Subsidy spending climbs for crisis-related expenditure
The government's subsidy spending would rise by 26.25 % to Tk 56,051 crore within the next fiscal year, on the trunk of taxpayer-funded allocation for food, interest and agriculture sectors.
The allocation was Tk 44,400 crore in the initial budget for fiscal 2019-20.
Up coming fiscal year's subsidy outlay is 15.57 per cent greater than Tk 48,500 crore reserve in the revised budget for fiscal 2019-20 and makes up about 9.87 per cent of the total budget.
Subsidies and transfer take up an essential role in reaching pro-poor and inclusive financial growth, according to a macroeconomic policy assertion of the government.
The government gives priorities while allocating subsidies and incentives to the sectors that induce positive externalities for different sectors, it said.
Transfers are set aside for the not-for-profit corporations that provide service in the households' levels.
Usually, sectors such as for example food, fertiliser and rural electrification receive subsidies through budgets.
The Bangladesh Power Creation Board, the Bangladesh Petroleum Company and the Bangladesh Jute Mills Company get financial assistance in the type of loans.
Agriculture and export sectors receive the government support yearly due to the engines of the overall economy.
Another fiscal year's subsidy budget will be mostly going towards taxpayer-funded spending for agriculture, food support for the poor and loans for large industries and SMEs.
The proceed to provide low-cost loans to pandemic-hit micro, small, medium and large entrepreneurs, farmers and exporters would improve the subsidy shelling out for interests to Tk 5,000 crore in the upcoming fiscal year. There's been no such allocation in the ongoing fiscal year.
The federal government has allocated Tk 9,500 crore for the agriculture sector for fiscal 2020-21, up 16.85 % from Tk 8,130 crore of the revised spending budget to maintain the growth in farm production and assure food security.
Usually, agriculture subsidy spending hovers around Tk 6,000 crore each year and this may rise to Tk 7,000 crore this fiscal year.
Just as much as Tk 200 crore has been allocated simply because incentives for farm mechanisation.
Besides, the federal government has raised the target for federal government procurement and distribution of rice and paddy by 2 lakh tonnes found in fiscal 2020-21 to make sure that farmers get yourself a fair price for their produce while at the same time the retail selling price of rice remains stable, said Financing Minister AHM Mustafa Kamal found in his spending plan speech on June 11.
The agriculture sector must ensure appropriate utilisation of subsidy in fiscal 2020-21, said the Centre for Insurance policy Dialogue on June 7.
Regardless of the allocation of Tk 9,000 crore in successive budgets during the last three years, a substantial part of the sum remained unutilised.
In fiscal 2015-16 Tk 2,570 crore was unused, in fiscal 2016-17 Tk 5,390 crore was remaining idle and in fiscal 2017-18 Tk 3,800 crore, the think-tank said.
Regardless of the collapse in economic activities in the home and abroad due to the coronavirus pandemic, the federal government has kept unchanged the subsidy allocation for export and remittance -- both major sources of exterior financing for Bangladesh -- at Tk 6,825 crore and Tk 3,060 crore for fiscal 2020-21.
The subsidy for the power sector was trimmed from Tk 9,500 crore to Tk 9,000 crore and that of liquified gas imports from Tk 9,000 crore to Tk 8,500 crore.
Bangladesh has deferred several LNG cargoes as a nationwide lockdown to combat the coronavirus pandemic dented domestic demand for gas.
Both cargoes were bound to provide LNG in May from Qatar's QatarGas, Md Kamruzzaman, managing director of state-manage Rupantarita Prakritik Gas Company, told S&P Global Platts, a supplier of information, benchmark rates and analytics for the strength and commodities markets.
Both cargoes have been re-scheduled for down the road in the entire year -- one of them will supply LNG in September and another in December -- when domestic demand is likely to grow, he said.
Food subsidies rose 26.25 per cent to Tk 6,166 crore, from Tk 4,884 crore.
The subsidy spending for providing food has been improved as the country's expenditure to feed the indegent has increased sharply because of the coronavirus-induced shutdown, which includes put a brake on the economic activities leaving people without work.
More subsidies have to be given in the next fiscal year weighed against earlier years and the upsurge in subsidies for the priority sectors such as for example agriculture, meals and interest rate is normally understandable, said Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh, a think-tank.
"But $6.5 billion in subsidy spending isn't a small amount. We have to take into account the sector. We can not give such large allocations inefficiently. We must take it down gradually," he informed The Daily Star lately.
The Tk 5,000 crore earmarked as interest subsidies is a token amount but nonetheless attractive as the funds are being channelled for monetary recovery.
Remittance and export subsidies are actually unnecessary and these could possibly be extended by depreciating the exchange rate somewhat, Mansur added.
