A BUDGET TO ENSURE EQUALITY : Exploring CPD’s key recommendations for the next budget

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The Centre for Policy Dialogue (CPD) has recently encouraged the government to establish a realistic budget for fiscal year 2022-23 with a clear execution plan. The CPD, a think tank and research organisation, also made budget suggestions focused on the country’s transition to a developing economy by 2026, budget implementation structure strengthening, and budget allocation based on risk factors and recovery plans. Bangladesh will confront a hurdle in imposing import duties after graduation, which is required to adapt the revenue-earning plan to reflect the post-LDC circumstances. In this article, we will see what are the recommendations by CPD and also, what thought leaders across the world are thinking about national-level budget priorities in the post-pandemic world.
These are the topline recommendations that have been suggested by CPD –




The CPD emphasised the importance of restructuring the total tax-revenue sector in terms of technology innovation and institutional competence, as well as establishing a unified tax system and justifying tax exemptions.
To construct a healthy and developed nation by 2030, the CPD recommended increasing budget spending on education, agriculture, children, and women’s health development.
To support effective governance, the CPD called for more transparency, institutional accountability, and general accessibility to data on public expenditure.

The export incentive sector needs to modernise with a single structure so that only those who are truly eligible can benefit.
The think tank also advocated for a stable exchange rate between the Bangladesh Taka and the US dollar because it had an impact on both domestic commodity prices and industrial production costs.
Increased investment for social safety nets in phases for pandemic recovery and the worldwide impact of food price spikes are also part of the budget recommendations. According to the proposals, the pandemic is wreaking havoc on the poor, and food inflation is driving up prices, making their lives even more difficult. Because their income was harmed by the epidemic and is not resilient so far, the fixed income group and marginal people would confront nutrition challenges if food gets more expensive. The budget must provide incentives for marginalised people in many forms, such as food price subsidies. CPD praised the government’s pandemic recovery strategy, saying that while the policy is sound, implementation is difficult and can cause delays in the distribution process.



Prof. Mustafizur Rahman, a distinguished fellow at the CPD, stated: “The amount of our grant element in foreign indebtedness would be reduced as we transition to a developing country. Our concessional loans will also be reduced. We’ll need to bring in foreign loans at market rates, which will be higher than our current loan rates.” He explained, “All of our past foreign loans had a maturity period of 30-40 years with a grace period of 5-10       years.”





D. Fahmida Khatun, executive director of the CPD, delivered the think-suggestions tank’s ahead of the fiscal year’s budget. She claimed that the current market price situation has made it difficult for middle-income people, in addition to having a negative influence on low- and lower-income people. The most pressing and critical macroeconomic policy goal should be to keep the cost of basics down. The commodity market price increase is even 5-6 times larger than the BBS’s inflation data. Higher-paid workers who have adjusted their salaries to BBS inflation are now unable to cover their families’ needs, according to Fahmida. In light of the additional pressures of rising food prices and income loss created by the pandemic, she advocated raising the tax-free income level for people to Tk3,50,000 for the next fiscal year, up from Tk3,00,000 currently. In addition, she stated, “Because of the higher costs and revenue losses, the suggested actions would put some pressure on the budget deficit. However, a certain degree of budget deficit to safeguard the poor’s livelihood would not put macroeconomic stability at risk.”
According to Fahmida, the government has a habit of putting together a larger budget based on certain unrealistic assumptions, which is then underutilised in terms of spending and income generation. She asked the administration to create a realistic budget and strengthen the institutional capacity to carry it out. The administration is putting up a budget at a time when the country is in the midst of a historic crisis, since the economy has yet to recover from the effects of Covid-19, despite the fact that the disease’s health effects have been decreased. Bangladesh would lose preferential trade benefits, low-cost loans, and other global facilities once it is no longer classified as a least developed country. She suggested expanding internal revenue collection and increasing expenditures for health and education to build human resources in order to prepare for issues once the country archives such statuses. To promote ecologically friendly sustainable development, Fahmida also suggested putting tariffs on single-use plastic products and instituting an eco-tariff of $1 per tonne of CO2 emissions. Few job opportunities for them. Delivering Sustainable Development Goals (SDGs) is also very critical since it prioritises the development of the marginalised rather than high economic accomplishment metrics – a point that she thoroughly highlighted.



Debapriya Bhattacharya, the coordinator of Bangladesh’s Citizen’s Platform for Sustainable Development Goals and a distinguished fellow at the Centre for Policy Dialogue (CPD), recommended two policy options to address the situation –
One is taking macroeconomic measures to prevent the taka from depreciating because of its effects on imported inflation, as well as interest rate management to lessen debt pressure for the low-income and left-behind. The other option is to defend purchasing power by lowering skyrocketing prices by lowering tariffs on everyday necessities.

He also suggested the government should decrease customs, tariffs, and taxes quickly to make essentials more cheap and offer access to basic goods at ‘fair pricing’ by increasing the Trading Corporation of Bangladesh’s open market sale (OMS) activities (TCB). The government should raise tax rebates for job development and expand public works, social protection programs, and food assistance. Subsidies for power, fuel, food, and fertiliser will need to be redirected from public funds, he said.
In 2020, governments have taken unprecedented policy efforts to allocate current resources toward health and social support initiatives. In many countries, this has entailed deviating from established fiscal policy objectives or suspending budgetary norms temporarily. The strategy-setting stage will provide a first opportunity to reassess the impact of these policies and begin planning to stabilise public finances. Governments should identify and adjust to the high level of macroeconomic uncertainty and its influence on revenues when determining the overall strategy for the FY2021 budget, take a cautious approach, and maintain a medium-term planning and budgeting focus when it exists. To further elaborate these strategies, IMF experts have suggested these strategies.


In light of the additional pressures of rising food prices and income loss created by the pandemic, she advocated raising the tax-free income level for people to Tk3,50,000 for the next fiscal year, up from Tk3,00,000 currently.


Instead of a single macroeconomic scenario, they have suggested creating a number of ones and base policies on them. Governments are clear about the dangers to their central (most likely) scenario and their attempts to minimise these risks even in normal times. Governments may have to acknowledge that making policy decisions in a unique scenario is difficult and hazardous in these unusual circumstances. Instead, they might show how these policies would be modified and changed in light of various assumptions, particularly in light of the impact on government revenue due to the slowing economy. Around a central baseline, all euro area nations are developing their own upside and downside forecasts. Egypt and Malawi are two more places where this has happened.




Looking at national budget formulation
from a global viewpoint –
The experts International Monetary Fund (IMF) had certain suggestions when
it comes to formulating budgets in these post-pandemic times


To address the restrictions of social distancing, make specific adaptations to institutions and procedures, and reinforce strategic guidance and central leadership.

Strategy Setting Phase
• Update predictions more frequently and revise the macroeconomic framework to account for the impact of the crisis and the COVID-19 initiatives.
· Make every effort to present a credible fiscal strategy based on revised medium-term fiscal goals.

Budget Guidance and Negotiation Phase
Using the budget circular, communicate priority expenditure and reallocation needs to line ministries and agencies (LMAs) early and unambiguously.
• Be prepared for a more difficult budget baseline exercise than usual. The FY2021 budget will necessitate extensive consultation with line ministries on their budget baselines, which will include costing current and new COVID-19-related policies, as well as the impact of the health crisis.
• Create and plan for more flexible and agile budgets that strike a balance between executive response and legislative scrutiny.
• Prepare the budget to account for the need for increased monitoring and control as the budget is being implemented.

Budget Documentation and Legislative Approval Phase
Use budget documentation to bring clarity to a very complex picture and bolster confidence in the government’s fiscal, economic, and social strategies


Another suggestion was to consider more frequent macro-fiscal framework modifications. Forecasts are often created at the beginning of the budget process and revised at the end. Forecasts will need to be updated more regularly to alert policymakers to the need to adjust policies in light of new data.



Since the beginning of the crisis, the UK’s Office for Budget Responsibility (OBR) has altered its baseline fiscal scenario every month, fine-tuning its budgetary predictions until 2021. A special meeting of the Development Budget Coordination Committee was conducted in the Philippines to update macroeconomic assumptions and revise the macro-fiscal framework at a considerably later stage than the previous year in order to prepare the budget for the coming fiscal year.


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