Tk 5.68 trillion budget to achieve smooth economic recovery

Finance Minister AHM Mustafa Kamal has proposed a national budget of Tk 5.68 trillion (5,68,000 crore) for the upcoming 2020-21 fiscal to achieve full economic recovery amid coronavirus pandemic.

"This budget, formulated at the directives of Hon'ble Prime Minister, will be our tool as we move towards overcoming economic recession and establishing the foundation for desired economic success in the future in continuation of past development." he said while announcing the budget in parliament on Thursday.

"InshaAllah. We shall have to overcome the situation with patience and bravery without being distracted and panicked at this critical moment," the finance minister said, quoting averse from Surah Al Baqarah.

This is the second budget of Awami League's third successive term in power and also the second one for Mustafa Kamal as the Finance Minister.

While placing the proposed budget, the Finance Minister said, "It is not a traditional budget, rather is a [economic] transitional budget."

Kamal said the government has taken up a comprehensive plan with four main strategies discouraging luxury expenditures and prioritizing government spending that creates jobs.

"We have taken a comprehensive plan to overcome the possible negative impacts of the pandemic on our economy and people," he said.

Under the plan, he said, they have taken measures that were necessary in the immediate term and implementing some in the medium term.

"We have also taken up a range of initiatives that will be implemented in the longer term to achieve full economic recovery," said the Finance Minister.

Due to sound macro-fiscal operation by the government during the last ten years, the Minister said, the Debt-to-GDP ratio is still as low as 34 percent.

This provides a cushion against any negative macroeconomic implication while they are increasing public spending to overcome the crisis.

"Secondly, we are creating loan facilities through commercial banks at subsidised interest rates for the affected industries and businesses so that they can revive their economic activities and maintain competitiveness at home and abroad," said the Finance Minister.

The third strategy is to expand the coverage of the government’s social safety net programmes to protect the extreme poor and low paid workers of five informal sectors from the sudden loss of their source of earning due to the pandemic.

"Finally, we will increase money supply to the economy while making a delicate balance between increased money supply and possible inflationary pressure," said the Finance Minister in his budget speech.

In light of the comprehensive plan and strategies described above, he said the government has declared a number of stimulus packages to support the emergency healthcare services, to protect jobs and to achieve smooth economic recovery.

The Finance Minister proposed Tk 3,78,000 crore revenue rearning target for the coming fiscal year. Of the amount, the NBR has been tasked to realize a revenue collection target of Tk 3,30,000 crore, the non-NBR revenue collection target is Tk 15,000 crore while the non-tax revenue collection target is Tk 33,000 crore. Besides, Tk 4,013 crore will come from foreign grants.

He said the overall budget deficit will be Tk 1,90,000 crore, which is 6 per cent of GDP. It is to be noted that deficit stood at 5 per cent in the last fiscal year. Out of the total deficit, Tk 80,017 crore will be financed from external sources, while Tk. 1,09,983 crore from domestic sources of which Tk 84,983 crore will come from the banking system and Tk. 25,000 crore from savings certificates and other non-bank sources.

The Finance Minister also proposed an allocation of Tk 10,000 crore to accomplish the emergency requirements in tackling coronavirus or Covid-19 pandemic.

In this regard, he proposed the amount for fulfilling the emergency requirements to combat the Covid-19 pandemic.

"We have taken all-out steps to improve the health sector. To combat the Covid-19 pandemic, we are implementing different programmes worth Tk 5,500 crore under the Health Services Division," the minister said.

He further said, "The government will do whatever is needed in addressing the coronavirus pandemic. To accomplish the emergency requirements, I propose to allocate Tk 10,000 crore as a lump sum."

Economic Recovery Packages

The economic recovery packages declared so far have totaled Tk 1,03,117 crore, said the Finance Minister.

Amid this unprecedented global crisis, the Finance Minister said Prime Minister has announced a number of stimulus packages totaling over Tk 1 lakh crore to stand by the poor and helpless people, to keep up the momentum in economic activities, and bring back the trend in growth and development.

These are akin to the bold steps she took to save the country during the Asian Financial Crisis in 1997 and the Global Recession in 2009, he said.

The fiscal and financial packages announced by the Prime Minister is equivalent to 3.7 percent of GDP, which is the largest in the South Asia region.

"To tackle this crisis, we have created a fund amounting Tk. 5,000 crore for the export oriented industries so that they can continue to pay salaries and allowances to their workers and employees," said the Finance Minister.

This quick action from the government has saved jobs of a large number of workers and employees, he said.

The partial shutdown in effect in the country since late March to contain the spread of the coronavirus resulted in massive slowdown in our economic activities.

"Given this context, in our bid to provide much needed support to the affected enterprises in the industrial sector, we have introduced a working capital loan facility of Tk. 30,000 crore at a subsidised interest rate for large industries," said Minister Kamal.

For the same reason, he said, the government has created another working capital loan facility of Tk. 20,000 crore at a subsidised interest rate for the Cottage, Micro, Small and Medium Enterprises (CMSMEs).

To facilitate the import of raw materials under the Back-to-back 6 Letter of Credit facility, the government has increased the size of Export Development Fund (EDF) from USD 3.5 billion to USD 5 billion, at a reduced interest rate.

"To improve our export competitiveness by financing the pre-shipment expenses of exporters, a new Pre-Shipment Credit Refinance Scheme of Tk 5,000 crore has been initiated through Bangladesh Bank," he said.

The Finance Minister said they have introduced a special honorarium equal to the basic pay of two months for the doctors, nurses and other healthcare workers who are providing critical healthcare services to COVID-19 patients.

"We are aware of the fact that doctors, nurses and other healthcare workers providing healthcare services to COVID-19 patients and officials from field administration, law enforcing agencies and armed forces and other employees of public service directly engaged in enforcing government’s guidelines in this respect are at high risks of getting infected with the coronavirus and some of them have died," he said.

The government suspended payment of interest for the months of April and May against loans distributed by all commercial banks.