This paper assesses the impact of the budget on the economic recovery, debt dynamics and fiscal–monetary policy interaction. It also looks at how the budget has addressed issues of lives and livelihoods. It concludes by noting that the fiscal stance of compression in the 2021–22 budget has jeopardised an already faltering economic recovery that is now jeopardised by the second wave of the pandemic.
Formulated against the backdrop of an unprecedented economic contraction and the continuing pandemic, now in its second wave, the fiscal stance of the 2021–22 budget is surprisingly contractionary and insensitive to the humanitarian crisis. But the menu of reforms it has announced, barring retrograde changes in tariffs, could have a strong positive impact on long-term growth if effectively implemented along with a fiscal stimulus. This paper discusses the short-term impact of the budget on stalling recovery along with related debt dynamics and monetary policy issues. The weak response of the budget to the humanitarian crisis and possible long-term growth implications of the reform programme it has announced are also investigated.