The government’s deficit financing grew by 130 per cent in the first four months of the current fiscal year compared to that of the same period of last fiscal, driven by a fall in resource mobilisation, according to official documents. The Ministry of Finance said the resource gap for the four months amounted to Tk 362 billion (36,200 crore), up from Tk 158 billion recorded in the corresponding period of the last fiscal year. The mobilisation of total revenue during the period of July to October last was recorded at Tk 767 billion against the total expenditure of Tk 1,129 billion. The revenue collection during the four months was much lower than nearly Tk 787 billion collected in the corresponding period of the fiscal year 2018-19, according to documents seen by the Financial Express. The total expenditure during the four months to October 2019 was more than 19 per cent higher than that of the corresponding four months a year earlier. Economists think the government should immediately cut unnecessary Annual Development Programme (ADP) projects in order to contain the deficit. If not, it will adversely affect the financial market, especially private investment. They suggest plugging the holes in the revenue collection process as they believe that a large amount of money mobilised from the people does not go to the public exchequer. Dr Zahid Hussain, an economist, told the FE that there are leakages of resources at the National Board of Revenue (NBR). “Still, people pay taxes but somehow there have developed leakages that do not go to the public exchequer, thus depriving the government,” Dr Hussain alleged. “To my mind, speedy digitalisation may help address this issue,” he said. He also said the government should be cautious about power projects. “There are huge subsidies and if the government does not renew small power projects, there may be a huge amount of money saved,” Dr Hussain added. On the other hand, Dr Ahsan H Mansur, executive director at the privately-owned think-tank Policy Research Institute of Bangladesh (PRI), said the government borrowing from the banking system would even touch Tk 1.2 trillion or more at the end of the current fiscal year. Dr Mansur said: “I don’t understand how the deficit grows, if the economy expands at a rate of 8.15 per cent.” Dr Mustafa K Mujeri, an economist, said such a higher deficit leads to loss of sustainability of an economy. “We’re even not progressing up to the expected levels, judging by many macro indicators, excepting remittances,” Dr Mujeri, who heads the research organisation Institute of Inclusive Finance and Development, told the FE. He said the government’s projection about the revenue earnings should be realistic in order to meet the target. Dr Mujeri, however, suggested austerity measures in some unproductive sectors to narrow the deficit. However, the large deficit was attributed to some extent to more spending on payment of interest on debts that reached Tk 168 billion during the period under review. The expenditure meant for the ADP was Tk 240 billion during the July-October period. The capital expenditure was Tk 35 billion during the period against Tk 25 billion a year earlier. The outlays under the operational activity head hit Tk 640 billion during July-October last against Tk 601 billion a year earlier. The government had announced the annual budget for the year to June 30 next involving Tk 5.23 trillion with the overall deficit projected to be 5.0 per cent of the Gross Domestic Product (GDP). The government planned to meet the deficit through external and domestic sources.
Source – The Financial Express.
