Finance ministry against creation of revolving fund

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Shakhawat Hossain
The finance ministry said it does not favour creation of a revolving fund for speedy disposal of cash incentives to the country's export sectors as suggested by the Better Business Forum (BBF), officials said Monday.
It is against the creation of such fund saying that it is contrary to the smooth functioning of the annual budget and the fiscal measures.
Better Business Forum, led by the Chief Adviser, was formed earlier to recommend suggestions for welfare of the country's business atmosphere.
The revolving fund would help reduce the lengthy process for the release of the cash incentive, which is being offered under the annual budgetary allocation to encourage the country's export oriented sectors.
But the finance ministry while reviewing the proposal found that it would face difficulties in creating a revolving fund as it needs a number of steps to dispose of the cash incentive, said a senior finance ministry official.
"Operating a revolving fund with compliance of the steps will be very difficult one," he said.
Besides creation of a 'revolving fund' will disturb the fiscal discipline as cash incentive is released from the budgetary allocation, he added.
Currently, it needs at least one and a half years time for the export-oriented sectors to get the cash incentive released from the central bank. The export oriented sectors have long been demanding to reduce the duration at maximum 90 days.
Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) president Fazlul Hoque said creation of a revolving fund was one of the main proposals for reducing time for releasing cash incentive.
"I don't know yet whether the finance ministry has rejected it," he said.
"If the creation of the revolving fund is not technically viable the finance ministry should look for other options," he added.
The BKMEA president said they want reinforcement of a previous system that helped the exporters receive the cash incentive by 90 days until 1996-97.
The government, however, changed the previous system and released the cash incentive through the central bank after a thorough scrutiny to prevent misuse of cash incentive, according to the finance ministry officials.
The amount of cash incentive has been growing with the increased export each year. Without proper scrutiny the release of the cash incentive is contrary to the prudent fiscal practice, ministry officials said.
In the current fiscal, more than Tk 10 billion has been set aside for 13 sectors as cash incentives.
The sectors include garment, frozen food, leather industry, agricultural products, poultry, light engineering and bicycle receive cash incentive ranging from 5.0 per cent to 20 per cent.