Budget allocation for education, health far below global standard: BIDS

The allocation for the education and health ministries in the proposed budget is far below the global standard, said the Bangladesh Institute of Development Studies (BIDS).

The state-backed think tank also said it would be difficult to curb inflation, which has been above 9% for more than two years, unless energy prices are reduced.

The comment comes a day after Finance Minister Abul Hassan Mahmood Ali said inflation would subside in the next six months, defending his projection of a 6.5% target set for the upcoming fiscal year.

BIDS Research Director SM Zulfiqar Ali said, "The proposed budgetary allocation to the education sector as a percentage of GDP is just about 2%. The global standard suggests 4-6% of GDP or 15-20% of public expenditure for the sector. Some of our neighbouring countries also allocate 3-4% of GDP for education."

"Budgetary allocation to the health sector as a percentage of GDP is less than 1% compared to the global standard of at least 5% of GDP," he said at a discussion titled "National Budget for 2024-2025 and the Medium-Term Outlook on the Bangladesh Economy" held at the BIDS conference room today.

He said some neighbouring countries also allocate 3-5% of their GDP for health.

The research director also said at this time there are some issues in education being discussed, such as new curricula, evaluation systems, educational management, and other topics. There is some discussion for and against these.

He said, "We have increased the enrolment rate and reduced dropout rates, which is good, but are we achieving the expected quality of education? Now we need to seriously look at ensuring quality. At the stage of development we are in, we have to move towards a new phase of capital development. We need to give importance to technology-based education. Job-oriented education should be prioritised."

"The allocation for education in the budget is only 2% in proportion to GDP. As such, we are quite behind. It should be considered whether the allocation can be increased in the next budget," he added.

He proposed some issues for health system improvement, including absenteeism, referral systems, health insurance, medically trained professionals (medical technologists), equipment-professional mismatch, mismatch in medicines and supplies, and the functioning of local-level health service-providing institutions, including community clinics.

Violation of tax equity

BIDS Director General Binayak Sen said allowing companies and individuals to legalise undisclosed income and assets at a flat 15% tax rate violates "tax equity."

"We are not in favour of fixing tax rates to legitimise undisclosed income. The rates should be based on the amount of undisclosed income or assets of the customers [taxpayers]," he added.

Binayak said, "Legitimate income of the customer can also be undisclosed income due to various reasons. In this case, that income needs to be given an opportunity to be disclosed.

"We are not in favour of absolute tax exemption or fixation of a fixed rate for showing undisclosed income. Our position is in-between."

Binayak also said, "In various sectors, including land transactions, some money is being transacted unofficially. We suggest that the opportunity to disclose this undisclosed money should be provided when submitting regular tax returns. 

"The rate of tax will depend on the amount of undisclosed money being disclosed. It could range from 10% in some cases to as high as 30% in others. But we are against keeping it fixed at 15%."

Energy price cuts are a must to curb inflation 

BIDS Research Director Monzur Hossain said the government has announced that energy prices will be adjusted periodically, which may fuel inflation. There needs to be a policy on whether those who are adjusting fuel prices will do so through announcements or automatic readjustments.

He said, "It will be difficult to reduce inflation if we do not take significant action in the energy sector. A rise in fuel prices always increases inflation in economic terms."

He emphasised the importance of increasing the capacity of the financial sector. While fuel subsidies should be reduced, inflation should also be considered. There is a need to increase efficiency in the energy sector.

"Besides, if we can directly import fuel from Russia, China, and India at a low price, it is possible to reduce the subsidy," added Monzur Hossain.

 "Taking inflation into consideration, this year's budget has been slightly reduced. It's okay under the circumstances," he added.

It will take time to reap benefits

Speakers at the BIDS discussion said the proposed budget highlights issues such as the adjustment of the currency exchange rate, the removal of the interest rate cap, a controlled increase in the size of the budget, and the expansion of social security as part of a medium-term economic perspective. In this regard, coordination has been maintained with monetary policy.

However, BIDS Director General Binayak Sen said the government should allow time to realise the benefits of these policies in the medium term.

He noted that if the global economic situation is favourable and the government implements some important reforms in the financial sector, the implementation process can be accelerated.

Food insecurity to increase if agriculture falls into crisis

Mohammad Yunus, another research director of BIDS, said that compared to the total national income, very little allocation has been given to the agriculture sector.

He warned that if the agricultural sector is in crisis, food insecurity will increase.

Research Director SM Zulfiqar Ali noted that, in the past, more spending has been directed towards building infrastructure rather than increasing service quality through allocation.

However, some issues were not highlighted in the budget. Ali emphasised that the budget should have included the introduction of private health insurance for all and the provision of TCB product cards for industrial workers.

Cenbank should not have given scope to reschedule loans four times

In the meeting, Binayak Sen stated that in the case of defaulted loans, intentional and unintentional defaulters should be considered separately.

"A defaulter should not be given the opportunity to reschedule the loan repeatedly," he added.

He pointed out that currently, defaulters are allowed to reschedule their loans up to four times or over a span of 12 years. However, over these 12 years, the overall economic landscape of both the country and abroad has changed.

"The opportunity to reschedule twice was sufficient. Therefore, allowing repeated debt rescheduling creates risks in the economy," he continued.