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INSIGHT

Subsidies and Grants in the Budget

Since the beginning of1990s, there has been a pressure from the donor agencies to rationalise the tariff -tax structure, liberalise trade, deregulate internal controls and step up the domestic resource mobilisation all directed towards opening up the economy to freer competition at home and abroad.

by Kabir U Ahmad
IT is a pleasure to see that the annual budget has attracted so much attention of almost all sections of people of the country — academics, professionals, business leaders, industrialists, traders, farmers organisations and even trade unionists. It is a healthy sign in a democratic society since It shows that unlike in a dictatorship, a government cannot arbitrarily push through a budget which touches everyone's life in one way or another without its accountability to the people. It also shows that people are asserting their rights to know what they pay and what they get in exchange. The more the people participate in the pre- and postbudget deliberations the more the government has to be answerable to them and modifications of the budget have to take place to accommodate their wishes. This is the vitality of the democratic system.
However, in spite of all the comments and observations of various commentators and observers, there are still a number of aspects of the budget like the quantitative effects of all taxes and expenditures on the growth of various sectors of the economy and the welfare of the population. net effects on poverty alleviation, human resource development and environmental protection and the control of terrorism etc., that should be brought to the public attention so as to make both the public and the policy makers aware of
their implications. Unless corrective measures on all these issues are taken effectively, efficiency in the country's scarce resources will not be achieved and the rate of economic growth cannot be optimal.
Since the beginning of 1990s, there has been a pressure from the donor agencies to ra tlonallse the tariff-tax structure. liberalise trade, deregulate Internal controls and step up the domestic resource mobilisation all directed towards open Ing up the economy to freer competition at home and abroad. Considerable- success has been achieved and the economy has been going through a phase of transition. Although the present government had previously accepted this process of transition to a liberalised economy, in 1997-98 budget it has reintroduced some protective measures which have been pointed out in the last week's column of this writer.
However, neither the last nor the present government has been able to cure the inherited sicknesses of the economy by drastically cutting the wasterful expenditures like subsidising the losses of the state-owned enterprises (SOEs), cutting out the redundant staff from the government pay roll.
recapitalising the sick banking sector, and eliminating the wasteful subsidies and grants from the budget. This writer has written a number of articles on the first three items, the last item is taken up here.
Amount of Subsidies
and Grants
The rate of growth of subsidies and grants in the budget is phenomenal. Look at the table of date over the last three years only.
Some observations are in order. In the first place, subsidies are not only in agriculture these days they are also very much prevalent in other sectors which account for about 4.6 per cent of the total revenue expenditure of 1997-98. If one adds the grantslnaU. which is a close cousin of subsidies, it comes to about 6 2 percent of 1997-98 revenue budget. In the second place, the amount of disaster relief is kept outside of these /official amounts of subsidy a/W grants-in-aid. In the third place, the disaster relief is not included In the outright subsidies or grants-in-ald according to the budget. Conceptually, it looks like it is treated as an insurance cost to the society borne by the government This is acceptable. Fourth, what is surprising is to see that a huge amounts of grants disbursed by the Ministry of Education are not Included in these figures. The annua] grant-in-aid to nongovernment Madrashas comes to a substantia) amount and one doesn't see why this should be kept out of the grant-in-aids estimate. The irony is that the total amount of budget for the entire university sector is only Tk 183.7 crores while grants-In-ald to non-government Madrashas is Tk 227 crores in the 1997-98 budget. Further, the
rate of growth of allocation in this sector is phenomenal. In 1994-95 budget its allocation was Tk 163 crores which has escalated to Tk 227 crores in 1997-98 budget registering an average annual rate of growth of 9.8 per cent. Does any sector of the economy grow at such a fast rate? One is interested to know who are the recipients of such a vast amount of grants year after year from the government budget. Why is such a princely treatment of this sector by the national government? What is more fundamental is the question whether this is the right way of using the country's scarce resources for developing the country's human resources for the future of growth of the economy?
Some Concluding Remarks
The subsidies and grants-in-aid are given not only to the important sector like agriculture, but also to many other sectors of the economy Apart from what have been reported above there are also departments like cooperatives, social welfare, health and population, education etc., where government expenditures do not seem to be serving the purpose that they are intended to. There is a need for a careful scrutiny of the value that the tax payers are getting for their hard earned money from the services of all these and other ministries and departments of the government.