Budget FY22: Sanem says recovery roadmap of priority sectors missing

‘Emphasis must not only be placed on financial recovery, but also on social recovery‘

The areas regarding poverty, job market, SME sector and Covid-19 vaccination have been overlooked in the proposed budget for 2021-22 fiscal year, the South Asian Network on Economic Modelling (Sanem) said in its budget reaction on Saturday.

It also noted that this would lead to limitations in formulating policies relevant to said issues.

The panel included Prof Selim Raihan, of the Department of Economics, University of Dhaka and executive director of Sanem, and Prof Sayema Haque Bidisha, of the same department and research director of Sanem.

The organization held a post-budget virtual press conference titled “Sanem’s Budget Reaction” on the day.

Selim Raihan elaborated that there is a disconnect between the title of the budget “Bangladesh towards a resilient future: Protecting Lives and Livelihoods” and its content.

This disconnect is due to the improper and inappropriate assessment of the pandemic situation, he also said.

There has been a big crisis in the labour market – including urban to rural migration and increased pressure in the rural job market; while micro, small and medium enterprises suffered the most. Emphasis must not only be placed on financial recovery, but also on social recovery – which would otherwise lead to an incomplete discussion, he observed.

Recovery of social issues such as education, health, social security, poverty, inequality, etc. also needs to be addressed. In brief, the solutions presented seem to be on an ad hoc basis, rather than overall planning in regards to the Covid-19 crisis, the Sanem executive director said.

Raihan further stated that budget implementation is another major issue. Although the budget has three stages, there is always little discussion about the revised and actual budgets later in the year.

From Sanem’s research, it has been found that for the past 10-12 years, the proportion of the proposed budget that is actual spending is around 75-78%.

Moreover, the difference between implementation and spending is crucial, as increased spending does not imply that policies are being properly implemented.

To meet the budget deficit, it is important to ensure honest use of the loans mentioned in the budget to be taken from the banking sector.

While many priorities have been appropriately mentioned in the budget, there is not much discussion about the education sector in the budget.

Sanem also said that previous initiatives have been mentioned, but issues with online education, risk of drop outs and early marriages have not been reflected upon.

Most notably, there is no mention of the “New Poor” and inaccuracies in the lists of “Old Poor” and “Neo Poor” – which would lead to issues in providing support to these groups.

Prof Saima Haque Bidisha said that there have also been some tax exemptions to encourage investment in the health sector, and many efforts have been made to make various products in the health sector affordable, which is also a positive aspect.

There are also additional incentives for female entrepreneurs. The budget is, overall, business friendly which is positive and there is visible effort in reviving the economy, she also said.

However, the question that arises is that it is not clear how much the general public, the low-income people and the middle class will benefit from the efforts made to boost businesses, Prof Bidisha feared.

She also said that the main reason for the difference in expectations is that this budget seeks to help the general public by providing some incentives and concessions at the basic level through some small policies.

However, the expectation was with employment and poverty alleviation at the forefront, as well as social infrastructure, health and education at the forefront and the allocation would be increased with emphasis on these issues, as well as a very clear roadmap. Although this is somewhat reflected at the individual level, it is not seen at the collective level, which was a cause of disappointment, she also mentioned.

She emphasized that if businesses do well, employment will be created, and the labour market will be stimulated through that employment.

However, it is not clear whether the kind of incentives that have been proposed in the budget to stimulate businesses will actually spread to the labour market, she warned.

“The current situation of our labour market, the kind of steps have been taken in the current financial year to cope with the impact of coronavirus and what else needs to be done to address other problems in the labor market all need to be considered,” said the Sanem research director.

There have been some concessions and incentives in terms of employment. In the case of e-learning, concessions have been given, 1 million people will be trained in the IT sector.

However, these issues are very small initiatives to address the challenges of the labor market in Bangladesh and there is a lack of a clear plan of action, she surmised.

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