Will this peculiar form of fiscal conservatism reverse the downturn? | The Business Standard
Skip to main content
  • Epaper
  • Economy
    • Aviation
    • Banking
    • Bazaar
    • Budget
    • Industry
    • NBR
    • RMG
    • Corporates
  • Stocks
  • Analysis
  • Videos
    • TBS Today
    • TBS Stories
    • TBS World
    • News of the day
    • TBS Programs
    • Podcast
    • Editor's Pick
  • World+Biz
  • Features
    • Panorama
    • The Big Picture
    • Pursuit
    • Habitat
    • Thoughts
    • Splash
    • Mode
    • Tech
    • Explorer
    • Brands
    • In Focus
    • Book Review
    • Earth
    • Food
    • Luxury
    • Wheels
  • Subscribe
    • Epaper
    • GOVT. Ad
  • More
    • Sports
    • TBS Graduates
    • Bangladesh
    • Supplement
    • Infograph
    • Archive
    • Gallery
    • Long Read
    • Interviews
    • Offbeat
    • Magazine
    • Climate Change
    • Health
    • Cartoons
  • বাংলা
The Business Standard

Wednesday
May 28, 2025

Sign In
Subscribe
  • Epaper
  • Economy
    • Aviation
    • Banking
    • Bazaar
    • Budget
    • Industry
    • NBR
    • RMG
    • Corporates
  • Stocks
  • Analysis
  • Videos
    • TBS Today
    • TBS Stories
    • TBS World
    • News of the day
    • TBS Programs
    • Podcast
    • Editor's Pick
  • World+Biz
  • Features
    • Panorama
    • The Big Picture
    • Pursuit
    • Habitat
    • Thoughts
    • Splash
    • Mode
    • Tech
    • Explorer
    • Brands
    • In Focus
    • Book Review
    • Earth
    • Food
    • Luxury
    • Wheels
  • Subscribe
    • Epaper
    • GOVT. Ad
  • More
    • Sports
    • TBS Graduates
    • Bangladesh
    • Supplement
    • Infograph
    • Archive
    • Gallery
    • Long Read
    • Interviews
    • Offbeat
    • Magazine
    • Climate Change
    • Health
    • Cartoons
  • বাংলা
WEDNESDAY, MAY 28, 2025
Will this peculiar form of fiscal conservatism reverse the downturn?

Panorama

Rashed Al Mahmud Titumir
05 June, 2021, 12:25 pm
Last modified: 05 June, 2021, 01:11 pm

Related News

  • Tk232cr-budget approved for Parliament Secretariat for FY26
  • Experts for healthy eating initiatives in schools to combat childhood obesity
  • 'Equity, not just equality': Experts call for stronger gender-responsive budgeting in Bangladesh
  • 7 refreshing foods that naturally cool your body in summer
  • Diet plan for sharper focus, memory and mental clarity

Will this peculiar form of fiscal conservatism reverse the downturn?

The budget proposals are more based on rhetoric than driven by data, hence diminishing the legitimacy of the policies

Rashed Al Mahmud Titumir
05 June, 2021, 12:25 pm
Last modified: 05 June, 2021, 01:11 pm
Rashed Al Mahmud Titumir
Rashed Al Mahmud Titumir

Cash injections have emerged worldwide as the antidote to fallouts from the pandemic, drawing lessons from the last global financial crisis. 

The mechanism is simple – offer eased credit for liquidity support to businesses, and fiscal expansion by increasing government spending on cash-relief to all citizens to stave off the slowdown in the economy. 

Drawing on thoughts such as functional finance and Chartalism, these policies are governed by the notion of deficit spending for boosting aggregate demand aka Keynesianism. 

The Business Standard Google News Keep updated, follow The Business Standard's Google news channel

Governments opted for policies of creating new money by using fiscal policy for both households and firms, expecting to raise aggregate demand, at the behest of advocates of the Modern Monetary Theory (MMT) and expansionary fiscal policy.

Coming off as a stark dissimilarity, the national budget 2021-22 laid out in Bangladesh proposes reductions and exemptions in taxation, and downsizing of allocations in the social sector, otherwise recognised as fiscal conservatism. 

It seems to be drawing from the age-old orthodox Ricardian equivalence, or the Laffer curve, in explaining the tax cuts. 

The Ricardian equivalence suggests that current tax cuts translated into future taxes will have an equivalent effect on the economy. 

The Laffer curve postulates that an increase in tax cuts will lead to higher tax revenue. 

Health sector is neglected in the proposed budget. Photo: Mumit M
Health sector is neglected in the proposed budget. Photo: Mumit M

The budget has followed at least two textbook fiscal conservatism mechanisms of reduction of public spending, no matter the size or condition of the poor population and cut in taxes. 

The government has remained conservative in spending in social sectors at a time when recovery-successful governments across the world have disbursed direct cash transfer in order to offset the income loss. 

Despite the new poor population, social sectors were allocated 20.9% of the ADP, decreasing from 22.3% ADP allocation in the previous fiscal year.  

Another mechanism of supply-side economics was visible through reduction and exemptions of taxes. 

Besides cuts in corporate taxes, it announced tax exemptions for several projects such as Made in Bangladesh. 

The tax-cut largesse, however, is not as bountiful to cottage, micro, small and medium enterprises (CMSMEs) that have received debt-financed stimulus at slower rates of disbursement than larger export-oriented industries, despite being a major employer of the labour force as a whole. 

The lower allocation in the healthcare and education sector, during a time when both the sectors have been the worst hit, may raise an eyebrow on the aims of the budget for protecting the lives and livelihoods of all citizens. 

Social safety net schemes have expanded in beneficiaries, with little significant change in allocation, lest integrate the new poor population. 

The qualitative change promised by the finance minister may not be a reality, as the expansion of allocation in absolute terms does little to solve high inclusion and exclusion error of social safety nets. 

Nevertheless, this conservative approach exhibits peculiarity, at least on three fronts. The neo-liberals argue for diminishing the size of the government, yet public sector salaries have occupied a large share of government spending over the years, with a year-on-year rise. 

Conservatives also prefer efficiency to equity, yet the budget continues to augment allocations for megaprojects known for their cost overruns. 

The austerity-philes advocate for balancing the budget, yet the deficit for the budget stands at 6.1% of the GDP. 

The national budget, therefore, is rather a peculiar twist to the ordinary fiscal conservatism, in a manner that offers preferential attention to selected coterie, whilst cutting down on the public spending for distressed millions. 

What this indicates is a weird fiscal conservatism, and stitching these three peculiarities together is the desire for upholding patronage among networks, leading to a clientelist fiscal conservatism.  

The previous budget had laid out an ambitious plan for recovery without really taking into account the possibility of a second wave of the virus. 

The proposed budget strikes a similar note as the country is far from reaching herd immunity as vaccination roll-out has slowed down due to a shortage in supply. 

The budget proposes an ambitious plan of vaccinating 80% of the population, but the rate of vaccination per month mentioned will take almost four years. 

Within the next year, given that the supply increases, only 20% of the population may receive vaccines leaving the country at risk of possible third or fourth waves. Who knows! 

With the country still coping from the shock, the budget was imbued with the aspirations of a well-rounded recovery and reconstruction plan.

The budget proposals are more based on rhetoric than driven by data, hence diminishing the legitimacy of the policies. The government calculation may use statistics as old as five years leaving scope for overestimation in some cases. 

Neither there is a provision of quarterly GDP estimates that could have depicted the economic conditions better, nor are there efforts to have a national household database in place to service the needy, with monthly statistics on the labour market participation.

Crises have always paved the way for reforms beyond conventional wisdom around the world. 

An alternative to the conventional framework of the national budget can be envisioned upon four pillars of respite from the Covid-19 crisis – relief, rehabilitation, recovery, and reconstruction. 

Such would entail addressing and incorporating the needs of the new poor population in the absence of basic income, increased median wage, and a fully-fledged social security that reaches cash-relief to the last mile while equally mindful of the businesses that employ most of the people.


Dr Rashed Al Mahmud Titumir is a professor of Economics at the Department of Development Studies at the University of Dhaka. He is also the  chairperson of the think-tank Unnayan Onneshan.

Analysis / Top News

health / Budget / Policy

Comments

While most comments will be posted if they are on-topic and not abusive, moderation decisions are subjective. Published comments are readers’ own views and The Business Standard does not endorse any of the readers’ comments.

Top Stories

  • Leaders and activists of BNP gather at Nayapaltan ahead of the rally of three BNP affiliated organisations on Wednesday, 28 May 2025. Photo: Rajib Dhar/TBS
    BNP's youth bodies hold rally in Nayapaltan
  • Inflation, exchange rate shocks to intensify fiscal pressure in FY26
    Inflation, exchange rate shocks to intensify fiscal pressure in FY26
  • Screengrab from Google Maps shows the traffic situation in Motijheel, Paltan, Dainik Bangla Intersection and other Dhaka areas ahead of the BNP rally on Wednesday, 28 May 2025
    BNP, Jamaat rallies: Traffic clogs Dhaka roads, including Motijheel, Paltan, Dainik Bangla intersection

MOST VIEWED

  • Selim RF Hussain. Sketch: TBS
    BRAC Bank MD Selim RF Hussain resigns
  • Bangladesh Bank Governor Ahsan H Mansur. TBS Sketch
    Depositors need not worry as govt will take over banks before merger: BB governor
  • Graphics: TBS
    Suspicious banking activities surge by 56% since July: Cenbank
  • Photo: Collected
    DU student assaulted for protesting eve-teasing at Chadni Chowk
  • Illustration: TBS
    Bangladesh sees highest-ever per capita income of $2,820 in FY25, BBS provisional data shows
  • Officials protest inside the Secretariat on Tuesday, 27 May 2025, over a government ordinance amending the Public Service Act, 2018. Photo: Rajib Dhar
    Protest at Secretariat suspended as govt assures decision on ordinance tomorrow

Related News

  • Tk232cr-budget approved for Parliament Secretariat for FY26
  • Experts for healthy eating initiatives in schools to combat childhood obesity
  • 'Equity, not just equality': Experts call for stronger gender-responsive budgeting in Bangladesh
  • 7 refreshing foods that naturally cool your body in summer
  • Diet plan for sharper focus, memory and mental clarity

Features

In recent years, the Gor-e-Shaheed Eidgah has emerged as a strong contender for the crown of the biggest Eid congregation in the country, having hosted 600,000 worshippers in 2017. Photo: TBS

Gor-e-Shaheed Boro Maath: The heart of Dinajpur

1d | Panorama
The Hili Land Port, officially opened in 1997 but with trade roots stretching back to before Partition, has grown into a cornerstone of bilateral commerce.

Dhaka-Delhi tensions ripple across Hili’s markets and livelihoods

2d | Panorama
Photo: Collected

Desk goals: Affordable ways to elevate your study setup

2d | Brands
Built on a diamond-type frame, the Hornet 2.0 is agile but grounded. PHOTO: Asif Chowdhury

Honda Hornet 2.0: Same spirit, upgraded sting

2d | Wheels

More Videos from TBS

UCB aims to grow deposits by Tk12,000 crore this year

UCB aims to grow deposits by Tk12,000 crore this year

30m | TBS Programs
What did Jamaat leader ATM Azhar say after being released from prison?

What did Jamaat leader ATM Azhar say after being released from prison?

1h | TBS Today
How can we protect Dhaka’s rivers and canals from plastic waste?

How can we protect Dhaka’s rivers and canals from plastic waste?

3h | TBS Programs
Jamaat leader ATM Azhar released from prison after 13 years

Jamaat leader ATM Azhar released from prison after 13 years

3h | TBS Today
EMAIL US
contact@tbsnews.net
FOLLOW US
WHATSAPP
+880 1847416158
The Business Standard
  • About Us
  • Contact us
  • Sitemap
  • Advertisement
  • Privacy Policy
  • Comment Policy
Copyright © 2025
The Business Standard All rights reserved
Technical Partner: RSI Lab

Contact Us

The Business Standard

Main Office -4/A, Eskaton Garden, Dhaka- 1000

Phone: +8801847 416158 - 59

Send Opinion articles to - oped.tbs@gmail.com

For advertisement- sales@tbsnews.net