Ask any serious policy maker about his job, and chances are that he will say economic policy making is not the easiest of jobs. And he will be right. But then the ability to make hard, unpopular decisions where necessary is what leadership is all about. This is accepted wisdom but bears mention even at the risk of being seen as pontification.

Define populism as action that pleases certain groups of people, especially those with political clout, or no action that might hurt certain social groups, and we have had plenty of it in past fiscal budgets. An arguable evidence of its overall importance is the very low tax/GDP ratio in Bangladesh. Combined with administrative inefficiency and corruption, populism has kept the ratio at low levels over the decades. This is primarily due to an income tax base that has remained stubbornly narrow.

Taxation of income is unpopular all over the world, but here Bangladesh appears to have an atavistic affinity with the US in its special hostility to taxation. Direct taxation is seen by governments more as a feared weapon of political self-immolation than as an instrument of economic policy. They, at best, tinker with it from time to time. Their preferred alternative is the opaque and easier world of indirect taxation.

This is not to deny that efforts at reform have been made. The introduction of the value added tax in place of sales tax is considered a right step. Measures of trade liberalisation of the 1980s and the 1990s, while not welcome to all, were certainly important steps to the much needed opening up of the economy to the world. Still, populism abounds.

Some critics think that presentation of an unrealistically large budget is itself a ploy to earn popularity. At Tk 572,480 million, the proposed budget is some 16 per cent larger than the revised 2003-2004 budget. Many critics think that the size of the budget has not been matched by concrete proposals to harness requisite financial resources. This may well be true. But for better evidence of popularity contest one should look elsewhere. A couple of examples should suffice.

The proposed budget allocates Tk 6,000 million for farm subsidies. This has been fairly widely hailed as a good step. Such a perception is strange in a world where important international efforts are under way to whittle down subsidies. That developed countries provide hefty subsidies to their agriculture, or that these countries can be rightly accused of hypocrisy in their dealing with developing countries in the matter of subsidies, is beside the point here. Subsidisation of production does carry with it twin dangers: it distorts prices and creates vested interests that are difficult to do away with. Ignoring either of these possibilities can hardly be a hallmark of good policy making. Experience in neighbouring India shows how difficult it is to reverse a policy of subsidisation of agriculture when the time comes for such action.

The populist image of the subsidy allocation is heightened by the following background. The subsidy in the proposed budget is double the Tk 3,000 million provided in the preceding budget, with scant rationale for such an increase. We are told that the ruling coalition actually wished an even sharper increase. It is futile to look for an economic rationale for the sudden conversion to the cause of farm subsidy. The idea of a popularity contest comes to mind far more easily. Perhaps equally important is the fact, studiously highlighted in budget discussions, that a previous government had allocated a measly Tk 1,000 as farm subsidy. What happens if the present political opposition forms a government in the near future and feels forced to do its bit to raise the subsidy still further?

This brief note is not meant to be a tally of populist provisions of the budget. But the innovation called "festival allowance" for retired government employees deserves mention. The population of the country is ageing. The number of older people just past their arbitrarily determined "retirement age" is thus also rising. Is there any justification for a special dispensation for this class of citizens, without regard to the income status of individual in the group, except that they are becoming a powerful electoral force? Again, will not a possible future government formed by the present opposition also feel tempted to pamper the group? Populism in matters of budgetary policy can be a dangerous game. The national economy will suffer in the end.

Mahfuzur Rahman is a former United Nations economist.