The government has shelved all vehicle purchases and cut back on hospitality and travel costs, in a fresh round of belt-tightening announced on Sunday to save around Tk32,000 crore in FY2022-23.
The measure has also slashed budget for stationery and furniture, and cancelled the honorarium for evaluation committee members for development works as a fresh round of austerity measures, Finance Division officials said.
According to two separate circulars of the Finance Division, the spending trimming will not only be applicable for public offices but also for semi-governmental offices, autonomous bodies, state-owned enterprises, statutory entities, state-owned companies and financial institutions.
The money flow to development works has also been readjusted, according to the circulars, as projects in this year's Annual Development Programme (ADP) have been categorised.
Projects with the "A" label will see the allocation unchanged, while "B" category works will have a 25% cut in government funding. There will be no allocation for the "C" category schemes.
"The measures will ensure the best value for money," said the Finance Division referring the belt-tightening order to the Prime Minister's Office.
During the pandemic, the government adopted the first round of belt-tightening that saved Tk45,000 crore in the FY2020-21. As the pandemic waned, causing the economy to reboot in the FY22, the authorities loosened the grip on the wallet – lifting ban on official tours abroad and releasing 50% fund for car purchase.
A series of adverse international developments in early-2022 coupled with mounting import bills, widening trade deficit and current account balance, and increasing subsidies for fuel and fertilisers jeopardised the Covid recovery.
Finance Division officials said the second round of belt-tightening is going to be tougher than the Covid times as concerns grow over a long-term recession in the USA and Europe.
Economists have appreciated the measures, and renewed their calls against project anomalies.
Former finance secretary Mahbub Ahmed told The Business Standard that the measures have been very realistic to achieve the challenges and targets identified by the government in the FY2022-23 budget.
"The main target of the budget is to tame inflation and reduce domestic demand. The monetary policy announced by the Bangladesh Bank has also been tightened for the same purpose. Considering these aspects, the austerity measures of the finance ministry are very positive," he added.
Mentioning there are no alternatives but to trim the public spending now, Centre for Policy Dialogue (CPD) Distinguished Fellow Prof Mustafizur Rahman called for ensuring good governance and adopting zero tolerance against corruption.
He also advocated for utilising skills for development projects efficiently, uninterrupted money flow to priority projects, continuous efforts for low-cost foreign loans and banning import of unnecessary items.
In the budget for the current fiscal year, Tk8,060 crore has been allocated for the purchase of vehicles, vessels and aircraft, which will be fully saved, said Finance Division officials.
Besides, Tk4,900 crore has been allocated for professional services, honorarium and special expenses. Development work evaluation committee members used to get the honorarium from the fund.
There is an allocation of Tk10,026 crore in the current fiscal year for administrative expenditure including hospitality and entertainment costs. Ministries will be allowed to spend 50% of the total allocation.
The allocated for travel and transfer in the current fiscal year is Tk2,167 crore. The government will save 50% of it. Similarly, 50% of Tk2,403 crore allocation for printing and stationery items will be saved.
The allocation for computer and accessories purchases is Tk2,238 crore, while for electrical equipment and furniture purchases is Tk15,857 crore. The government will save half of the money from these two sectors.
The total allocation for training programmes within the country is Tk4,904 crore. The ministries will be allowed to spend half of it.
Ensuring best value for money
Mega-projects, foreign funded projects, projects that will complete this year, and projects related to agriculture, food security, power and energy have been categorised in the "A" level.
In other words, 100% of the budget allocated for these projects can be spent. The number of such projects is more than 700, according to Finance Division officials.
"The government is pushing for the implementation of projects that will be completed in the current fiscal year, including the mega-projects, to ensure best value for money in tackling the global economic crisis. The economic returns from these projects will be useful in dealing with the crisis," a Finance Division official told The Business Standard.
According to the Finance Division officials, out of 1,487 projects that got budget allocation in the current fiscal year, 280 projects will be completed this year. Besides, 295 projects have foreign funding.
There are 150 projects related to agriculture and 66 projects related to power and energy. These works have been placed in the "A" category.
Officials said more than 500 projects have been placed in the "B" category. These projects will be allowed to spend 75% of the allocated government funds.
"Projects that will continue for the next two to three years and a bit slowed down implementation will not have any adverse effect on the economy, have been placed in the 'B' category by the PMO," a Finance Division official said.
In the "C" category, there are around 150 projects. There are 11 projects under the Prime Minister's Office that got allocation in the current budget. Of these, 6 are in the "A" category and 5 are in the "B" category.