Bangladesh: Subsidy cut to upset agriculture

The Daily Star (Dhaka)
The New Nation

A budgetary plan to cut farm subsidies will frustrate farmers and the sector as a whole, as they still need special care for a few more years, warned this week Khondar Ibrahim Khaled, emeritus fellow of Unnayan Shamannay (national focal point of Social Watch).

The expert also said the government would face challenges in implementing the budget, as the mechanism to implement the annual development programme is still weak and slow, according to The Daily Star, a newspaper published in Dhaka.

"The national budget allocates fewer subsidies for the agriculture sector than the previous two years. We think the sector still needs special care for another few years,” said Khaled. “Ideally, subsidy is not a solution for any sector in the long run, but the government should continue providing financial assistance to the sector for at least three more years,” he said.

“Although the government allocates more money to be disbursed as loans for the sector, it will not be as beneficial as subsidies for farmers,” said Khaled.

The expert spoke at a post-budget discussion meeting co-organised by Unnayan Shamannay and Shamunnay, both research organisations, at the CIRDAP auditorium in Dhaka.

A rally was convened on Tuesday in Dhaka also to urge the government to increase budgetary allocation for subsidies in agriculture, with a view to achieving self sufficiency in food while also ensuring the country's food security, reported The New Nation daily newspaper. The speakers said that enhancing subsidy in agriculture is a must to gain food self-sufficiency and gaining food self sufficiency in 2013 is in line with the election manifesto of Awami League, the party in power.

The speakers strongly criticized the Finance Minister for submitting to IMF conditions to reduce the subsidy bill in the 2011-12 budget, as the government has been trying to receive $ 1 billion loan from IMF as a budget support.

Rezaul Karim Chowdhury, Chief Moderator of EquityBD, said in the rally that developed countries are still giving huge subsidies to their farmers. USA government pays around $ 400 million per day. In Europe, farmers receive around $ 6 for each cow every day, and they want to sell their surplus products to Bangladesh.

Finance Minister AMA Muhith has proposed a 12.19 percent cut in subsidy for the agriculture sector in the national budget for fiscal 2011-12.

The government plans to provide Tk 4,500 crore (USD 607 millions) in farm subsidy in 2011-12, which was Tk 5,700 crore (USD 770 millions) in the outgoing fiscal year. The minister has also proposed to set a target to disburse Tk 13,800 crore (USD 1,9 billions) in farm loans in 2011-12.

Khaled, also the chairman of Bangladesh Krishi Bank, said the government has to change its mindset about determining black money in order to increase the tax-GDP ratio further, so that it can reach its target of becoming a middle income country by 2021.

“The tax department should not ask about the source of income. If one declares his income as illegal he pays less tax. So, if there was no such differentiation, the government could have earned more,” he explained.

“Whenever one earns illegally, there is police and Anti-Corruption Commission to punish him. So there is no point of losing revenue from these people,” he said.

Khaled said the implementation of the proposed budget would depend on managing funds to finance the budget deficit of Tk 45,000 crore (USD 6,1 billions).