The Financial Express

Budget shows surplus in four months despite lower revenue

| Updated: January 14, 2019 20:14:46

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Picture used for illustrative purpose only Picture used for illustrative purpose only

The current budget recorded a Tk 24.07 billion surplus during the four months to October last, though tax receipts are less-than-expected, the ministry of finance said on Thursday.

Revenue income of the National Board of Revenue (NBR) amounted to Tk 200 billion up to November last, falling short of the target by around 22 per cent, according to the tax authorities.

The government sustained a budget deficit of nearly Tk 800 million during the corresponding period of the last fiscal year.

Meanwhile, many believe that the bigger-than-expected surplus until October has little to affect the longer-term trend in budget financing.

"If you look at the immediate past budget financing you get a picture of big deficit at the end of the fiscal year," said a finance official.

The deficit for the fiscal year 2017-18, which ended in June last, was Tk 873.71 billion.

Officials familiar with the development told the FE that the execution rate of the annual development programme (ADP) was low during the July-October period of the current FY.

The budget allocation for the current FY's ADP is Tk 1.73 trillion and the authorities spent only Tk 162.21 billion during the period, or less than 10 per cent of the total allocation.

However, the officials said the interest payments against domestic borrowing was Tk 130.97 billion during the period against Tk 64.73 billion in the same period the year before.

Another senior official at the finance division told the FE that the domestic interest payment was high as the number of maturing savings instruments, or liquidation was high during the period.

He also said the government did not borrow from the banking system rather it repaid Tk 25.3 billion. A year earlier, the government had borrowed Tk 44.56 billion from the same system.

Of the non-NBR taxes, land revenue fell by Tk 7.33 billion, which many believe that the authorities went for soft approach towards mobilising resources on account of national elections.

Experts and economists familiar with the development said this budget surplus means that the pace of development activities remains slow.

"If we fail to execute the ADP, then the country and the people are deprived of getting the desired outcome," Dr Mirza Azizul Islam, a former finance adviser, told the FE.

He said the budget implementation rate has been declining in recent years, especially since the fiscal year 2013 although the budget size is expanding each year.

Dr Islam said the ADP implementation usually accelerates towards the closing months of a fiscal year, which affects quality work.

He said there is a need for proper planning and improvement of the capacity of the public administration. Policy-makers should look into the issue, he said.

Dr Islam, however, was critical of the fund inflow from the national savings schemes as it is "most expensive."

The Centre for Policy Dialogue (CPD), in a recent study, showed over 60 per cent of ADP were funded by the money from savings tools. It was only 18 per cent in fiscal year 2009.

This has had an impact on the banking system as the government borrowed less from banks, according to Mustafa K Mujeri, a former chief economist of the Bangladesh Bank.

The private sector borrowing was also comparatively lower during the period, he said, adding, "If the government borrows less from the banking system banks' profitability shrinks."

The government planned to borrow Tk 420.28 billion from the banking system in the current fiscal year. But instead of borrowing, the government repaid Tk 2.53 billion to the banking system during the period under review.

Dr Mujeri, now the executive director at the Institute for Inclusive Finance and Development (InM), also said there is nothing to cheer about the surplus.

"This is not an achievement," he said. "We can give credit to the authorities concerned only if they can achieve the revenue target."

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