THE non-development expenditure for the next fiscal year has been estimated to be nearly 32 percent above the size of the revised budget, as per a national daily reports. It is a potential threat that could be the main cause for a fiscal and budgetary mismatch amid poor prospects of achieving targeted revenue growth. It is feared that the huge spending plan on a tight revenue budget might force the government to go for a bigger amount of bank borrowing that might make the sector more volatile than the current fiscal. While the country still lags behind due to infrastructure inadequacy, the increasing trend of the budgetary allocation for non-development sectors will hardly fast forward economic growth.
The Finance Ministry last week finalized expenditures of the non-development and annual development programmes – for both the current revised budget and the next budget. The revised Revenue Expenditure for the current fiscal year has been finalized at Tk 173,565 crore for non-development and Tk 91,000 crore for ADP. The next budgetary expenditure of the government has been set at Tk 340,000 crore. Of the total outlay, Tk 229,736 crore has been earmarked as non-development or revenue budget. As the projected revenue earning for the next fiscal, up by nearly 36 percent, is bound to fail, the government must borrow an amount greater than the targeted bank borrowing to finance the budgetary deficit. A former Bangladesh Bank Governor said that the 31.78 percent growth in Revenue Expenditure would cause the government to resort to aggressive domestic borrowing, particularly from the banking sector.
The recent salary hike for government employees and plans to recruit above 50,000 staff in different tiers in the upcoming fiscal and constructing new buildings will force the government to allocate greater amounts in the non-development sector. Though, the Finance Ministry expressed their optimism over achieving the gigantic revenue earning targets next year and brushed aside any possibility of borrowing more than the anticipated amount from domestic sources, economists are not optimistic enough. The government has set a Tk 242,752 crore revenue earning target for the next fiscal year, up by Tk 65,352 crore. Its machineries are more interested in spending huge amounts on development expenditure, but are less motivated to earn revenue for spending.
The prospective GDP growth will stumble if the non-development spending is greater than 20 percent of the total budget and overall economic growth will be sluggish. To overcome the deficit the government will have to borrow a big amount from banks, resulting in the banking sector coming under pressure. In our view any plan violating fiscal discipline will be a boomerang at the end. The government should cut its coat according to its means.
