Daily Bangla Times: The government is unlikely to furnish austerity steps in the coming national budget after failing to implement such measures stipulated in the ongoing budget against the backdrop of a sharp economic downturn.

Of the steps, the Finance Division on July 3 had suspended the allocation of funds for less important projects, Category-C projects, under the Annual Development Programme. 

But early this month, the division was forced to withdraw the restriction amid pressures from implementing ministries and divisions, said Finance Division officials.

Besides, the current restrictions on purchasing vehicles, training at home and abroad and the consumption of fuel oils and power are likely to be relaxed in the new financial year starting from next July, said the officials.

The division, after its month-long pre-budget discussions with other ministries and divisions which concluded in the past week, has already calculated the demands and grants for the new financial year without taking into account the current austerity measures, added the officials.

Economists, however, observed that most of the current austerity steps were eyewash as the government did not clear the funds to be saved while adopting the budgetary measures.

Besides, the failure in implementing the cost-cutting measures has exposed the lack of government capacity, they further observed, while the necessity of the steps is still valid amid the persisting economic slowdown.

Dhaka University economics professor Muhammad Shahadat Hossain Siddiquee said that cost-cutting measures were an imperative for many projects to check wastages.

‘The country’s road infrastructure projects are already known as the most expensive ones globally,’ he said.

The Finance Division officials remarked that pursuing austerity under the current budget had been necessary to deal with the growing budget deficit amid high subsidies for fertiliser, gas and power.

But, they pointed out, the government has, meanwhile, raised the prices of fuel oils, gas and power on several occasions in line with suggestions from the International Monetary Fund for a $4.7 billion loan package which has also eased, they added, the pressure on the budget a bit.

According to former Word Bank Dhaka office chief economist Zahid Hussain, the continuation of the austerity steps is necessary in checking the overall demand and bringing down inflation.

‘The government move against continuing austerity may prove to be counterproductive for inflation,’ he feared.   

The country’s overall inflation rate jumped in February to 8.78 per cent from 8.57 per cent in January due to rise in the prices of almost all food items, putting fixed- and low-income groups in tight spots.

The upward movement of the inflation rate in the past month broke a five-month-long easing between September and January after the rate had hit 9.5 per cent in August, the highest in a decade.

Amid the continued economic downturn, the government has already slashed the projected gross domestic product growth to 6.5 per cent from 7.5 per cent for the current financial year.

The government is expected to prepare a Tk 7.5 lakh crore budget for the next financial year with the aim to set the GDP growth target at 7.5 per cent again.

The overall revenue collection target may be fixed at Tk 4.8 lakh crore for FY24, requiring the government to borrow some Tk 2.6 lakh core, mainly from local sources, to meet the budget deficit.

Finance minister AHM Mustafa Kamal is likely to begin his pre-budget discussions with stakeholders today.

On the first day, he is expected to virtually hold talks with economists.

The finance minister would hold two more meetings with businesses and journalists before concluding the traditional budget parley.

The meetings were originally scheduled to be held in the past week, but were delayed due to unavoidable circumstances, said a close aid to the finance minister.