Govt for saving Tk 50,000cr thru austerity measures

The government is contemplating to save a total of Tk50,000 crore through several austerity measures to provide additional funds to projects taken to absorb the coronavirus shock.

Official of finance division not to be mentioned the name said the biggest savings will be made from the Annual Development Programme (ADP). 

The planning ministry has set a target of saving Tk 40,000 crore from the government development programme projects. 

In this regard, the Ministry of Finance has already instructed every ministry, department and agency to be prudent in unreasonable and luxurious expenditure, sources of finance division said.

The prospect of saving the amount of money through austerity measures will be cleared in December this year, an official said. 

The other sectors that have been identified for saving money under the government austerity measures which are banned vehicles for six months. The government will save Tk 8,930 crore through suspension of purchase of vehicles under management and development expenditure and Tk 1,123 crore through suspension of foreign travel of employees. 

Apart from this, the allocation in the ministries for various unnecessary sectors including training has been reduced by Tk 960 crore.

Government spending in various sectors has tremendously increased in tackling the ongoing coronavirus infection.

On the other hand, those concerned fear that there could be a big deficit in revenue.

According to them, the government has taken various steps to handle the existing situation. This affordable money will balance income and expenditure.

Planning Minister MA Mannan told The Business Post that various decisions have been taken to disburse funds for development projects under austerity measures. The release of funds has been suspended for low-priority projects, he said. 

Minister said, “Besides, the ministries, divisions and agencies have been instructed to spend money realising the importance of other projects. Because the government's expenditure to handle the spread of coronavirus has increased abnormally. Now more attention is being paid to the pandemic.” 

He also said, “As a result, by reducing unreasonable expenses, affordable money will be spent on necessary sectors including medical care.” 

Former caretaker government's finance ministry adviser Dr AB Mirza Azizul Islam told that money was being misused by government officials travelling abroad unnecessarily and buying vehicles for ministries. It is good that those items suspended and I support such a government move, he said. 

Former adviser said, “But ADP, projects are taken more and not allocated again. The less the allocation gets, the more time is wasted. It is also okay to stop funding low-quality projects”. 

In reality, it will not be possible to achieve the revenue collection target, I am saying this from the beginning, he said. 

According to the source, a letter was recently sent from the Ministry of Finance to various ministries, departments and agencies asking them to know about the importance of the project. In the light of that letter, the list has been sent to the Ministry of Finance identifying the more important, less important and medium quality projects.

After receiving the list, it was decided to suspend the 40 per cent of the projects from the government funding for the implementation of less important projects.

Besides, it was decided to stop a 30 per cent discount on more important projects and a 30 per cent discount on medium important projects. This will save about Tk 40 thousand crore as the Ministry of Finance. The government is eyeing to save Tk 40,000 crore from its share of ADP funding which amounts to Tk 1,34,634 crore. However, the total ADP size is Tk 2,05,145 crore.

Former senior finance secretary Mahbub Ahmed thinks the suspension of low-quality projects is a good initiative. He said that the expenditure would be spent on more important sectors by cutting unnecessary expenditure and not saving it. 

The funds will be used for better projects by deferring spending on low-quality projects. The former secretary added that the revenue collection target for the current financial year will not be achieved.

Sources in the finance division said besides the austerity measures, more importance should be given to getting foreign aid. The World Bank and the IMF have announced various packages to soften the Covid-19 blow. 

We have to be more diligent in getting money from there. In addition, there is a lot of money in the pipeline.

This way the government want Tk 60,000 crore. If we can save another Tk 20,000 crore from other sectors, it will be possible to fill the revenue deficit. But the question is - there will be no permanent solution through cost reduction. This is temporary. The National Board of Revenue (NBR) needs to be reformed to find a lasting solution. Otherwise, the expenditure in education, health and other sectors will increase every year. It will not be possible to deal with that.

It is learned that the government has allocated Tk 8,930 crore in the transport and equipment sector this year. To practise austerity, the government has banned all government, semi-government, autonomous and other institutions from buying new cars till December 31. 

It was directed to stop the purchase of vehicles under the management and development expenses of these institutions. The government will also save from this sector.

As part of austerity measures, government, semi-government and autonomous organisations have been instructed to avoid routine travel in the current financial year. Explaining this, the Ministry of Finance official said that necessary funds are being allocated to more priority sectors to deal with the outbreak of the global pandemic of coronavirus.

ask/wi