Bangladesh government on Thursday renewed the austerity steps by suspending the block allocation under the current operating budget after deviating from the ban on vehicle purchases in the just-concluded FY24 amid resource crunches.聽
It has, however, kept block allocations under the development budget, the amount of which is more than four times higher than that of the operation budget, according to a circular issued by the finance division.聽
Economists said that the renewed austerity steps were insufficient to meet the required cut in overall expenditure and maintain the balance of the budget amid a shortage of resources.
Policy Research Institute executive director Ahsan H Mansur said that overall budget expenditure should be reduced by around Tk 40,000 crore to relieve pressure on bank borrowing, which was projected to be at Tk 1.37 lakh crore in FY25.
Such huge borrowing from the banking sector will crowd out the private sector and complicate the prolonged economic downturn because of a lack of employment generation and private investment, he noted.聽
The government also increased the allocation by five percentage points to 80 per cent for expenditure on electricity, petrol and lubricants by the ministries and divisions from the previous 75 per cent under both the operating budget and the development budget.
It has also relaxed the suspension of funds for the construction of buildings by ministries such as education, health, and agriculture under the operating budget.
Other ministries and divisions will also be allowed to utilise the allocation for building construction under the operating budget by the finance division on condition that they complete 70 per cent of their construction.
Finance division officials said that unlike suspensions on block allocation under the operating budget, utilisation of block allocation under the development budget faced almost no restriction.
Referring to the annual financial statement for FY25, the officials said that block allocation had been projected at Tk 6,256 crore under the operating budget for FY25.
The amount is around Tk 26,128 crore, including Tk 6,328 crore earmarked for special needs in the development budget worth Tk 2,65,00 crore.
The fund for special needs can be utilised with approvals from the planning commission, while the rest of the block allocation under the development budget can be utilised with approvals from the finance division.聽
Economists said that the austerity steps could have been more meaningful had the government suspended block allocations used for the implementation of development projects.
Former Bangladesh Bank governor Salehuddin Ahmed said that many unnecessary projects were being implemented under the annual development programme.
The suspension of such projects can easily cut a significant amount of expenditure, he said.
The government had suspended funds for less important projects while categorising the overall development projects into three categories in FY23, the first year of the current austerity programme.聽
But the step was rolled back during the revised Annual Development Programme of the same FY23 due to resistance from the ministries and divisions.聽
Another step, such as the ban on vehicle purchases in FY23, was changed with the provision of replacing more than 10-year-old vehicles with prior approval from the finance division.
The provision that was retained in FY25 allowed the public administration ministry to purchase 261 vehicles worth Tk 381 crore for deputy commissioners and upazila nirbahi officers amid the shortage of dollars.
The government has borrowed $4.7 billion from the International Monetary Fund to check the depletion of forex reserves.聽
The acquisition of land under the operating budget has also been retained.
The circular of the finance division also showed that the ban on the purchase of cars, planes, and ships and the acquisition of land with prior approval from the same division under the development budget would remain unchanged in the current financial year, beginning on July 1.
Overseas tours and training by public officials funded by foreign grants have been retained, while the ban on such tours and training under government finance will remain in force.