Bangladesh News

Government borrowing from banks has shot up by a staggering 32 percent in the first five months of the current fiscal year compared to the last fiscal year’s same period due to low revenue income and a massive drop in foreign aids.

To rein back the borrowing spree, the caretaker government has decided to tighten regulations and scrutinise project fund disbursements under the Annual Development Programme (ADP) more closely.

From July to November the amount of government borrowing stood at Tk 4,661 crore, compared to Tk 3,547 crore in the corresponding period of last fiscal year.

Finance ministry sources fear that the government might be forced to borrow even more due to additional spending required for the elections and chances of fall in revenue earning caused by political instability.

A finance ministry high official, preferring anonymity, said the government will review the ADP projects and will only approve their funds if the projects are deemed important.

The finance ministry last month instructed all ministries to send all projects approved by Executive Committee of the National Economic Council (Ecnec) after July 1, 2006, to the planning ministry and Finance Division for review. The ministries were also asked to include all ADP projects yet to spend 10 percent of their designated budgets.

National Board of Revenue (NBR) sources said the government borrowing has increased in the first half of this fiscal year because the government failed to increase revenue income by the targeted 21 percent in the first four months, managing to earn only 8 percent. In the corresponding period last year, revenue income increased by 15 percent.

The government’s borrowing troubles have been compounded by net foreign aid dropping by a staggering 81 percent in the first three months of this fiscal year, with only $35.19 million coming in, compared to $179.64 million in the last fiscal year.

Planning ministry sources say the immediate past government marginalised the donor-funded projects because they were busy implementing the government funded projects due to greater opportunities for ‘corruption’ and to boost popularity before the upcoming elections.

Meanwhile, an increase in government spending also forced a rise in government borrowing. It was learnt, the government spent nearly 13 percent of its annual ADP budget, mostly with local funds, within the first three months of the current fiscal.

In the same period last year, only 6 percent of the ADP budget was spent.