Govt may trim budget by Tk 100,000cr

The interim government is planning to revise the national budget for the current fiscal year urgently and cut “wasteful expenditures” in order to alleviate the pressure on the foreign currency reserves and tame persistent inflation.
A finance ministry official said last week that formal discussions in this regard may start in September, adding that there is scope to cut the budget by more than Tk 100,000 crore.
The official said that most cutbacks would relate to the annual development programme (ADP) since there is little scope to trim the revenue budget.
The official added that most ministries and divisions usually do not spend large portions of their budgetary allocations each year.
The Awami League government, which was ousted on August 5 by a mass uprising, formulated a Tk 797,000 crore budget for the current fiscal year, with an ADP size of Tk 265,000 crore.
According to finance division statistics, the national budget for FY23 was Tk 678,064 crore, of which Tk 563,921 crore was spent.
Since taking charge, the interim government has been planning to take numerous measures to curb wasteful and unnecessary government expenses.
The finance ministry official said the finance adviser and planning adviser both verbally asked them to be cautious about unnecessary spending.
Usually, the government revises the national budget in the second half of the fiscal year, specifically in March. However, as the interim government is planning to revise it earlier, the finance ministry and planning ministry have already started internal exercises to identify sectors where the budget may be trimmed.
Hinting at a possible ADP revision, Planning Adviser Wahiduddin Mahmud said the interim government would extensively scrutinise both ongoing and new projects under the ADP to cut back on “wasteful” initiatives.
The Planning Commission, Finance Division and Economic Relations Division will jointly scrutinise the budget and place a report during a meeting of the Executive Committee of the National Economic Council (Ecnec), Wahiduddin said on August 19.
“They have to do it in the shortest possible time,” he told reporters.
There are 1,326 projects under the ADP for the ongoing fiscal year, many of which were included in 2023 but have not seen any expenditure yet.
For example, a total of 102 projects under the Ministry of Local Government, Rural Development and Co-operatives received allocations amounting to Tk 17,500 crore in the ongoing fiscal year. Of those, 30 projects are new and have not seen any expenditure till now.
Moreover, separate block allocations have been kept in the ADP for many new projects that are awaiting Ecnec approval.
Several planning ministry officials told this newspaper last week that there were no new activities from their end regarding projects approved under the previous government.
Although they have received verbal guidelines, no written directive has yet been issued in this regard, they said while adding that they are waiting for the next Ecnec meeting.
On August 19, Wahiduddin said government expenditures must be decreased in order to reduce inflation and bring stability to the economy.
He also mentioned the scope to reduce the development budget at the time.
“At this moment, indiscipline in government projects is rife. There are some projects which haven’t started, some are in the middle stages and some are about to be completed,” he said.
He further said many projects were undertaken in different constituencies based on political considerations.
Of the new projects awaiting Ecnec approval, the less important ones will be scrapped. Even ongoing projects that are not crucial will be ended regardless of whether money has been spent on those, he added.
Professor Selim Raihan, executive director of the South Asian Network on Economic Modeling, said the budget should be revised considering the existing economic challenges.
“However, to what extent it may be trimmed cannot be said on an ad-hoc basis. What is required for this is a proper exercise to finalise the figure,” he added.
Raihan also said the current budget had been formulated based on “wrong assumptions”.
“Now, the interim government needs proper projections on GDP growth, inflation, export earnings and remittances to redesign the budget,” he added.