Research organisation Unnayan Onneshan finds that the expected growth rate of 8.2 percent, as set in the proposed budget, is “unrealistic”
Unnayan Onneshan finds that the proposed budget for the fiscal year 2020-2021 lacks measures necessary to address the macroeconomic, medium term and institutional challenges posed by the coronavirus pandemic.
The budget still remains abundantly in the spectrum of exclusion and short-sighted motivations, says the research organisation in its report styled "Whither Bending the Curves for life and livelihood: A Rapid Assessment of National Budget 2020-21".
Income erosion in productive sectors due to the pandemic induced shutdown will lead to the emergence of 'new' poor, and 43.5 percent households may see their income dipping below the poverty line, it says.
"In the worst case scenario, with prolonged shutdown, we estimate 47.43 percent of the households will have their income below the poverty line," the research organisation forecasts.
Poverty, which saw a gradual decline since 1992, is about to move upward while economic growth fell to its lowest since 1980 to 5.2 percent and unemployment reached an all-time high since 1984, the report says, pointing at a 'dramatically reverse course' of macroeconomic indicators.
Unnayan Onneshan also fears that inequality would cross the fault line 0.50 from the existing 0.32 in terms of Gini coefficient due to income erosion in the low and middle-income section of society and job losses in both formal and informal sectors.
The organisation estimates that a percentage decrease in the GDP growth will result in 0.93 percent increase in unemployment rate. "Hence, unemployment rate may rise more than 3 percent because of the fall in the GDP," it says in its report.
The research organisation also finds that the expected growth rate of 8.2 percent, as set in the proposed budget, is "unrealistic", which may even plummet due to weakening of investment, consumption, government expenditure and net exports, stemming from the pandemic.
Contribution of specific productive sectors to the GDP will drop 12.4 percent drop, it says.
The post-budget report also assessed the impact of Covid-19 on farm sector, saying farmers lost more than Tk56,000 crore in a month and a half, but the budget fails to ensure them a fair price for their produces.
"Over the last six years, the subsidy in agriculture has remained at Tk9,000 crore which means the proportion of subsidy is decreasing every year as the size of the budget increases," it points out.
Pointing out that the manufacturing sector greatly relies on a single industry and that it requires diversification and financial assistance to the SMEs and woman entrepreneurs, the organisation notes that the allocation for the sector has rather declined if inflation is adjusted.
Notwithstanding that the allocation has increased slightly for the health sector, it comprises only 0.9 percent of GDP while education and technology sector takes 2.7 percent of the GDP which is not sufficient at all, the organisation observed.
The inflation-adjusted allocation for social security is only 2.5 percent higher than that of the previous year and it is certainly not ample to help a huge segment of the population who have lost income and job due to the pandemic, the report says.
Revenue collection may face a negative growth of 6 percent in the FY2020-21, the Unnayan Onneshan forecasts, calling for steps to plug tax forgery and evasion.
It calls for the optimisation of debt portfolio and revealing the government's borrowing plan through proper debt management strategy.
The research organisation feels the government should enforce a strict lockdown as numbers of Covid-19 infections and deaths are rising every day.