Govt budget management ordinance awaits advisory council approval

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Shakhawat Hossain
The finance ministry Sunday sought advisory council's approval for the proposed budget management ordinance, aimed at keeping government's bank borrowings within 3.0 per cent of gross domestic product (GDP), officials said.
The 'government properties and budget management ordinance 2008' is the first of its kind and is zoomed in on maintaining the country's fiscal discipline in the wake of massive rise in public borrowings.
The finance ministry prepared the new laws at the behest of the major donors and multilateral agencies who have raised alarm bells over the government's borrowing habit in the past three years.
In 2007-08 fiscal, public borrowings from the country's banking system rose 43 per cent to Tk 103.98 billion as the government needed funds to finance its growing budget deficit.
Officials said the ordinance has been designed to enhance regulation by the finance ministry on budget making and its implementation.
"It's a very good move towards ensuring fiscal discipline in the country. It will also rein in future government profligacy," an official said, speaking on condition of anonymity.
"The laws will keep annual government bank borrowings at not so harmful three per cent of the GDP no matter who is in power," he said.
The draft laws have drawn praises from the International Monetary Fund (IMF), which said the regulations are crucial to keep the country's macro-economic indicators stable.
The official said the new regulation has, however, not put any bars on government seeking loans from bilateral donors and multilateral agencies.
The new regulations will make it mandatory for the government to set aside 6.5 per cent of the GDP in the annual budget to fight poverty.
In addition, the ordinance will restrict government capacity to keep contingent liabilities within 1.0 per cent of the GDP.
Contingent liabilities relate to future financial burden that include guarantees and the outcome of legal disputes, explained another finance ministry official.
The IMF has already suggested the finance ministry that it refrains from giving state guarantee to Bangladesh Biman's procurement of aircraft worth around US$2.0 billion from Boeing.
Such guarantee, according to the IMF, will raise the government contingent liabilities substantially, jeopardising its fight against poverty or scaling up spending in its rickety infrastructure.
Officials said the ordinance also seeks to set a new fiscal guideline for the loss-making state-owned enterprises (SoEs).
The new guideline will force ministries, which control the management of the SOEs, to make the loss-making enterprises balance sheet clean and operation costs minimal.
The government has 44 SoEs under its management. In the 2007-8 fiscal year, these enterprises' combined losses stood Tk 52.76 in 2007-08, which is almost double the amount than the previous fiscal.