Economy

Govt to make rare reduction of own fund in ADP

In a move unseen in recent years, the government is going to cut the size of the fund meant for its own use while revising the annual development programme (ADP) for the current fiscal year.

This may lead to a decrease in the government's own fund by 4.43 percent or Tk 7,500 crore.

In the current ADP, Tk 1,69,000 crore has been kept as the government's own fund, which is likely to stand at Tk 1,61,500 crore after the revision.

Normally the government revises the original budget and reduces it by a certain percentage each fiscal year.

While doing so, the government cuts the portion of foreign funds meant for use in the ADP but keeps untouched its own fund, although usually at the end of the fiscal year neither the foreign nor the local fund is fully implemented.

The finance ministry has already sent a revision of the original ADP allocation for the current fiscal year to the planning ministry. The original ADP is likely to be reduced by 6.84 percent, or Tk 18,000 crore, to Tk 2,45,000 crore.

The size of the original ADP for fiscal year 2023-24 is Tk 2,63,000 crore.

A planning ministry official said they have already started to prepare the revised ADP based on the finance ministry allocation.

The revision proposal could be placed for approval before a National Economic Council meeting scheduled to be held in the first week of next month, the official added.

In the latest revision, the portion of foreign funds would be slashed by about 11.17 percent to Tk 83,500 crore.

The size of the foreign fund in the original ADP is Tk 94,000 crore.

Zahid Hussain, a former lead economist at the World Bank's Dhaka office, said the government step to decrease the size of its own fund in the ADP seems to be a move in the right direction.

"However, considering the country's present context, it is crucial to trim domestic financing more while it would be better to keep the foreign fund untouched," he said.

He said keeping the foreign fund untouched will provide two benefits -- it will be easier to continue making public investments without putting pressure on the foreign currency reserves while inflation will not be fuelled.

At the beginning of the current fiscal year the government announced several austerity measures. So, reduction of both local and foreign funds should have been prioritised based on such measures, he said.

He added that slashing domestic funds will bring about more benefit.

However, trimming the size of the local fund seems to be a step in the right direction, he further said.

Since March last year, overall inflation in the country has been at more than 9 percent while the foreign currency reserves have been declining gradually over the past two years, reaching to less than $20 billion.

In this context, the government and the central bank have taken several measures, including controlling public expenditure.

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Govt to make rare reduction of own fund in ADP

In a move unseen in recent years, the government is going to cut the size of the fund meant for its own use while revising the annual development programme (ADP) for the current fiscal year.

This may lead to a decrease in the government's own fund by 4.43 percent or Tk 7,500 crore.

In the current ADP, Tk 1,69,000 crore has been kept as the government's own fund, which is likely to stand at Tk 1,61,500 crore after the revision.

Normally the government revises the original budget and reduces it by a certain percentage each fiscal year.

While doing so, the government cuts the portion of foreign funds meant for use in the ADP but keeps untouched its own fund, although usually at the end of the fiscal year neither the foreign nor the local fund is fully implemented.

The finance ministry has already sent a revision of the original ADP allocation for the current fiscal year to the planning ministry. The original ADP is likely to be reduced by 6.84 percent, or Tk 18,000 crore, to Tk 2,45,000 crore.

The size of the original ADP for fiscal year 2023-24 is Tk 2,63,000 crore.

A planning ministry official said they have already started to prepare the revised ADP based on the finance ministry allocation.

The revision proposal could be placed for approval before a National Economic Council meeting scheduled to be held in the first week of next month, the official added.

In the latest revision, the portion of foreign funds would be slashed by about 11.17 percent to Tk 83,500 crore.

The size of the foreign fund in the original ADP is Tk 94,000 crore.

Zahid Hussain, a former lead economist at the World Bank's Dhaka office, said the government step to decrease the size of its own fund in the ADP seems to be a move in the right direction.

"However, considering the country's present context, it is crucial to trim domestic financing more while it would be better to keep the foreign fund untouched," he said.

He said keeping the foreign fund untouched will provide two benefits -- it will be easier to continue making public investments without putting pressure on the foreign currency reserves while inflation will not be fuelled.

At the beginning of the current fiscal year the government announced several austerity measures. So, reduction of both local and foreign funds should have been prioritised based on such measures, he said.

He added that slashing domestic funds will bring about more benefit.

However, trimming the size of the local fund seems to be a step in the right direction, he further said.

Since March last year, overall inflation in the country has been at more than 9 percent while the foreign currency reserves have been declining gradually over the past two years, reaching to less than $20 billion.

In this context, the government and the central bank have taken several measures, including controlling public expenditure.

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