Finance division asks ministries to make disciplined use of allocations
Monday, 15 September 2008
Shakhawat Hossain
The finance division has recently requested other ministries to utilise their allocations in a disciplined manner to avoid borrowing by the government from the country's banking system beyond the budgetary projections.
In a letter signed by the finance secretary Mohammad Tareque, the finance division said the rising trend of unplanned credit growth has made it difficult for the finance ministry to maintain fiscal discipline.
In the last fiscal (2007-08), the government had borrowed Tk 30 billion in excess of the budgetary projection of bank borrowing worth Tk.72.53 billion. A reluctant finance division had to go for such borrowing when pressed hard by other ministries in the second half of the financial year, sources said.
The more than projected borrowing from banks in the last fiscal appeared rather strange, particularly when the government mobilised 25 per cent more revenue than the previous fiscal and downsized the annual development programme (ADP) by about Tk 40 billion.
The bank borrowing overshot the target by about Tk 10.00 billion in the fiscal 2006-07. However, until 2005-06 fiscal, such borrowing hardly crossed Tk 5.0 billion, according to the budget documents.
Finance division officials attribute the rising trend in the growth of unplanned bank borrowing to the lack of coordination between finance ministry and other ministries and lack of expertise in the utilisation of the development allocations in the line ministries.
The finance secretary in his letter, however, sought cooperation from the ministries and divisions to help the finance ministry to maintain a prudent fiscal management and avoid unplanned borrowing from the banking system.
It suggested the ministries and divisions to be careful while making projections on eight areas, including ADP, procurement of cars and payment of utility bills.
The size of the ADP is almost equivalent to one fourth of the total budget. The government procures goods and services worth nearly more than US$ 3.0 billion annually in connection with the implementation of the ADP.
Pointing out lapses in ADP implementation, the finance division said the ministries and divisions could not make significant progress in ADP implementation during the first six months of the last fiscal, leading to disbursement of higher amount of funds in the second half. Such spending is not good for prudent fiscal management, said the letter.
Besides, the latter asked the ministries and division to clear their utility bills on quarterly basis.
At present, the ministries and divisions wait until the last quarter of a financial year to clear their utility bills, creating unnecessary financial problems for the state-owned companies concerned.
The caretaker government has projected to borrow some Tk 135 billion from the banking system and Tk 35 billion from non-bank sources in the current fiscal to meet the deficit of 4.9 per cent.
If the rising trend of unplanned borowing could not be stopped, the budget deficit might soar to 5.0 per cent in the current fiscal for the first time, said the finance ministry officials.
The finance division has recently requested other ministries to utilise their allocations in a disciplined manner to avoid borrowing by the government from the country's banking system beyond the budgetary projections.
In a letter signed by the finance secretary Mohammad Tareque, the finance division said the rising trend of unplanned credit growth has made it difficult for the finance ministry to maintain fiscal discipline.
In the last fiscal (2007-08), the government had borrowed Tk 30 billion in excess of the budgetary projection of bank borrowing worth Tk.72.53 billion. A reluctant finance division had to go for such borrowing when pressed hard by other ministries in the second half of the financial year, sources said.
The more than projected borrowing from banks in the last fiscal appeared rather strange, particularly when the government mobilised 25 per cent more revenue than the previous fiscal and downsized the annual development programme (ADP) by about Tk 40 billion.
The bank borrowing overshot the target by about Tk 10.00 billion in the fiscal 2006-07. However, until 2005-06 fiscal, such borrowing hardly crossed Tk 5.0 billion, according to the budget documents.
Finance division officials attribute the rising trend in the growth of unplanned bank borrowing to the lack of coordination between finance ministry and other ministries and lack of expertise in the utilisation of the development allocations in the line ministries.
The finance secretary in his letter, however, sought cooperation from the ministries and divisions to help the finance ministry to maintain a prudent fiscal management and avoid unplanned borrowing from the banking system.
It suggested the ministries and divisions to be careful while making projections on eight areas, including ADP, procurement of cars and payment of utility bills.
The size of the ADP is almost equivalent to one fourth of the total budget. The government procures goods and services worth nearly more than US$ 3.0 billion annually in connection with the implementation of the ADP.
Pointing out lapses in ADP implementation, the finance division said the ministries and divisions could not make significant progress in ADP implementation during the first six months of the last fiscal, leading to disbursement of higher amount of funds in the second half. Such spending is not good for prudent fiscal management, said the letter.
Besides, the latter asked the ministries and division to clear their utility bills on quarterly basis.
At present, the ministries and divisions wait until the last quarter of a financial year to clear their utility bills, creating unnecessary financial problems for the state-owned companies concerned.
The caretaker government has projected to borrow some Tk 135 billion from the banking system and Tk 35 billion from non-bank sources in the current fiscal to meet the deficit of 4.9 per cent.
If the rising trend of unplanned borowing could not be stopped, the budget deficit might soar to 5.0 per cent in the current fiscal for the first time, said the finance ministry officials.