Political considerations to dominate next budget
Economists warn of further imbalance in macro-economyShakhawat Hossain
Political considerations ahead of the national elections are likely to prevail over economic necessities in the next fiscal budget which will be announced on June 7 in Parliament, said a finance ministry official.
The Ministry of Finance, despite repeated urging, has not received any green signal from the Prime Minister’s Office to reduce the overall size of subsidies in the new fiscal year.
It wanted belt-tightening measures on subsidy to agriculture, electricity, petroleum and loss-making state-owned enterprises for improvement of the macro-economy which has been under pressure in the outgoing fiscal year.
But its appeals were turned down, said the officials.
The Prime Minister’s Office wanted that the budgetary measures on subsidy should remain intact to get the approval of the ‘vote bank’ of the Awami League.
The present government will get half a fiscal year in June 2013 to complete its current five-year tenure.
Economists said the dangers of undermining the economic necessities are higher deficit, higher borrowing and higher inflation, and destabilizing effects on the overall economy.
The Bangladesh Institute of Development Studies’ executive director, MK Mujeri, told New Age that political considerations were not always good for the overall economy.
It may create further imbalance in the macro-economy which had been under severe pressure throughout the outgoing fiscal year, he warned.
The overall subsidy bill stood at more than Tk 410 billion, two and half times higher than the originally projected Tk 170 billion, in the outgoing fiscal year.
Due to shortage of funds the finance ministry was forced to transfer around Tk 100 billion subsidy bill to the next fiscal year after they could give only Tk 300 billion as subsidy in the outgoing fiscal year.
The finance ministry officials feared that the next fiscal year would be almost the same as demand for subsidy has crossed Tk 450 billion.
They apprehend that a big portion of the subsidy bill will be passed on to the following fiscal year due to resource crunch.
Former finance adviser M Azizul Islam said that preparing a budget on political considerations sounds alarming.
The government may face problems in maintaining deficit financing, one of the most critical areas of the budget, he said.
Finance minister AMA Muhith has already hinted that they have to compromise with many controversial measures in the next fiscal budget due to political reasons.
One such measure is retention of the ‘whitening black money’ facility which was introduced in 2009-10 and again in 2011-12 after discontinuing it in 2010-11.
‘Democratic government has to know the art of compromise,’ said the finance minister.
Muhith is also facing the big challenge of containing pressure from the International Monetary Fund which opposes subsidy on petroleum fuel oils and budget deficit at 5 per cent of the Gross Domestic Product.
The government is committed to fulfill dozens of conditions in the next one year to get a loan of $1 billion. Already one installment of $150 million was released by the IMF which helped the government to meet the balance of payments need. The next installment is due next December.
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