Low revenue forces Bangladesh to tighten belt

Ministries, divisions asked not to seek extra fund 

Shakhawat Hossain   | Published: 00:38, Jan 22,2020 | Updated: 01:09, Jan 22,2020


The finance ministry has asked all ministries and divisions not to seek additional fund in the current fiscal year in a signal that the government is tightening its belt amid a revenue shortfall, officials said.

The ministry furnished the instruction with regard to the operating and development budgets in a circular issued in December in its process of revising the Tk 5,23,190 crore budget for the 2019-20 fiscal year.

Finance Division additional secretary Habibur Rahman said that they had issued the circular to help others to understand the criteria for the budget revision process.

Seeking no additional fund is one criterion, he said.

Other finance ministry officials, however, said that such provision was not seen in the last fiscal year’s directive for the revision of the budget.

They said that the ministries and divisions were asked to keep the operating and development budgets as projected in the original budget so that the government does not face additional financial burden against the backdrop of the revenue shortfall.

The revenue income, according to officials, was only Tk 83,692 crore in the July-November period of the FY20 against a collection target of Tk 1,10,568 crore for the period.

The National Board of Revenue suffered the  Tk 26,876-crore shortfall mainly due to the poor performance of the board’s VAT and customs wings and the dismal economic performance of the country during the period.

Besides the poor revenue growth, the government’s borrowing from the banks significantly increased reaching Tk 48,015.81 crore during the period from July 1 to December 31, 2019, according to the Bangladesh Bank’s ‘Fortnightly Trends of Major Economic Indicators: Updates on 31 December 2019’.

The bank borrowing for the entire fiscal year has been earmarked at Tk 47,364 crore.

At a meeting of the coordination council on macroeconomic and budget management on November 25, the country’s policymakers viewed the poor revenue collection with anxiety.

Bangladesh Institute of Development Studies director general KAS Murshid said that the revenue shortfall started ‘biting’ now although poor revenue collection was always a worry for the government.

He said that the government should not ignore the crucial issue and should immediately review the policies for augmenting the revenue collection to achieve the status of a higher middle income country for Bangladesh.

Finance minister AHM Mustafa Kamal has already asked the tax people to expedite coordinated efforts to achieve the revenue collection target of Tk 3,25,600 crore, set for the entire fiscal year.

He blamed immediate past National Board of Revenue chairman Md Mosharraf Hossain Bhuiyan for the delay in the installation of electronic fiscal devices causing the poor revenue collection over the period.

The finance ministry officials hinted at taking further austerity measures as there were no signs of improvement in the revenue earnings.

They said that the last time the finance ministry effected austerity measures was in 2005 in order to ease the pressure on the foreign exchange reserve and the balance of payment in the wake of increases in the prices of petroleum products on the international market.

The austerity steps then included a ban on the purchase of new cars under both the development and non-development budgets, restrictions on the overseas tour by the government officials using public money and a 10 per cent cut in fuel supply to the ministries, divisions, departments and other agencies.

The continuous rise in the prices of petroleum products in the 2004–05 fiscal year put the finance ministry into a precarious situation as the annual bill for the fuel oils more than doubled.

The government had to provide a Tk 2,700-crore subsidy to import 3.8 million tonnes of fuel oils in that fiscal year.

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