Tuesday, 18 January, 2022

Budget may see Tk 100bn cut from dev expenditure

Budget may see Tk 100bn cut from dev expenditure

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The government may cut at least Tk 100 billion from the current fiscal’s budget, mainly from development expenditure, and the saved money is likely to be spent on subsidies and loan interests.

Global spike in fuel, LNG, fertilizer and essential commodity prices has pushed up the government’s subsidy burden, while the loan interest payment pressure is also expected to rise in FY22, official sources said. 

Despite the planned cut in the development budget, the revenue or operational budget is likely to remain intact, according to sources at the finance ministry that has already started the budget revision process.

Finance ministry officials informed that the money will be curtailed from ADP’s foreign resource part for which the finance division has sent letters to the concerned agencies.

For the ongoing 2021-22 fiscal year, the government had announced a Tk 6036.82 billion budget, of which Tk 1,328.78 billion was spent till November, sources informed.

Of the total budget, Annual Development Programme (ADP) outlay is Tk 2,253.24 billion, including Tk 880.24 billion overseas project assistance. Money will be actually slashed from this portion.

Subsidy was estimated at Tk 480 billion in the original budget, but the finance division has calculated that total subsidy on fuel, LNG, fertiliser may rise to as high as Tk 700 billion because of their global price hike.  Official sources said the government has a plan for an upward adjustment to gas and electricity prices. Even after that adjustment, the total subsidy may eventually surpass Tk 700 billion.

Moreover, the government is struggling to keep loan interest payment pressure within control in the current fiscal year despite curtailing interests on savings certificates.

Tk 686.09 billion has been set aside in the budget for loan interest payment, but it might not be enough at the yearend given the public bank borrowing trend. 

The total operational cost of the government, which is met with government revenues, has been estimated at Tk 3,288.41 billion.

While preparing for budget revision, Finance Division has issued letters to different ministries asking them for providing information with regard to their operational expenditure in writing.

It includes actual expenditure on electricity, gas, water and telephone bills payment and land tax against budgetary allocation against them.  

The finance division also sought information about the number of petrol, diesel and CNG run vehicles belonging to the ministries separately and asked them to submit necessary documents for the proposed cost of fuel and lubricants.

Information was also sought for the number of officials going to PRL or those to be on recreation leave and the amount of necessary money allocation for these.

The revenue collection target set for FY22 is not being lowered in the revised budget as the revenue collection situation has improved, sources added.

“While preparing the budget, the government estimates development partners’ support in budget. A realistic estimate of foreign resource availability is now possible as six months have already elapsed. In that sense project assistance estimate may be lowered,” thinks MK Mujeri, former director-general of BIDS.

Similarly, estimates are also made for local resources availability which also needs a reassessment, he said, warning that attention should be given while trimming the budget so that no mismatch is created between local and foreign money. 

In the current fiscal year, initiatives have been taken so that the government’s development activities won’t lose momentum.

Unlike last fiscal year, the government has put no bar on development expenditure for the current fiscal year. There was 85 percent ceiling for expenditure against ADP allocations in FY21 taken into account corona emergencies. 

Besides, the third instalment of project allocation is being automatically released to increase money flow at the field level. Now, project directors do not require any approval to get the third instalment released.

The initiatives have paid off as ADP money spending hit a five-year high at Tk 440.61 billion in the first five months of FY22. In terms of percentage, it also soared to 18.61 per cent in November from 17.93 per cent a year earlier.

Expenditure from foreign money also grew to a five-year high at Tk 142.90 billion, but in terms of allocation size, it dipped to 16.23 per cent year-on-year in November from 16.57 per cent.

It was higher from only the first Covid-hit FY20’s 15.44 percent. In the previous two fiscal years, it was 21.62 percent and 22.59 percent respectively.