How Have the Sectors Been Impacted by This Year’s Budget?- Part II

LightCastle Analytics Wing
June 23, 2020
How Have the Sectors Been Impacted by This Year’s Budget?- Part II

Healthcare Sector

The government has given the highest priority to the healthcare sector in the national budget for FY 20-21 but it does not have the highest allocation. The new budget has proposed raising the allocation for the health services to BDT 29,247 crore in the next fiscal year to deal with the impacts of the pandemic.

This is the highest spending on healthcare proposed till date. This is also a 23% increase from the revised allocation of BDT 23,692 crore for the 2019-20 fiscal year. This will be divided to BDT 22,883 crore for the Health Services Division, which will focus its initiatives on tackling the coronavirus implications. The remaining BDT 6,363 crore, will be spent on health education and family welfare.

The ministry however does not detail out how this budget will be utilized to equip hospitals and doctors with relevant hospital beds, ICUs, testing kits, etc. the government must create emergency healthcare facilities, encourage private investment and reform current operations in order to tackle the pandemic more effectively and utilize the budget allocation fastidiously. 

In addition to the health ministry, another 13 ministries and divisions are involved in tackling the impact of the coronavirus through implementing programs related to health and family welfare. The allocation for these purposes in the budget for the upcoming fiscal year is BDT 41,027 crore, which is 1.3% of GDP and takes the figure to 7.2% of the total budget allocations. [1]

The new budget proposed has also allocated BDT 100 crore for an ‘Integrated Health-Science Research and Development Fund’ dedicated to preventing future impact of similar pandemics. A committee consisting of experienced researchers in the health sector, nutritionists, public health experts, sociologists, economists, environmentalists, civil society and other suitable representatives will be formed to manage this fund according to the finance ministry. 

The finance ministry has introduced a special honorarium equal to the basic pay of two months for the doctors, nurses and other healthcare workers who are providing critical healthcare services to COVID-19 patients. Around 34% of the Health Services Division’s expenditure is allocated for paying wages, while 43% for Medical Education and Family Welfare Division’s expenditure.

For wages and salaries, administrative expenses, repair and maintenance, buildings and structures, lands, and machinery and equipment would account for 71% of the Health Services Division’s expenditure and similarly 66% of Medical Education and Family Welfare Division’s expenditure.

All capital expenditure segments have seen a rise, while the training budget allocation has seen a decrease. It stands to be seen if this stimulus and expenditure planning will create respite from the impact of the pandemic in the coming months as the tackling of the pandemic by the health ministry has been consistently criticized by the general populace. 

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Pharmaceuticals Sector

The pharmaceuticals sector of Bangladesh is at a crossroads. The effective moratorium on general health services due to the advent of Covid-19 has all but demolished the traditionally-derived new demand derived from the doctors and pharmacist prescriptions, resulting in a decline in revenues for the industry in H1 of 2019 (Calendar Year). 

Although the government has proposed several measures for the wider healthcare sector such as VAT exemption on the import, manufacturing and trading on Test kits and medicines of Covid-19, importers rather than pharmaceuticals are more likely to take advantage of these exemptions.

Tax exemptions proposed at the manufacturing and trading stages for locally manufactured Personal Protective Equipment (PPE) and Surgical Mask (including face mask) can, however, provide a boost in non-traditional segment for the local pharmaceutical sector.

Pharmaceuticals will keep their fingers crossed that these additional deployments can quickly convert into a resumption of general health services and translate into doctor prescriptions. However, going forward, there are fears that the domestic demand for healthcare services and pharmaceutical products may be deflated for the medium term by the drop in household incomes, particularly among the lower income communities, brought on by Covid-19. 

On the export end, while the government remains committed to providing export incentives to the pharmaceutical sector as one of the thrust sectors for export diversification, the pharmaceutical sector faces other major non-financial bottlenecks in the form of disrupted air shipments and API imports restrictions imposed by foreign governments.

To compensate for these additional complexities, tax breaks and reductions should be offered as a lifeline to the pharmaceutical sector of Bangladesh.However, as things stand, with exports of only $74 million in H1 of FY 2019-20, the government’s ambitions of $2 billion in annual pharmaceuticals exports by 2022 [2] remains a distant dream. In helping to achieve this dream, the knowledge base of local pharmaceuticals should be leveraged and enhanced further by involving them closely in the newly-announced ‘Integrated Health-Science Research and Development Fund’ of BDT 100 crore.

Author: Rageeb Kibria, Principal Business Consultant, LightCastle Partners.

As part of LightCastle’s budget analysis, we look into the direct and indirect impacts of this year’s budget on different sectors. While some of the sectors have received significant policy assistance, others have been cast aside in the government’s attempt to salvage additional revenues for financing the budget. The economic contribution and perceived importance of the sector were key considerations while deciding whether the sector will be eligible for policy support. In this write-up, we look into the immediate term impacts of the budget on the Healthcare and Pharmaceutical sectors.


WRITTEN BY: LightCastle Analytics Wing

At LightCastle, we take a data-driven approach to create opportunities for growth and impact. We consult and collaborate with development partners, the public sector, and private organizations to promote inclusive economic growth that positively changes the lives of people at scale. Being a data-driven and transparent organization, we believe in democratizing knowledge and information among the stakeholders of the economy to drive inclusive growth.

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