It\\\'s all about resources

The poor rate of implementation of the country's annual development programme (ADP) in the first or the second quarter of any financial year has become more of a tradition. However, the rate has dipped further in recent years. The rate of implementation of the ADP in the first quarter of the current fiscal (2014-15), according to a report published in this paper Saturday last, was worse than that of any of the last four financial years; only 9.0 per cent of the ADP allocation could be spent during the period. The dismal rate of utilisation of the ADP allocation in the quarter under review is attributed to a very low level of spending on a cost-intensive dream project, the elevated expressway.

The reasons for low utilisation of the ADP fund during the initial months of a financial year and a sudden spurt in spending in the final months are more or less known to all concerned, including the policymakers. Volumes have been said and written on the issue but the barriers to smooth implementation of development projects, particularly those having foreign finances, remain in place. In the backdrop of such an unsavoury situation, the news that the government borrowing through high interest-bearing savings tools during the first four months of the current fiscal has surpassed the annual sales target for the same is quite a disconcerting one.

The government experienced a shortfall in tax revenue income during the first quarter. But due to a lower development spending it was not supposed to face any major problem as far as the availability of resources was concerned. But the unprecedented rush of investors for its savings tools would only add to the interest-debt burden of the government. The higher borrowing through savings tools would help the authorities to borrow less from the banking system, leaving more resources for the private sector. But, there is no dearth of funds with the banks these days for lending to the private sector.  

The government's borrowing through high interesting-bearing savings tools would have carried some meaning if the resources mobilised could be spent on development projects that would add real value to the economy. But a large part of the funds would, in all probability, be channelled to meeting administrative expenses or servicing debts. It seems that the current borrowing strategy is responsible for creating a few anomalies in fiscal management on the part of the government of the day.

There is no denying that subsidies and interest payments on an ever-bulging domestic debt have been eating up a substantial part of the government revenue, leaving an inadequate surplus for development financing. Questions are aplenty about the quality of government spending on administration and subsidies. The size, according to a recent series of FE reports, of the administration has expanded over the years but its services to the taxpayers have remained well below the expectation. Similarly, there are questions about the destination and quality of spending on subsidies. So, under the prevailing circumstances, the Ministry of Finance does need to examine afresh its resource mobilisation strategy and issues concerning expenditures, administrative or otherwise.