Election year budget: Not going to be an 'easy come, easy go' case
In the afternoon of June 1, when Finance Minister Mustafa Kamal will take the parliamentary floor of a seven-storied high ambulatory, with light streaming through the ceiling and walls surrounding the assembly, to present the budget for the new financial year, he will find none of the BNP MPs in the House.
Absence of only seven BNP MPs who resigned last December from the House of 350 lawmakers might not be a major factor, at least in terms of their number. In fact, new members joined the House after being elected to the seats that fell vacant following the resignation of the BNP MPs. But their recent agitation programmes on the streets and planned course of actions for the coming months indicate the ambience of the parliamentary floor during his budget presentation does not exist outside.
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Politics has suddenly heated up over the upcoming parliamentary election with ruling Awami League and its rival BNP both taking to the streets to establish their supremacy with an increased fear of violence. There is no sign of resolution to the contentious issue—the non-partisan election time government—as the party in power has kept rejecting it while BNP is adamant to force the government to step down clearing the way for a non-partisan polls time government. Political analysts however now think the latest shocking defeat of the ruling party candidate in Gazipur city election and the US new visa rules may contribute to reshaping the coming days' politics.
All signs as of today indicate that the coming months ahead of the election scheduled for early next January will turn more volatile. Certainly, political unrest before parliamentary elections will throw a wrench in the wheels of the economy and people's livelihood as has happened on several occasions in past years since reintroduction of democracy in 1991.
In the parliament, the finance minister may neither face any strong scrutiny nor opposition to have his budget proposals passed. But the implementation process of the new budget is set to bear the brunt of the political unrest. The extent of the heat will depend on the extent of the political storm and its reflection on the streets. It is almost certain that the finance minister will not have smooth time to go ahead in the first six months of the new budget to keep the growth wheels rolling smoothly. The fate of the remaining six months from January to next June will largely depend on the nature of the first six months. It is difficult to exactly predict how things will take shape in the first six months beginning from July of the new budget.
Taking the economic growth rate to pre-pandemic level was already a herculean task. The Ukraine invasion of Russia in February last year has made the task more difficult and complicated too.
When Finance Minister Kamal assumed the rein of the finance ministry in early January of 2019 after his party won a landslide in the December election the previous year, the country's economy was flying, recording an average 7% growth for the last few years. The economy even registered 8.15% record growth at one point.
Banking on the faster pace of growth, he raised the bar higher and set the target of 8.5% GDP growth in his first budget for FY20. But to everybody's consternation, the covid-19 pandemic suddenly derailed the wheels of the economy. In March 2020, Bangladesh detected the first cases of the Covid-19 infections and gradually moved to enforce shutdowns to fight the pandemic. Even FY21 began on the first day of July when the country was under lockdown. The Covid induced shutdown reversed Bangladesh's achievements in poverty reduction and education. The flying economy nosedived and GDP growth fell.
When the economy was recovering from the pandemic shock providing a breather for the finance minister, the Russian invasion of Ukraine not only upended the global economy, it has made the battle tougher for him and his government. High inflationary pressure, depleting reserves, and the hidden ogre of the ballooning subsidy burden, forced the government to seek loans from the IMF.
The political turmoil over the election will add pressure to the economy already under stress which has put a brake on the finance minister to come up with fiscal measures to give comfort to people under inflationary pressure.
In this time of economic downturn, the revenue administration is struggling to minimise the gap between the target and collected revenue which is vital for the government to carry out the development activities and run the administration. Though an election year, the finance minister may expand the tax net to generate more revenue. Some tax proposals reported by the media indicate desperation for revenue.
The finance minister may be criticised for some of his proposals if they are considered against businesses and consumers or seen as weakness in the proposed fiscal framework to deal with the crisis. Critics may have difficulty finding elections in his budget despite his party's aim to see a fourth consecutive election win in January 2024. It may not be possible to come up with a budget to make the large segment of the voters happy due to ongoing economic stress.
But his new budget may have to weather the growing political storm in addition to the stress the economy is already going through. Needless to say, any political uncertainty will hurt investment which is most needed for the country's economy now.
Against all odds, a peaceful resolution to the political crisis may appear to be the game changer for the economy. For this, extraordinary measures are required in this extraordinary crisis which has now turned into a combination of economics and politics in an election year. After all Bangladesh economy needs a good election for the sake of fresh investment and its growth as well.
