budget review 2008-09 budget analysis & review based on economic justice and equity

Budget Review 2008-09

Budget analysis & review based on economic justice and equity

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The policy framework of Budgeting; Ignored the long term development plan for short term populism

- Budget has prepared following the policy framework of PRSP and so called market economy

- Government has been continuing the privatization process of State owned Enterprises (SoE)

- Although the Government has emphasis the growth rather than reducing discrepancies to eliminate poverty. But

- Didn’t increase the budgetary allocation among the basic supportive factors (e.g. Education, Health, Investment and Employment) for long term growth making.

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The Financing opportunity of Budget

- Poor people will suffer due to inclusion of different new areas under taxation and intensification

- Government has made a high ambitious projection to collect the revenue of Taka 693820 million which may not be achieved

- The budget has been prepared depending of over burden of loan. The deficit projection is 30.6% of total budget for the fiscal year of 2008-09. But it was 22.7% in last fiscal year 2007- 08.

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The trend of deficit finance in Annual Development Plan (ADP)

Fiscal Year % of Deficit Finance

2007-08 65.05%

2006-07 44.68%

2005-06 49.77%

2004-05 50.88%

2003-04 49.23%

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Resource allocation in Budget; A charity approach rather than sustainable development.

- Government has increased the revenue expenditure (non development expenses) amount of 7,25,840 million which is 1,24,110 million higher than the fiscal year of 2007-08.

- ADP is allocated amounting 256000 million and it is less than 10000 million comparing the ADP of 2007-08.

- Debt servicing (17.3% of total budget) has crossed all the allocation of service sector’s (e.g. Education 11.5%, Health 5.6%, Agriculture 4.7% and Electricity & Power 4.3%) budget.

- Allocation of Social Safety Net program (different subsidies for poor) assumed logical, but it’s a “Charity Approach”. Because there are no initiatives for sustainable employment for poverty reduction in long term.

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The objectives of this Budget 2008-09

- The budget doesn’t give emphasis in long term development investment in agriculture & food security, electricity & structural development that will support towards poverty reduction and create sustainable employment .

- 75% of budget has been allocated in the following sectors,

- Salary & benefits have been increased for government employee for keeping them satisfied.

- Subsidies in Social Safety Net has increased that’s treated as virtually “Window Dressing approach” rather than poverty elimination

That’s why government has tried to establish their revenue expenditure as a development investment.

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Some meseaurable impact of 2007-08 fiscal year budget

- There are more 2.5 million family in Bangladesh have gone below the poverty line newly due to frequent price hike and inflation.

- Government has taken loan amounting taka 373450 million from domestic & foreign sources for budget implementation. This amount is 5% of GDP and 154980 million higher comparing the projected debt financing (tk 218470million) in 2007-08 fiscal year.

- Government has revised the ADP and cut off the allocation 40000 million due to slow pace of implementation. The achievement of ADP implementation will merely not more than 40-50%.

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A performance overview on budget implementation of different ministry or sectors in 2007-08 fiscal year

- 26 no of ministry/sectors have used more resource than proposed budget allocation

- 20 no of ministry/sectors didn’t able to used there allocated resource in proposed budget

- Only one ministry/sectors (Ministry of Commerce) have used 100% allocated resource in budget

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List of ministry/sectors used more resource

Ministry/Sectors Yearly allocation Revised allocation

+ %

Establishment 72.1 million 77 million 8.08%

Defense 108460 million 118080 million 9.0%

Debt servicing 94640 million 106210 million 12.22%

Food & Disaster 39040 million 46270 million 18.5 %

Agriculture 43320 million 61000 40.8%

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List of ministry/sectors didn’t able to use budgetary allocation

Ministry/Sectors Yearly allocation Revised allocation

- %

Education & Technology

123700 million 116540 million 6.0%

Health & Family Welfare


Power & Natural resource


Local Govt. and Rural Dev

67000 million 60710 million 9.5 %

Monitoring & Evaluation


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Why this differentiate is happening in case of budget implementation?

Process lacking in Budget preparation. e.g.

- Budget planning process is confined among some bureaucrats. Because they prepare some so called development project in every year and give traditional increment.

- Budget doesn’t give long term emphasis on sustainable employment creation and poverty elimination

- Budget preparation process doesn't ensure effective peoples participation from local level and their problems and acceptable solution

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Undue intervention of donors in case of budgeting

- Targeting country’s yearly budget donors are prepare and published some reports with recommendation according their own style, those will virtually serve their own interest. e.g.

- World Bank has published an agriculture report on Bangladesh, where they said that, Bangladesh can produce Bio-fuel and import food through exporting.

- According this recommendation World Bank and IMF pressurize government to privatization our agriculture sector

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Transparency and Accountability is less in national budget. like

- Mid term and yearly progress and review report doesn’t prepare from government part

- Annual Development Plan (ADP) implementation is slow pace due to bureaucratic hassle.

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Our proposal to reform the budget process

- Budget planning Bill have to submit in the national parliament by December in every fiscal year. Parliament will decide the on how the strategy will be for next fiscal year.

- The core problem have to identify before preparation of national budget, and allocation along with specific and long term solution have to ensure according that’s.

- We have to back to our “Five year economic plan” rejecting the so called donor driven PRSP (Poverty Reduction Strategy paper).

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Our proposal to reform the budget process

- Accountability and Transparency have to be ensured in national budget process and budgetary allocation. E.g.

- Pre budget statement have to circulate in public media where mass are allow to through their comment

- Mid term and annual progress report have to prepare and make to public.

- Budget allocation have to ensure district wise and addressing their need and reality

- Government has to ensure district wise budget book that will be open for mass.

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Agriculture and Food Security; Endangering the food sovereignty through importing GM under the name of food security

- Government has been given emphasis the Hybrid and GM (Genetically Modified) technology in our agriculture to increase production that’s not a realistic solution in long term perspective. Because this policy will may create vulnerability of our poor farmers and loose their control on the land and inputs.

- There are no effective policy reflection and budget allocation in national budget 2008-09 to save our agricultural land & quality, use organic fertilizer and water utilization policy.

- Government has allocated the budget (2007-08 fiscal year) 3000 million for research but yet to be utilized.

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Our proposal in Agriculture & Food Security

- Government has to prepare long term plan to ensure food security through ensuring the rights of farmers on agriculture land and inputs. That’s why,

- Budget allocation and subsidy to be provided to strengthen the farmers supportive institutions like BADC (Bangladesh Agriculture Development Corporation).

- Research have to be strengthen on hi yielding verities instead of hybrid technologies which will ensure the farmers rights on seed and market protection.

- Government have to provide necessary budget allocation to save our agriculture land and surface water utilization.

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Social Safety Net (SSN) and Subsidy

- In 2008-09 fiscal year, government has declared as subsidy amount of taka 169320 million for SSN program and 136480 million for subsidy in fertilizer, fossil fuel and electricity.

This subsidies doesn’t allocated logically and it will virtually increase the inequality. Because,

- If subsidy in SSN program assume logical in our country perspective, but increasing subsidy reflecting the frequent pauperization of our people and poverty. This also a paradigm of frequent failure of our government policy & approach in reducing the poverty.

- Subsidy is also a charity approach and denial the citizen rights of living with dignity and sustainable income opportunity. This approach and policy never be a proven & effective tool of reducing poverty.

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- Secondly; the beneficiaries of fossil fuel and electricity subsidies are mostly rich and middle class people. Because rich people are using the cent percent of electricity rather poor and farmers. and

- The bus & transport owners, private car owners, government bureaucrats and foreigners they are the mostly beneficiaries of fossil fuel subsidy.

- Our poor people and farmers they are only use the fossil fuel and electricity for their agriculture and irrigation and merely benefited.

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Our proposal in SSN & Subsidy

- Government will have to withdraw the subsidies from fossil fuel and electricity.

- Only for selected agriculture purpose, subsidy will be provided where poor farmers will be benefited.

- To reduce fossil fuel consumption, our public transport network system have to be strengthen and subsidy budget to be allocated.

- Government have to imposed increasing rate of tax on lavish electric home appliances, ban high cc car import.

- Subsidy have to allocated on using solar system as alternative power and energy saving bulb

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Investment and Employment

- Government has try to encourage the domestic investment revised the tax rate in 2008-09 fiscal year. e.g. - Tax reduce from 5 to 3% on capital machineries import - Raw material import tax from 10 to 7%.

But this encouragement will may not create any significant impact to enhance the domestic investment. Because there are multidimensional factors working for domestic investment raise. i.e.

- There are no structural and physical facilities in rural area in Bangladesh- Limited gas and electricity facilities suffering existing local industries- There are no market protection policy for local entrepreneurs

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Budget Review 2008-09Our proposal in Investment and Employment

- Government have to be allocated the budget for physical and structural development and ensure logistic support in rural area to increase the domestic investment and employment .- Logistic support (gas, electricity and others) have to ensure with subsidized price those who will invest in rural area especially district and upazila (sub district) level.- Government have to ensure market protection for local industries and entrepreneurs direct or indirectly. e.g. - Strengthen the BSTI (Bangladesh Standard &Testing Institution) for quality ensure - Introduce the certification system - Strengthen market research activity and have to ensure necessary information - Strengthen Countervailing tax system

- Government have to declare the yearly employment target in national budget and make to public as quarterly basis.

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Budget and Human Resource (Education and Health) development

- Government has allocated an amount taka 122580 million (1.9% of GDP) for education and 58620 million (0.95% of GDP) for health in 2008-09 fiscal year.

- This allocations are decreasing comparing with following,

- In last fiscal year (2007-08) budgetary allocation for education was 2.15% of GDP and for health, it was 1.2% of GDP.

- According to government report, the inflation rate is 14.7%. If it adjusted the purchasing power of this new budget allocation is negative.

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Budget and Human Resource (Education and Health) development

- Government didn’t give any emphasis and specific direction in national budget for strengthening the vocation education for drop out students in secondary and higher secondary level.

- Government has taken an initiative (“Hospital Autonomy Bill- 2007”) privatization of health sector. This privatization already speed up through World Bank support and handing over of 15 hospital, 300 community clinic to private sector.

As result poor people don’t have any accessibility and will deprive from health service.

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Our proposal for Budget and Human Resource (Education and Health) development

- Government have to increase budget allocation at least 5% of GDP in education and health sector each.

- Budget allocation have to provide to introduce the vocational trade course at secondary and higher secondary level. If drop out happen in this level, students will get opportunity of employment through utilization of their knowledge and skill.

- Government have to suspend the so called “Hospital Autonomy Bill-2007” and all hospital and community clinic management will have to hand over to local government instead of private ownership.

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budget review 2008-09 budget analysis & review based on economic justice and equity

Documents

budget review

total budget

budget doesnt

budget implement

fiscal year budget

budget analysis review

short term populism

sustainable development