Home ›› 10 May 2023 ›› Front
The government is set to increase the allocation for the social safety net sector by Tk 5,000 crore to Tk 1.18 lakh crore in the upcoming budget for the fiscal year 2023-24 (FY24).
The rise in allocation will increase the budget expenditure in the next fiscal year by 4.42 per cent compared to FY23.
Besides, subsidy and incentive expenditure is set to grow by Tk 8,000 crore to Tk 1.1 lakh crore in the next budget.
According to finance ministry sources, ministers and government officials concerned will place the proposals during a meeting with Prime Minister Sheikh Hasina today to finalise the next budget.
The meeting will be attended by Finance Minister AHM Mustafa Kamal, Planning Minister MA Mannan, Prime Minister’s Economic Advisor Mashiur Rahman, State Minister for Planning Shamsul Alam, Governor of the Bangladesh Bank Abdur Rauf Talukder, Finance Division Senior Secretary Fatima Yasmin, and other senior government officials.
Sources said proposals will also be placed to allocate Tk 24,000 crore for paying interests on foreign loans.
However, there is no plan to introduce a new salary structure or pay scale for government officials due to economic volatility despite the inflationary pressure. But, to give them some relief, the government plans to allocate a 20 per cent dearness allowance in the new budget.
The finance ministry has drafted an expenditure of Tk 7,59,955 crore for the next fiscal year keeping in mind the additional expenditure on social security to meet the pressure of inflation, subsidy arrears, and to provide financial aid to low-income people in the election year.
The expenditure is 15.20 per cent of the estimated gross domestic product (GDP) for FY24. The budget for FY23 is Tk 6,78,064 crore.
In the next budget, the government has decided to bring about 7.5 lakh elderly, widows and disabled people under the social security net. At the same time, after almost a decade, the rate of old age and widow allowance is also being slightly increased.
A recent meeting of the Finance Division estimated an allocation of Tk 1.18 lakh crore for the sector. In the current fiscal, the sector has been allocated Tk 1,13,576 crore, a 5 per cent increase than the previous year.
The increase in social safety net allocation comes in line with the conditions set by the International Monetary Fund (IMF) under its $4.7 billion loan programme for Bangladesh.
In the upcoming budget, a total of 122 social security sectors including pension and savings tools are getting allocation simultaneously.
According to finance ministry sources, the allocation for the social safety net sector will be presented to the IMF excluding the allocation for these two sectors.
Old age allowance: According to finance ministry sources, there are currently 57.01 lakh beneficiaries under the government’s old age allowance scheme, who are given Tk 500 per person a month.
In FY24, the number of beneficiaries for the allowance will be increased by one lakh and the allowance will be increased by Tk 100 to Tk 600. In the coming fiscal, the scheme will be allotted Tk 4,205 crore.
Widow and husband deserted women allowance: Currently, 24.75 lakh beneficiaries are getting an allowance of Tk 500 per month under the widow and husband deserted women allowance scheme.
In the next budget, the government will increase the number of beneficiaries by one lakh and the monthly allowance will increase by Tk 50 to Tk 550. The expenditure for the scheme has been proposed at Tk 2,294.75 crore.
Persons with disabilities allowance: At present, 23.65 lakh people with disabilities get an allowance of Tk 850 per month. The Ministry of Social Welfare has proposed increasing the number of beneficiaries and allowances. The Finance Division is in favour of increasing the number of beneficiaries by 5,350 without increasing the allowance.
Education stipend for students with disabilities: Currently, one lakh beneficiaries are getting allowances under the education stipend programme for students with disabilities.
The scheme provides Tk 750 to every eligible primary level student, Tk 800 to secondary level student, Tk 900 to higher secondary student, and Tk 1,300 to those pursuing higher education.
The Ministry of Finance has kept the number of beneficiaries and allowance under the scheme unchanged.
The number of beneficiaries and allowances in other social security categories also remain unchanged.
According to sources at the Finance Division, the allocation for other social expenses including subsidised food (KABIKHA) and TRA will not be increased.
Subsidy allocation of Tk 1.10 lakh crore
The government is planning to increase the subsidy allocation for fertiliser, electricity and gas in FY24, despite the IMF conditions to reduce subsidies for the sectors.
The government had earlier increased the prices of fertiliser, electricity and gas in multiple phases.
According to sources, a portion of the next budgetary allocation will be used to meet the outstanding subsidy liability of the current fiscal year. However, if the arrears of the current fiscal year are excluded, the subsidy amount will reduce in FY24.
In the original budget for FY23, Tk 82,745 crore was allocated for subsidies, incentives and cash assistance. But it was increased to Tk 1.02 lakh crore in the revised budget. In the upcoming budget, the total allocation for these sectors will be increased to Tk 1.10 lakh crore.
Agri and food subsidies
In the budget for FY22, Tk 9,100 crore was allocated for agricultural subsidies. However, the subsidy requirement increased to Tk 28,000 crore due to a hike in fertiliser prices. Ultimately, in the revised budget for the fiscal, subsidy for the sector was increased to Tk 15,173 crore, leading to a shortfall in payment.
In the current fiscal year, Tk 16,000 crore was allocated for the sector originally. But in the revised budget, the allocation has been increased to Tk 26,000 crore following the demand for additional subsidy.
Meanwhile, there was an allocation of Tk 5,995 crore for food subsidy in the current budget, which was increased by Tk 812 crore in the revised budget. In the next budget, an allocation of Tk 8,000 crore has been estimated for the sector.
Debt interest payment pressure to increase
The expenditure on debt interest payment is estimated to be Tk 1,02,376 crore or 2 per cent of GDP in the budget for the next fiscal year.
In the current fiscal, Tk 80,375 crore is estimated to be spent on loan interest in the current FY. Of the total, Tk 7,200 crore is likely to be spent on foreign loan interest. In the current fiscal, the foreign debt repayment allocation is Tk 17,000. It will be increased to Tk 24,000 crore in the next budget for FY24. The cost of paying interest on foreign loans is expected to increase in the next fiscal year.
There will also be additional expenditure on interest payments in the coming fiscal when the debt repayment of various mega projects including the Rooppur Nuclear Power Plant, Matarbari Project and Mass Rapid Transit (MRT) will begin.
Apart from this, the recent devaluation of taka against US dollar and the rise in London Interbank Offer Rate (LIBOR) and Secured Overnight Financing Rate (SOFR) interest rates are also increasing the estimated cost of government’s interest payments in FY24, according to sources in the finance ministry.
Compared to the current fiscal year, the revenue target for the next fiscal year will be increased by 15 per cent to Tk 4,33,000 crore. Even if the budget is estimated to be Tk 759,955 crore in the budget for next FY, 27 per cent of the total budget will be spent to handle the pressure of interest and subsidy.
Despite such a huge subsidy, there is not much good news about inflation for the next fiscal year. Inflation target is estimated at 6 per cent in FY24, which has been estimated to be 5.6 per cent in the original budget for the current FY23.
DA proposal for government employees
The government is planning to give 20 per cent dearness allowance (DA) to government officials and employees in the budget for the next fiscal year 2023-24.
In the current financial year, the allocation for government employees’ salaries and allowances has been reduced by Tk 1,093 crore and kept at Tk 73,173 crore in the revised budget.
Finance Division has estimated an allocation of Tk 77,000 crore for the salary and allowances of government officials and employees in the next fiscal year. This amount will rise if the government gives dearness allowance.
