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Another budget, another ritualistic document
Enayet Rasul
3/29/2006

EVERY year since the independence of the country, a national budget indicating the revenue receipts and expenditures of the government was declared. The declaration of another such budget is only some months away. Thus, it is not irrelevant to start discussing the budget which, every time, creates a great deal of interest but fails in its purpose as the powerful macro economic instrument to stimulate the economy.
A budget must not only be about receipts and expenditures of the government. It can be a powerful macro economic tool in the hands of the government in setting a pace to economic activities. Government through its fiscal policies in the budget can seek to achieve a desired orientation for the economy and then further buttress the same with the adoption of appropriate monetary policies. Furthermore, the budget should be prepared on the basis of careful cost-benefit analysis reflecting the efficiency of the government in employing scare economic resources to attain desired economic objectives.
It is doubtful whether these principles have been applied in any of the national budgets that were unfurled every year during the last thirty five years of the independent existence of this country. Budget formulations here have tended to be mainly a compromise between the competing demands of interest groups or reflected little beyond ritualistic balancing of accounts. It is a pity that when the national budget can be a formidable catalytic force in favour of economic growth and economic development through greater efficiency in the allocation of resources and adoption of proper fiscal and monetary policies, these potentials have remained rather unexplored in the budget making of Bangladesh.
Thus, changes are particularly overdue in the sphere of budget making from the perspective of optimum efficient utilisation of resources. In countries where economic management is considered as efficient, great stress is laid on ensuring that resources are utilised to yield optimum socio-economic benefits.
Let us take up one example of not achieving efficiency either in the allocation of budgetary resources for a vital sector or in the utilsation of the allocated resources. The government has been spending freely on the education sector in recent years and saying that the mission in this regard is to produce human resources for the country's economic growth and development. In fact, successive governments in the last decade and the present one never failed to say that the lion's share of the budget was allocated for the education sector. But to what extent spending the highest amount for the education sector was done in the efficient manner to get the best dividends ?
Any analysis properly carried out would show up that hardly the best results were achieved in spending for the education sector that devoured the biggest chunk of budgetary resources. Much of the allocations were for purely consumptive purposes such as paying higher salaries to teachers and staff of educational institutions, increasing of government grants for private educational institutions and construction activities. But increased allocations in these areas hardly produced better quality teaching or devoted teaching. The government grants to private institutions were similarly misspent due to corruption like paying salaries to ghost teachers. The buildings that were set up in many cases were poorly constructed to whet the appetite of supernormal profit of contractors and gains from corruption thereof by their associates.
The worst case of non realisation of objectives in the vital education sector is seen from the fact that in the last over one decade, meagre public sector investments were made in new or additional engineering college and universities, medical universities, agricultural colleges and universities, polytechnic institutes, specialised educational institutions, etc. But these are exactly the sort of educational institutions the number of which must increase many times from their present number to produce human resources on a large scale to prepare the country for a substantially faster rate of economic growth. All kinds of economic ills ranging from unemployment to poor standard of living can be cured mainly by economic growth and this growth, as economists maintain, depends crucially on investment in quality education, in science and technology education and vocational education to produce appropriate human resources for undertaking diverse economic activities.
But the allocation patterns in our budgets do not show up that successive governments have at all cared to allocate higher amounts for the establishment of these institutions that alone could create the right kind of human resources.
Then, let us take up another example. Increasingly, in Bangladesh these days, it is realised that road congestion is taking a heavy toll on private benefits, businesses and on the economy as a whole. Road congestion is increasing fuel consumption costs, causing delays in transporting goods, increasing transportation costs and the maintenance costs of vehicles, etc. The economic costs of congestion were estimated in several studies and found to be very heavy indeed. Recommendations were made to urgently spend resources from the national budget to build new roads and take other measures to reduce road congestion to attain transportation efficiency which in turn could add to competitiveness in many areas of the economy. But the budgetary allocations in recent years do not indicate that such recommendations have been particularly heeded.
Looking around, it should be possible to find many glaring examples of gross inefficiency in the allocation of resources the rectification of which could inject dynamism in the economy and get it moving at the right speed and in the right direction. Lowering of all sorts of taxes for producers, import duties on industrial raw materials, opertionalising tax incentives like the tax holiday, etc., in different targeted areas of the economy can create a great deal of incentives for investments among entrepreneurs in different areas of the economy. All of these incentives to encourage greater investment and hence production activities, can be encouraged through appropriate fiscal measures in the budget.
Certainly, the government needs revenues and needs them in increasing amounts. But it can also aim to get such revenues not by taxing further existing enterprises but creating conditions for investments into newer areas through the fiscal incentives so that its total collection of revenues can increase from these new enterprises coming into existence. The growth of enterprises creates jobs and earning and also reduces employment apart from increasing the vital demand conditions in the economy.
Will the next budget signal a move towards achieving greater efficiency in the utilisation of resources? We do not know about this but it only makes economic sense to go all out to ensure this efficiency. In the future, all aspects of budget making would deserve to be subjected to strict cost-benefits analysis and all resources should be channelled for utilisation on the basis of such analysis.