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SPOTLIGHT ON BUDGET

Proposals Fall Short of Explicit Pledges

In the overall expenditure allocation pattern for the revenue budget in 1991-92, there has not been much of any departure from the earlier budgets. This is particularly true about the economic classification of the government's current expenditure.

bv Moazzem Hossain
THE government has proposed a 10.57 per epnt rise In Its revenue or current expenditures under the National Budget for 1991-92. With an anticipated Inflationary rate at eight per cent for the forthcoming fiscal year, the growth in current expenditures will exceed the needs to absorb the price-rise effects on the revenue budget.
The higher allocation proposals under the revenue bud-, get are somewhat inconsistent with what the Finance and Planning Minister Saifur Rahman has laid much emphasis In his 50 page budget speech (English version, in two parts) on June 12. And quite justifiably, he has driven home the need to contain the growth of revenue expenditures of the government to conserve more resources for investment support activities. Revenue or current expenditures are mostly unproductive in nature though, not necessarily, all avoidable. Nonetheless, restraints on growth of current expenditures are a circumstantial need in our pontext to maximise the use of available resources In the government sector for development-oriented and poverty alleviation purposes.
It was the phenomenal expansion of unproductive expenditures in the eighties under the fallen Ershad regime that worsened the fiscal deficit of the government, leading to investment cutbacks and greater dependence on external assistance with multiplicity of aid strings.
The Finance Minister has identified "the large size of the government" as "one important reason for growth of revenue expenditure — unproductive and consumption expenditure in particular". "It Is difficult to contain revenue expenditure without reducing the size of the government for which necessary steps will be taken", so how he highlighted the imperatives for curtailing the
bulging current expenditures. Governmental action, long regarded as an ally of development and even its principal Impetus, has now come to be seen by a growing number of people including those in the developing countries as an Impediment to growth. And. there are obvious reasons for this. The ruling Bangladesh Nationalist Party (BNP) government, as the Finance Minister has again reminded us all through his budget speech, is also firmly committed to an open market-oriented economy where the public intervention policy will be limited to poverty alleviation efforts and development infrastructure building activities, besides the normal law and order, and other Interrelated functions.
But, the budget for 1991-92. proposed by the government on Its 84th day in office after being "chosen through a neutral election", falls short of its explicit pledges. This is particularly true about the expenditure proposals under the revenue budget.
In his post-budget press conference on June 13, the Finance Minister told the newsmen an unusual thing which was all the more unexpected from him because of his professional excellence as a Chartered Accountant and management consultant. The Taka 600 crore block allocation kept under head 179— unexpected expenditure — tn the revenue budget will be utilised for expenditures under Annual Development Programme (ADP) for 1991-92, If sufficient number of projects can be prepared, finalised and approved by the Planning Commission or the line ministries. If this Is to be done so, one fails to understand why
the same amount of money could not be shown separately in the approved ADP for 1991 92 aa block allocation. Such a provision would have been only reasonable on grounds of budgetary transparency, clarity and discipline when the government says emphatically that ft is committed to enforce budgetary discipline and follow transparency, as opposed to ambiguity, in all its financial operations Without such a course of action, it is not possible to address the problem of fiscal profligacy that ruled the roost under the authoritarian Ershad regime.
Until the time, the unexpected expenditure, shown in the revenue budget, is diverted
to and reallocated for ADP through the revision of the latter's size on approval by National Economic Council or any other authorised body, one will have to take the proposed revenue expenditure of Taka 8083.25 crore, as it is, for any assessment of the overall budget itself. The current or revenue expenditure of the government for 1991-92 will then be Taka 773 crore higher than the revenue expenditure of Taka 7310.24 crore under the revised budget for 1990-91. Actual amount of such expenditures was Taka 6697 crore in 1989-90, according to the Memorandum, prepared by the government, for the Bangladesh Aid Group (1991-92). Viewed in this context, the objective of restraining the growth of current expenditure is belled by the proposed budget for 1991-92.
About 52 per cent of total current expenditures for the forthcoming fiscal year will be meant for pay and allowances,
operation and maintenance, works {original) and other contingencies, belonging to the category of expenditure on goods and services. Interest payments on both domestic and foreign debts will involve Taka 1140.21 crore, about eight per cent of the total revenue expenditures. The expenditure bill on subsidies and other current transfers in the forms of subsidies on food grains, other subsidies. Vulnerable Group Development and Test Relief, operational deficits of Bangladesh Railway and Post Office, transfers to Local Government, grants-in-ald and other transfer payments, apd pension and retirement benefits will be Taka
2206.69 crore in 1991-92 compared with Taka 2391.79 crore under the revised budget for 1990-91. Excluding the deficit of departmental enterprises which are shown under receipts (in minus figures or negative amounts) In the revenue budget, overall subsidies and other current transfers will involve 27 per cent of total revenue expenditures in 1991-92. The unexpected expenditures of Taka 600 crore will account for 7.4 per cent of the aggregate current expenditures in the next fiscal year.
In the overall expenditure allocation patter for the revenue budget in 1991-92, there has not been much of any departure from the earlier budgets. This is particularly true about the economic classification of the government's current expenditure. Admittedly there are some inflexible elements in such expenditures, allowing limited scope for any drastic curtailment in one single year. The annual budget
which to the authoritative legal document for allocating re sources to a one-year slice of a medium term expenditure plan. Its time horizon to short and it provides little scope for proposing and evaluating options. and is typically prepared under significant time pres
Yet then, it must be substantially linked with a medium term programme which promotes careful consideration of spending alternatives and provides some indication of the sustainability of the proposed revenue and expenditure plans. The proposed budget for 1991-92 does not give much indications as to how the government would link it through a firm plan of action to its medium term op-
erational strategy. The link between medium-term pro-Eramme and the proposed udget for 1091-92 remains, thus, in practice tenuous. This is well borne out by the provision made under the budget for meeting the deficit of Bangladesh Railway. The proposed budget allocated Taka 125.80 crore for 1991-92. The amount is only Taka 24 crore lower than the amount of Taka 149.13 crore earmarked for the operational deficit of the Railway under the revised budget for 1990-91. This is contrary to what the Finance Minister has mentioned about the urgency of actions to make the loss-making state enterprises operationally viable. Reduction of loss by only Taka 24 crore for one of the largest public sector bodies In 1991-92 does not certainly reflect this urgency.
The broad details of revenue expenditure, proposed for 1091-92, showed that edu-
cation would receive the highest allocation at Taka 1256.57 crore, followed by defence at Taka 1209.83 crore The Health and Family Planning sector has been proposed an allocation of Taka 401.75 crore under the current expenditure. Similar allocations have been matte for all other sectors in keeping with the normal budgetary practices.
One would likely to note here that the allocations under the revenue budget cover traditional budget categories such as salaries, subventions, and operational maintenance charges for the available facilities. Such expenditures are not investments or development expenditures. Traditional line-item budgets useful in tracking spending in a narrow accounting frame, cannot however provide an adequate picture of the extent to which public object Ives are met. Meeting the salaries, subventions and other for the education^Xctor do not necessarily raise the efficiency or quality of education itself. This calls for reclassifying the budget to reflect objectives and programmes and also for monitoring the performance by relating inputs to outputs.
The categorisation of spending by programme, the formance and the view of the budget as a planning and policy instrument remain central to better government budgeting for greater transparency and much needed public accountability. The budget for 1991-92, framed by a democratic government after long many years of authoritarian rule, has in this context fallen much short of the expects | Hons. This Is particularly the case with its current expenditure proposals.
The writer Is the Economic Editor of the Star.