Austerity to continue in next budget

The finance ministry has initiated measures to reduce operating expenses in the budget for the fiscal 2023-24, in line with Prime Minister Sheikh Hasina's directive to continue the government's austerity policy and cut unnecessary allocations.

To save dollars, the prime minister has called for continuing restrictions on government officials' foreign trips, and luxury expenses and vehicle purchases of government agencies.

She also suggested that tightening of luxury imports should continue, while the cost of construction of new buildings should be reduced.

Her directives came when Finance Minister AHM Mustafa Kamal presented the estimated budget for FY24 at Ganabhaban on Wednesday night. 

The instructions might result in trimming the size of the overall budget for the next fiscal, initially estimated at Tk7.60 lakh crore, finance officials hinted. 

The directives will be reflected in official circulars to be issued in July, they said.

The prime minister also reiterated the same instructions during the National Economic Council meeting on Thursday, as Planning Minister MA Mannan confirmed to The Business Standard.

She emphasised the need to increase agricultural production, ensure uninterrupted import of daily necessities and expand social safety benefits with a wider coverage. 

She also underscored the importance of keeping inflation at a manageable level by managing demand-side factors through monetary policy. 

As soaring inflation dampened demand in major export markets like the United States and the European Union, there is a fear of decline in future exports, the officials said, adding that the prime minister called for steps to explore new markets and attract more foreign investment.

To cope with shocks from Covid-19 and the Ukraine-Russia war, the government has been implementing austerity measures since the last financial year, which helped save about Tk34,000 crore in development works and administrative expenditures for the current fiscal year.

According to Mahbub Ahmed, a former senior secretary of the Finance Division, inflation control should be the top priority in balancing growth and inflation in the upcoming budget. 

"If government expenditure is controlled, this will help reduce domestic demand and maintain a manageable level of inflation. However, if government expenditure is not regulated, the projected GDP growth of 7.5% may not be feasible," he argued.

Mahbub also noted that the exchange rate of imported goods was previously controlled through monetary policy, but this option will not be available in the next fiscal year due to IMF conditions.

Ahsan H Mansur, the executive director of the Policy Research Institute (PRI), commended the decision to stop or reduce unnecessary expenditure, stating that it would help rectify the economy's imbalance and reduce balance of payment pressure. 

Mansur also commended the government's decision to not allow the annual development programme (ADP) to expand unlike in previous years terming it "a positive development". 

However, he urged the use of foreign aid and warned that economic growth may slow down in the future due to the decrease in the import of industrial capital machinery, raw materials, and intermediate goods, as well as the dollar crisis. 

7.35 lakh more elderly, widows, and disabled to get allowance

In the upcoming budget for the next financial year, the Finance Division has allocated Tk1.19 lakh crore for social safety net programmes, with plans to include 7.35 lakh elderly, widows, and disabled individuals under monthly allowance programs. Besides, the Finance Ministry has decided to increase the elderly allowance by Tk100 and the widow and disability allowance by Tk50.

"The prime minister emphasised the importance of increasing the number of beneficiaries rather than increasing the amount of allowance, stating that receiving an allowance from the government elevates one's status in society," said an official who was present at Wednesday's meeting.

When asked whether the amount of allowance for the elderly, widows, and disabled will be increased after the directive of the prime minister, the official said that there has been no change in this decision yet.

Budget may get trimmed

Meanwhile, the Ministry of Finance held a meeting with all the ministries and divisions to discuss ways to further reduce the operational expenses of government officials in FY24, as part of the ongoing austerity measures. The Finance Division has considered reducing allocations to various ministries as part of this effort.

As per the instructions of the prime minister, further cuts will be made in the operating expenditure portion of the estimated budget for FY24. This may result in a smaller budget than what has been estimated for the upcoming financial year. From Thursday, officials of the Finance Division started working on reducing operating expenses.

Officials of the Finance Division stated that while the government usually spends more during election years, the directive to reduce expenditure in the upcoming budget is to ensure economic stability. 

The FY24 budget in brief

In the Tk7.60 lakh crore estimated budget for the next fiscal year, an allocation of Tk2.63 lakh crore has been earmarked for the development portion – up from Tk2.46 lakh crore this year – and Tk4.96 lakh crore for the operating expenditure portion, which is Tk65,000 crore more than the allocation for operational expenditure in the revised budget of the current financial year.

In the last budget of the current government before the 12th General Election, the expenditure allocated to the operating cost portion has been estimated at 9.9% of the GDP, while the allocation amount is 9.7% of the GDP in the original as well as the revised budget for the current fiscal year.

The finance minister is expected to present the proposed budget for FY24 in the parliament on 1 June 2023.