Bangladesh’s public spending in July-Sept quarter slowest in years

November 01, 2020 09:36:09

| Updated:

November 01, 2020 13:10:02

The public expenditure increased in the first quarter (Q1) of the current fiscal year (FY2020-21) but at its slowest pace in many years.

Officials blamed the Covid-19 pandemic for the decline in the usual pace of economic activities, officials said.

The budget spending in the July-September quarter stood approximately at Tk 895 billion, which was only 1.4 per cent higher than the same quarter a year earlier, according to official sources.

The overall size of the budget for the current financial is larger by nearly 13 per cent than that of the last FY.

Economists said restricting the unnecessary expenditure is a prudent step during the ongoing Covid-19 pandemic, but essential spending and implementation of job-creation projects should continue to prevent possible adverse impact on the economy.

Traditionally, the government spending largely contributes to the economic growth.

People familiar with the development told the FE that the government is releasing funds only for the top-priority development projects.

Moreover, the contingency expenditure of different ministries and divisions has been cut by 50 per cent, said one of them, adding: “We are advising only essential procurement”.

However, the revenue collection edged up during the period under review as compared to the corresponding period of FY2019-20 as the surplus funds available with the state corporations are now being transferred to the government exchequer.

The overall revenue receipt increased to Tk 652 billion in Q1, 2021 as compared to at Tk 603 billion in the same period last fiscal year. Consequently, the budget deficit narrowed down in the quarter over the last fiscal’s .

The deficit financing was recorded just at Tk 243 billion in Q1, 2021, down by over 14 per cent than that of July-September, 2020.

But, according to finance division, the non-bank financing mostly through national saving certificates surged during the period. It declined in the last FY, but again jumped by nearly 300 per cent in the last quarter, according to the officials at the finance division.

“Non-bank borrowing surged to Tk 121 billion against just Tk 47 billion in Q1, 2020 fiscal year.”

Dr. Zahid Hussain, an independent economist and who is well conversant with public finance, told the FE: “Suspension of financing the less priority projects is justified.”

He said the measures to cut the funding for contingency expenditures were also good.

He, however, noted that discontinuation of financing the projects like road, bridge, electricity, environment and employment creation through the social safety net programmes will not be a right decision.

“I think the proper targeting for the social safety net programmes as well as other public welfare-oriented projects should continue.”

About non-bank financing, Dr Hussain who also served the World Bank as lead economist, said that higher remittance inflow may be the reason behind it.”This is an area where people get confidence as it gives the highest return among all investment tools in Bangladesh.”

The government, however, placed a Tk 5.68 trillion budget for this fiscal year with an overall deficit of 6.0 per cent of the gross domestic product (GDP).

It set a target to mobilise resources amounting to Tk 3.82 trillion from tax, non-tax revenues and foreign grants.

It also targeted to borrow Tk 250 billion (net) from non-bank sources while from banks Tk 849.8 billion (net).

[email protected]