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Austerity measures cosmetic, won’t work

Economists observe

Rejaul Karim Byron
The finance ministry's austerity measures, if carried out successfully, will save the governmentTk37 crore from its current revenue expenditure, which constitutes only .09 percent of the total revenue budget.
Economists are also of the opinion that it is very much possible to shed expenditure by at least Tk 1,000 crore from the current revenue budget. But the government will not
be able to attain much in bringing down the expenditure, as the measures it has taken so far are 'merely cosmetic’, tlieyobserved.
In a bid to maintain the country's macroeconomic stability especially by containing the alarming rise in inflation in the wake of oil price hike in the global market, the finance . division took some austerity measures early tills month.
The measures include 10 percent cut in the budgetary allocation for
petrol and lubricant as well as "other expenditures'. Besides, per head entertainment allowance for the government employees has also been halved.
The current revenue expenditure stands at Tk 39,110 crore. An analysis of the budgetary documents shows that Tk 208 crore has been earmarked for petrol and lubricant usage by all ministries and departments and 10 percent cut from this
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allocation will save the government onlyTk20 crore.
The government .can hope to save at best Tk 14 crore if its plans to cut by 10 percent the allocation for "other expenditures" under the category of services and supplies. Thc total allocation in this regard stands atTk 140.8 crore.
There is an allocation of Tk 3.97 crore as entertainment allowance for a number of ministries. If per head entertainment allowance is halved, as per the government's plans, it will save around Tk 2 crore. Most of thc ministries however cover their entertainment expenditure from the allocation for 'other expenditures', a finance division source said. He however could not specify the amount, but said it wouldnotbebig.
The finance division in a circular detailing the austerity measures said the ministries will need to have the permission of the finance division to Eurchase new cars under the revenue udgeL It however did not put any ban on the purchase of new cars.
The current revenue budget has Tk 111.11 crore earmarked for the purchase of new vehicles, of which Tk 73 crore has been allocated for the home ministry alone. So the chances are slim that the government will save a lot of money from here, especially when it seems to be very generous in providing the home ministry with logistics.
Last year the government increased the original budgetary allocation for purchasing cars for the home ministry in the revised budget. In the original budget, Rapid Action Battalion (Rab) had been allotted Tk 36 crore, but the amount was raised to Tk 53 crore in the revised budget
Last year's devastating floods prompted the government to direct a 10 percent cut in allocation for services and supplies category. But in the face of opposition from different ministries, thc finance division had to backtrack on the directive.
Executive Director of Centre for Policy Dialogue (CPD) Debapriya Bhattacharya described the government's austerity measures as taken
with good intentions but inadequate. He said there is a scope for cutting at least Tk 1,000 crore from lite budgetary allocation for expenditure under different items through efficient revenue management.
For instance, he said, Tk 1,782 crore has been kept in reserve to cover unforeseeable expenditure. There Ls little chance of flood this year and dnn that no other calamities visit the country, the entire amount shouldbcsaved,hcpointedouL
The services and supplies has go t an allocation ofTk 5,764 crqre while another 1,810 crore has been earmarked for Acquisition of Assets and Works. Die government has opportunity to save substantial amount by reducing the money to be spent for buying land and constructing buildings, hesaid.
Besides, there is an allocation of Tk 3,100 crore for annual development programme (ADP) from where too the government can save money, Bhattacharyasaid.
Research Director of Bangladesh Institute of Development Studies (BIDS) Zaid Bakht said the scope to cut cost is larger in development budget than in the revenue. But not some cosmetic measures, rather bold steps arc needed to be taken to make a real difference in maintaining the macroeconomic stability, he observed.
Bakht explained that there is no alternative to reducing the government expenditure to ease the pressure on macroeconomic situation in the context of global rise in oil prices and the spiralling rate of inflation. A huge amount of money is wasted hi projects under the ADP in the name of Prime Minister’s commitment" or " Jono gunittapurna prokolpo" (projects bi public interest], hesaid.
Instead of trying a contractionary monetary policy the government should rather go for a contractionary fiscal policy/ Bakht said.
If the government expenditure Ls reduced it will not affect the GDP growth, but the contractionary monetary policy, if pursued, may adversely affect the private sector and ultimately have a negative impact on trie country's GDP growth, he explained.