Budget to see major cuts as earnings,

spending drop

Rejaul Karim Byron  and Dwaipayan Barua

The government is likely to downsize its income and expenditure targets in the revised budget
because of lower revenue growth, slower implementation of development programmes and a fall
in spending due to the pandemic.

The fiscal coordination council discussed the issue at a meeting on Thursday. Finance Minister
AHM Mustafa Kamal, head of the council, chaired the meeting through a virtual platform from
Singapore.

The finance division prepared a draft about the revised budget, considering the incomes and
expenditure in the last six months and placed the document at the meeting.

Sources at the finance ministry said the Tk 568,000-crore budget might be slashed by Tk 30,000
crore.
The Tk 205,145-crore annual development programme (ADP) will be trimmed by Tk 8,000 crore
through a reduction in the allocation for foreign-aided projects.

Other areas that will also see a cut include subsidy and block allocations. The government has set
aside Tk 54,695 crore for subsidy expenditure and Tk 10,000 crore in block allocation for the
current fiscal year.

The revised budget will be finalised in March.

The government has set a target to earn Tk 378,000 crore in revenue in FY21, and given the
National Board of Revenue (NBR) the task to raise Tk 330,000 crore.

The target for the NBR may be slashed by Tk 29,000 crore, according to sources. 

The finance ministry is also going to revise down the GDP growth target to 7.4 per cent from 8.2
per cent, in keeping with the Eighth Five-Year Plan.

The budget implementation in the outgoing year came under challenges as the pandemic-induced
lockdown slowed the global trade and brought the country's economy to a halt.

One of the reasons behind the likely downsizing of the budget is the mismatch between the
ambitious revenue target and the actual generation: the target for the NBR is 53.60 per cent
higher than the real receipts in the last fiscal year. 

The revised target for the NBR was Tk 300,500 crore in FY20 and the actual collection stood at
Tk 214,836 crore.

Official data from the finance ministry showed that the revenue collection rose 3.4 per cent year-
on-year in the July-October period. Non-NBR tax collection declined 18.95 per cent.

As the government could not spend much amid the slowdown in economic activities, expenditure
dropped 12.87 per cent from July to October, which was 26.27 per cent in the positive territory in
2019.

The implementation of the revenue budget was down 2.52 per cent during the period while it was
20.14 per cent in the black in the corresponding period a year ago.
 Development expenditure plunged 35.06 per cent in the first four months of FY21, whereas it
had risen 48.13 per cent during the same period last fiscal.

The size of the budget could be Tk 592,000 crore in the next fiscal year, and Tk 213,000 crore
could be set aside to implement the ADP, said an official of the finance ministry. 

The revenue generation goal may be set at Tk 385,000 crore, up Tk 7,000 crore from the current
fiscal year. The allocation for safety net programmes may go up by 5 per cent. 

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