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SANEM’s Budget Response 2022-23

13 June 2022, Brac Centre Inn, Mohakhali, Dhaka

South Asian Network on Economic Modeling (SANEM) organized the post-budget response programme on Monday, June 13, 2022, at Brac Centre Inn, Mohakhali, Dhaka. The event started with opening remarks by Dr Selim Raihan, Professor, Department of Economics, University of Dhaka & Executive Director, SANEM, followed by a presentation responding to the National Budget 2022-23, by Dr Sayema Haque Bidisha, Professor, Department of Economics, University of Dhaka & Research Director, SANEM. Dr Raihan and Dr Bidisha were accompanied by their research team members in the panel. The event was graced by the members of the press from different organizations of the digital and print media.

Dr Sayema Haque Bidisha commenced her presentation stating how the National Budget 2022-23 was announced in the middle of an economic turmoil. As the economy is still in the recovery phase from the impacts of COVID-19, it is being further slowed down by the inflationary pressure due to the supply-demand imbalances. The inflation situation is further triggered by the Russia-Ukraine war on a global level. She stated how the existing challenges like balance of payment deficit, revenue mobilization, poverty, inequality, and low rate of implementation of budget, pulled the macroeconomic stability of the country out of its comfort zone. Moreover, among the indicators like the revenue generation target rate is still not fulfilled till date. And among the major sectors, health, education, and social welfare is progressing at a slower pace in the case of ADP implementation. Dr Bidisha mentioned the prime set of objectives that needs to be in the lookout for while analyzing the budget. The objectives include stabilizing the macro economy, containing inflation, sustaining the growth momentum, reducing poverty and inequality, generating employment, and human resource development.

Next, Dr Bidisha shared SANEM’s observations regarding this year’s proposed National Budget. The key observations are summarized below,

Stabilization of the macro economy – SANEM supports the move towards the competitiveness of the market determined exchange rate, however, they suggest cutting back the incentive to 1%. The lowering of the incentives can be done as the official and the carb market exchange rates are converging. It is also very important to avoid the issue of over invoicing of imports. SANEM also support curtailing unnecessary government expenditure.
Containing inflation – According to SANEM’s recent findings, it is observed that the food inflation is higher in rural areas and in poorer households. But there are no specific steps taken to address the inflation rate. Both fiscal and monetary policies should work in tandem to contain inflation. BBS should update the base year for compiling the HIES data for calculating the CPI inflation rate, otherwise it will not portray the changes in the market supply and demand from the consumers from recent times.
Growth and employment generation – Employment generation is a key indicator of growth in the economy. The government took initiatives for skill development training for overseas employment, raised the ICT based employment allocation and reduced the corporate tax rate by 2.5%. However, SANEM thinks that these are not enough for creating jobs in the economy that goes with the economic growth rate. With low employment elasticity of growth, it is unclear whether this tax reduction will lead to creating the adequate number of jobs. They suggested that a detailed and specific road map of job creation is necessary.
Poverty and inequality reduction – It is important to observe the growth elasticity of poverty to see whether poverty and inequality is being reduced at the same pace as that of the overall growth rate in the economy. SANEM found that due to the increased vulnerability post COVID-19, many people have become the ‘new poor’ population. And now due to the ongoing Russia-Ukraine war situation, there are concerns for an increasing population of the ‘inflation poor’. In addition, the overall allocation for the social safety net programs should be given more attention in the budget. Given high inflation, it was needed to increase the allocation to open market sales and to raise the per capita allocation for core programs like old-age cash allowance program. Digitalization of the process can make it more transparent. In reducing the income https://junglefitnessoc.com/diazepam-for-sale/ inequality, the tax structure should be reformed and changed to a progressive tax structure.
Social Infrastructure – Health sector allocation is around 5.4% of the total budget in this year’s budget but WHO suggests that it should be around 15% instead. Besides this, burden on the out-of-pocket health expenditure still remains high. In a similar way, budget allocation for this year on the education sector is at 12% which, UNESCO recommends it to be at least 20%. SANEM suggested that a well-planned guideline is required to address the learning loss in education due to COVID-19.
Agriculture – The government’s decision of providing an increased level of subsidy, reducing the import duty for some food products, providing a 10-year tax break to the agricultural entrepreneurs are all appreciated by SANEM. SANEM thinks these will help in containing the inflationary pressure. But the utilization process for agriculture related stimulus packages has not been satisfactory.

Dr Bidisha ended her presentation with some relevant recommendations by SANEM on the overall budgetary initiatives. Those include, detailed and specific plan of action should be sketched out for inflation. Strengthening of market monitoring mechanism is required and both fiscal and monetary policies need to be linked more specifically to inflation targets and macro stability. In addition, a road map for employment generation is necessary. Besides increasing the allocation in social infrastructure, per capita allocation of the social safety net programs should be raised. There needs to be an update in the data base for tracking the status of key indicators especially after the pandemic. It is important to conduct both M&E exercises and feasibility studies at the ministry level. And more importantly, a reformed tax structure with specifically designing a progressive tax structure cannot be over emphasized.

Dr Selim Raihan discussed about whether the overall budgetary allocations were fulfilling the standards when comparing with the Eighth Five Year Plan. According to the Eighth Five Year Plan, the allocations for health, education and social safety net programs are not satisfactory at all. The government was expected to address and take initiatives for the newly ‘poor’ population due to the rising inflation and post-pandemic situation. It was also expected from the government to revise their tax policies specifically for import duties and value-added taxes. Dr Raihan also summarized the recommendations from the above discussions and expressed his concerns over the issues like growth and employment generation, domestic and foreign direct investments, over and under invoicing of imports, subsidies, and overall budget deficit. The session was ended with some interesting questions from the press members which were addressed through some informative answers by Dr Raihan and Dr Bidisha.

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