A final time for reckoning

As Finance Minister AHM Mustafa Kamal walks into the Parliament Thursday to present his budget for the new year, a few faces will linger with him with their own stories – faces of Nipa, Ahmed and Russel who represent millions more. They will make the dull discussion of growth, macroeconomic balance and fiscal deficit so profane.

Nipa lost her job in a beauty parlour when the Covid-19 hit Bangladesh in March last year. She remained unemployed for over seven months before getting back her job again, but this time at a salary cut of almost 40%. She was ready to grab at anything that would come her way at that desperate hour.

She does not even want to recall how she survived those desperate months without any government help and depending solely on her small savings and borrowing from a few friends. The humiliation, the uncertainty, the sleepless nights.

Now, Nipa had to move from her small two-room apartment in Kalachandpur, an urban hell of haphazardly built multistoreys right across the street from the city's posh diplomatic enclave, to a tin-shed room with her mother and three brothers. Thanks to the closure of schools and colleges, she did not have to pay the tuition for her brothers for whom what a classroom really feels like is already a dim memory and they have no Internet for distant learning.

Nipa is now getting by with her scanty wage, cutting back on small "luxuries" like impulse-buying a hair clip from the roadside carts.

Ahmed has started going to the office after a long home office period now that he got two jabs done. He feels more secure now although the worry of new variants lingers as he suffered Covid attack after his first jab. He is also worried what will happen six months down the line when his antibody will wear out and he would need another round of shots.

But for now he is happy he could get the two shots all for free. For the first time he feels the government has done something real for him, and he knows it costs the government a hell lot of money that came from his taxes and all.

In hilly Matiranga, about 240km to the south-east of Dhaka, Russel is not so confident about his future. He had the first jab, but then he missed the second one as the stock ran dry. Nobody can answer his anxious query when he can get his next jab.

All these faces and many more should get an answer in the budget the finance minister is going to present in the Parliament Thursday.

Last year, when the budget was presented, Covid-19 was raging. The finance minister had mentioned the pandemic 186 times in his budget presentation, and yet, after lots of dust-up, what he delivered was a business-as-usual budget with the assumption that the disease will evaporate after a few months.

Hardly any reforms were suggested in any sector, be it health, education or revenue.

Our health system remained as vulnerable as before and so when the second wave hit us, people died simply because of a lack of ICUs and hospital beds.

A good start in vaccination has petered out in abject unavailability of vaccines.

Education remained a cruel case with most students, especially the rural ones, out of touch with any textbooks. Forget the current learning, they have slipped on their past learning as well.

So this is the time for the final reckoning of these faces and to draw up a budget for the future.

It will need a lot of money, an expansionary budget, because of the people who have slipped deep into poverty, those who were doing well but then lost income and became poor will need money to be reached directly. Not the 3.5 million hungry faces as the government declared but 25 million new poor as surveys found out. Not the Tk2,500 which, despite its newness, does not go very far.

If the people's consumption cannot be brought back to normal, the economy will only sputter and not rave as we all want it to.

The health and education systems need refitting so that people do not die from ICU shortage and can withstand an India-like wave, and so that our children do not become shadows of the past, they do not become a dumb generation.

Thousands of cottage, small and medium enterprises still frantically look for funds to restart their businesses. A Dhaka Chamber of Commerce and Industry survey has starkly shown that 47% of the small enterprises need a stimulus package and yet only 23% of this 47% got it.

For jobs to pop up and incomes to be restored, the SMEs need urgent help. The sumptuous amount slopped on the apparel sector has kept them on the export track, although they did not hesitate to shed thousands of jobs notwithstanding the money that came out of the taxpayers' pockets. Now the time has come to revamp domestic consumption through such small industries.

On a different level, figures show, there has not been any net credit expansion outside the stimulus package. Unless the domestic industries can be revamped with credit, growth will remain elusive.

One can ask where the money for all these tasks will come from and that makes us look at the revenue situation. That is when things tend to choke up.

The NBR has posted a 7% nominal growth this year despite Covid but that has been achieved on a small previous year's base. But with over 5% inflation, that growth would pale down to 2%. For a pandemic year, even that might be acceptable.

But what is not acceptable is the eventual slide in the tax-GDP ratio that has come down from as high as 9% to only 7.5% today. Even the outcome of the eighth five-year plan of achieving a 12.3% ratio looks like a distant dream.

If the GDP grows rapidly but the revenue does not for some mysterious but decipherable reasons, then this slide is a natural outcome. And not only revenue, all other proxy indicators also mismatch with growth.

Bangladesh is today a middle income country but it has the lowest tax-GDP ratio among the South Asian countries. If it has to steam ahead on the path to becoming a higher middle income country it must raise its tax-GDP ratio to 17% to 18%.

But this is not to happen without a deep reform in the tax administration. Today all the discretionary power is enshrined with the tax officials, making them the demigods of affairs. Scores of donor-initiated tax reform programmes have fallen flat because of entrenched interest. One does not have to go far to get an answer why the so important automation of the NBR, being discussed since the 1990s, has not been implemented and who is benefitting from the non-starter. No true initiative has been taken since the erstwhile finance minister Saifur Rahman's introduction of VAT, the golden goose.

One has to acknowledge that our economic resilience has decreased significantly over these one and a half years of pandemic and so a high tax target portends to harassment of the business owners.

Is it possible for the finance minister to break the jinx?

However, the other big problem lies with our capacity to spend. We have to spend now to feed people, to backstop their becoming members of the new poor class.

But that ability is hamstrung by bureaucratic inability. This is why our development programmes are remaining underperformed. This is why we cannot build more hospitals and oxygen production units quickly to fend off the pandemic.

More than anything, the pandemic has seriously dented our resilience as a middle income country that needs high skilled workers. But in reality, a great number of people who have slipped on their jobs are taking up low-skilling tasks that don't go with the idea of being a middle income country.

In the long run, this will have serious implications if the situation cannot be reversed. And many more faces will be added to the trailing string of tales of sorrow.