and Tk 560,000 crore, down from Tk 580,000 crore initially planned.

The finance ministry would set aside Tk 213,000 crore for annual development programmes.