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A career macroeconomist before his foray into politics by joining Dr Kamal Hossain’s Gono Forum, a key component of opposition alliance Oikya Front, Kibria termed the document placed in parliament on Thursday by Finance Minister A.H.M. Mustafa Kamal “an example of poorly-conceived budgeting based on delusional growth, revenue and financing projections.”
The budget had also failed in its task of providing the direction of future government policy, he said.
“In the face of the worst global economic downturn in centuries, fiscal policy must take the lead in fostering a recovery. Monetary stimulus is less effective when consumer and investor confidence have collapsed. Restoring confidence will be one of the most difficult challenges facing those managing the economy,” said Kibria.
In a statement to the media providing his reaction to the proposed budget, Kibria, the son of the slain ex-finance minister S.A.M.S. Kibria, criticised the “delayed and half-hearted attempt” to slowdown the spread of the coronavirus that “completely disrupted the economy while failing to achieve public health objectives.”
He said the projected growth figure of 8.2 percent for FY 2021 shows “a lack of understanding of the implications of the global downturn due to the coronavirus and the likely lingering impact on our economy.” He also came down hard on the “poorly managed and corruption-plagued” relief distribution system.
The recent strong remittance figures need to be analyzed carefully, Kibria said, to see whether they at least partly reflect the repatriation of savings of overseas workers who have lost their jobs and relocated.
On the expenditure side, Kibria said the government should have used this opportunity to “completely restructure the budget to cut out wasteful spending programs that are rife with corruption, and shift resources to the social sectors.
He also termed the revenue projection of Tk 378,000 as ‘far too optimistic’. The ensuing shortfall, he predicts, will trigger a financing crisis by mid-year.
While the budgeted deficit of Tk 190,000 crore (6 percent of GDP) is “in itself not exceptionally high” according to Kibria, the concern for him is that it is likely to be “significantly higher” due to expenditure overruns and likely revenue shortfalls.
“Financing the deficit has been a serious problem in recent years, with large shortfalls in nonbank borrowing. The planned borrowing from the central bank – essentially, printing money – may have undesirable inflationary consequences,” he warned.