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Subsidy spending doubles

Govt to carry over Tk 10,000cr to next budget

Rejaul Karim Byron
Subsidy spending by the government will nearly double in the revised budget for the current fiscal year.
The subsidy in different areas including fuel, electricity and agriculture will rise to Tk 38,500 crore or 4.3 percent of gross domestic product from the original allocation of Tk 20,477 crore or 2.3 percent of GDP, according to statistics from the finance ministry.
The government took the decision in the face of increasing demand for additional subsidy by different ministries.
Of the total subsidy meant for fiscal 2011-12, the government will carry over around Tk 10,000 crore or 1.1 percent of GDP to the next fiscal year's budget to keep the deficit within the target.
It means Tk 10,000 crore will be spent this year, but the amount will be counted in the next budget.
However, even after carrying over the amount, the allocation for subsidy will cross the original target in the current budget.
The government will meet a portion of the additional requirements for subsidy in the current budget by setting priorities and maintaining coordination among different ministries.
Early this month, Finance Minister AMA Muhith held a meeting with Prime Minister Sheikh Hasina on the revised budget.
The government has hiked fuel and electricity prices several times since the budget was announced in June last year. Still, the government will have to pay bigger subsidy bills for fuel and electricity.
However, the fertiliser price did not
see any hike.
The allocation of subsidy for the farm sector was Tk 4,500 crore in the current budget, but the agriculture ministry is now asking for more than Tk 10,000 crore.
The finance ministry official said the prime minister did not back the idea of increasing prices through a cut in subsidy. As a result, an amount of the subsidy money will be carried over to the next budget, he said.
In a report prepared for placing in parliament, the finance minister also indicated that some additional demands will be pushed towards the next budget.
According to preliminary estimates, even after making a big slash in the annual development programme (ADP) and the revenue expenditure, the budget deficit may stand at 5.1 percent of GDP orTk46,328 crore.
In the original budget the deficit was estimated at 5 percent of GDP orTk45,205 crore.
The finance ministry official said expenditure cut in revenue budget is going on in different ways even after a plan to trim the current ADP by Tk5,500crore.
When the ministries were sending proposals for car purchase and manpower recruitment, most of the applications were turned down except some important cases.
The block allocation in the revenue sector is not being spent elsewhere as there has not been any natural disaster this year.
The development expenditure under the revenue budget is also going through major slash.
The report prepared by the finance ministry on the budget implementation in six months is likely to be placed in parliament in a couple of days.
In the report, Muhith said: "Inflation, instability in balance of payments and credit crunch on the overall economy have been created by additional subsidy demand and expansionary revenue expenditure.”
“We have been trying to control expenditure to stave off the pressure.”
Muhith said, even after cutting the expenditure, the budget deficit will not come down in the revised budget due to a decrease in non-tax revenue.
The finance ministry official said the total revenue decreased by Tk3,500 crore in the revised budget and may stand atTk 114,885 crore.
However, tax from the National Board of Revenue may be increased by Tk 500 crore in the revised budget over the original target.
The official said the total size of the revised budget may be Tk 160,000 crore which was Tk 163,590 crore in the original budget.