[🇧🇩] Monitoring Bangladesh's Economy

[Saif]

Salehuddin urges industrialists to invest in education, research

Finance adviser Salehuddin Ahmed on Sunday urged industrialists to invest in education and research to bridge the gap in skilled manpower and knowledge in the industrial sector...

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Salehuddin urges industrialists to invest in education, research
Bangladesh Sangbad Sangstha . Dhaka 08 December, 2024, 22:58

Salehuddin Ahmed | BSS photo

Finance adviser Salehuddin Ahmed on Sunday urged industrialists to invest in education and research to bridge the gap in skilled manpower and knowledge in the industrial sector.

The adviser made these remarks as chief guest at the celebration ceremony of the Graduate Diploma in Leather, Leather Goods and Footwear Management programme of East West University held at EWU campus in the city, said a press release.

Salehuddin Ahmed emphasised that successful figures like Bill Gates and Elon Musk did not achieve their innovations solely by themselves; their success was built on long- term investments in research.

He highlighted the irony that while business leaders in Bangladesh often complain about the lack of skilled manpower, they did not invest in educational and research institutions.

The event was presided over by chief adviser of EWU and former governor of the Bangladesh Bank Mohammed Farashuddin. Other distinguished speakers included resident representative of the Asian Development Bank in Bangladesh Hoe Yun Jeong, vice-chancellor of EWU Shams Rahman, senior vice-president of the Leathergoods and Footwear Manufacturers and Exporters Association of Bangladesh Mohammed Nazmul Hassan, additional secretary of the Finance Division Mohammed Walid Hossain and professor of the Department of Business Administration of EWU and programme director of the Graduate Diploma in Leather, Leathergoods and Footwear Management Programme Tanbir Ahmed Chowdhury.

The ceremony was attended by EWU diploma graduates, faculty members, Officers from different sections, officials from the Ministry of Finance, and representatives from the Asian Development Bank, among others.​

 

[Saif]

NBR to cut tax exemptions once economy improves: chairman

The government will rationalise tax exemptions once the country’s economic situation improves to some extent, according to National Board of Revenue (NBR) Chairman Md Abdur Rahman Khan.

www.thedailystar.net

NBR to cut tax exemptions once economy improves: chairman

The government will rationalise tax exemptions once the country's economic situation improves to some extent, according to National Board of Revenue (NBR) Chairman Md Abdur Rahman Khan.

"To boost revenue, we must come out of the culture of tax exemptions. Our development partners have asked us to discontinue this practice for our benefit," he said, describing the practice as discriminatory.

Khan made these remarks while responding to queries from journalists at the NBR headquarters in Agargaon yesterday.

The revenue authority is considering bold measures regarding tax exemptions, especially as the International Monetary Fund (IMF) has been persistently urging the government to cut them in a bid to increase the country's tax-to-gross domestic product ratio, which is among the lowest in the world.

"We have no alternative but to cut exemptions," he said.

"We will do it timely. We have already started. It's not like we are sitting idle. Except for essential commodities, we will take steps immediately where we have the scope."

The interim government has introduced various tax exemptions on the import of essential commodities, including rice, oil, eggs, and onions in recent months. The NBR chairman attributed these exemptions to the ongoing "economic crisis".

He also hinted at the imminent withdrawal of some tax exemption facilities.

"We have issued some statutory regulatory orders to cancel existing exemptions. Some more will be issued later," he said.

However, Khan assured that no forceful measures would be taken.

"We will move only after discussion with traders," he added.

Despite the revenue board allowing significant exemptions at the import stage, the prices of essential commodities have not yet reduced to expected levels, he said.

Khan also said that the NBR was set to observe the National VAT Day today and "VAT Week" from December 10 to 15.​

 

[Saif]

No overnight cure for ailing financial sector

There is no overnight cure for the deep-rooted challenges facing the country’s banking sector, Abdul Awal Mintoo, former president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), said yesterday.

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No overnight cure for ailing financial sector
Former FBCCI president Abdul Awal Mintoo says

There is no overnight cure for the deep-rooted challenges facing the country's banking sector, Abdul Awal Mintoo, former president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), said yesterday.

He also said the initiatives that the Bangladesh Bank has taken so far are not enough to bring down non-performing loans.

He made the remarks while speaking on the current business and investment environment and the way forward at the Economic Reporters' Forum (ERF) office in Dhaka. The ERF organised the conversation.

Minto added that printing money to lend to cash-strapped banks is a misstep because it can cause inflationary pressures -- a thorn in Bangladesh's side for over two years -- in the domestic markets to intensify.

The economic data requires a lot of corrections, including in exports and imports, as the real data was not published during the last government's regime

The investment environment climate is attractive enough to lure in foreign direct investment, he added.

More than 96 percent of investment comes from people's savings, but they can hardly save due to high inflation, he said.

In recent times, well-dressed people are also standing in queues in front of the Trading Corporation of Bangladesh's Open Market Sales programme, which sells essentials at subsidised prices through trucks.

The former FBCCI president also said a warm relationship with India is needed for the sake of the country's interests.

Minto also said Bangladesh should not graduate from the group of Least Developed Countries (LDCs) and get the status of a developing nation based on false economic data.

A recent white paper on the state of the economy estimated that Bangladesh's gross domestic product had been overstated by 3.5 percentage points on average between FY13 and FY19.

"The economic data requires a lot of corrections, including in exports and imports, as the real data was not published during the last government's regime," he said.

Replying to queries, Mintoo said the corporate culture in the country has not improved yet as most big corporations are still very much family businesses.

He said the country's failure to produce an adequate number of qualified personnel to run such big corporations efficiently was one of the reasons for that.

However, this can cause serious problems for businesses, as exemplified by Beximco Group, which has been in hot water since the arrest of its vice-chairman Salman F Rahman after the political changeover.

Salman also served as the private industry affairs adviser to deposed Prime Minister Sheikh Hasina.

Regarding corruption under the past government, he said a section of people considered bribes to be an investment. It was not a political party but a section of people that ran the country without holding acceptable elections, Mintoo said.

He added that an acceptable election is needed to improve the business and investment environment.

He said a special environment must be prepared to attract investment, especially to capitalise on investments that are being shifted away from China.

Other countries are attracting that capital because of a good investment environment, he added.

He added that foreign direct investment has been slowing because foreign investors think Bangladesh is a risky country for parking funds.

Significant discrimination is being noticed in the country's education and health sectors and an elected government can remove such discrimination, he opined.

Mintoo expects the interim government will announce a roadmap to elections soon as all reform reports will be submitted to the government by the end of this month.

The way the government has been freezing the bank accounts of businessmen is not right. Such steps will affect business, he said.​

 

[Saif]

Finance adviser hints at end to tax break

Finance adviser Salehuddin Ahmed on Tuesday said that the tax exception culture enjoyed by industries over the years was due largely to low domestic revenue generation...

www.newagebd.net

Finance adviser hints at end to tax break
Staff Correspondent 10 December, 2024, 22:46

National Board of Revenue chairman Md Abdur Rahman Khan speaks at a seminar on the occasion of ‘VAT Day and VAT Week 2024’ organised by the National Board of Revenue at its head office at Agargaon in the capital Dhaka on Tuesday. Finance adviser Salehuddin Ahmed, Finance Division secretary Md Khairuzzaman Mozumder and Federation of Bangladesh Chambers of Commerce and Industry administrator Md Hafizur Rahman also spoke on the occasion. | New Age photo

Finance adviser Salehuddin Ahmed on Tuesday said that the tax exception culture enjoyed by industries over the years was due largely to low domestic revenue generation.

‘Days are numbered for enjoying the tax break,’ said the finance adviser at a seminar on the occasion of ‘VAT Day and VAT Week 2024’ organised by the National Board of Revenue at its head office at Agargaon in the capital Dhaka.

The finance adviser said that the local industries were needed to be got rid of tax exemption facility to face the challenges the country’s graduation from the least developed countries’ bloc in 2026 would bring.

Many local export-oriented industries which are now enjoying duty preferences in developed and developing countries may lose the benefit, he said.

The finance adviser was also critical about the tax evasion for which the country’s tax-GDP ratio has been ridiculed as one of the lowest in the world.

He suggested that tax officials should be friendly to taxpayers.

He called upon all to pay taxes so that the government is able to increase allocation to health and education sectors.

A World Bank report said the county’s income from value-added tax in 2018-19 could have been at least three times higher than the collection of Tk 85,000 crore had the government implemented the VAT law properly.

Presided over by NBR chairman Md Abdur Rahman Khan, Finance Division secretary Md Khairuzzaman Mozumder and Federation of Bangladesh Chambers of Commerce and Industry administrator Md Hafizur Rahman spoke at the seminar.

The finance secretary said the development partners often raised the issue of low tax-GDP ratio.

The revenue board should conduct strong efforts to augment revenue mobilisation, he said.​

 

[Saif]

IMF offers extra $1b for reforms

The International Monetary Fund (IMF) has offered an additional $1 billion to Bangladesh but the government is pushing for at least $2 billion to implement the interim government’s reform agenda, narrow the deficit in the current account and shore up the dollar stockpile.

www.thedailystar.net

IMF offers extra $1b for reforms
Govt pushing for at least $2b under existing loan programme

The International Monetary Fund (IMF) headquarters building is seen in Washington, U.S., April 8, 2019. REUTERS

The International Monetary Fund (IMF) has offered an additional $1 billion to Bangladesh but the government is pushing for at least $2 billion to implement the interim government's reform agenda, narrow the deficit in the current account and shore up the dollar stockpile.

Finance Adviser Salehuddin Ahmed sought a fresh $3 billion from the Washington-based multilateral lender under the existing loan programme on the sidelines of the annual World Bank-IMF meeting in October.

Following the discussion, a 13-member IMF mission came to Bangladesh at the beginning of the month to review the country's performance and compliance with structural reform conditions for the fourth tranche of the existing loan.

The issue of extending the loan amount was discussed with the mission, which has offered about $1 billion in exchange for additional reform conditions, The Daily Star has learnt from people involved with the discussions.

But the government is holding out for at least $2 billion. In that case, $1 billion would be coming in each of the remaining four tranches under the existing loan programme.

In January last year, the multilateral lender approved a $4.7 billion loan package for Bangladesh. So far, it has disbursed $2.3 billion in three instalments.

Meanwhile, the IMF mission is set to hold talks with officials of the finance ministry and the central bank today and on December 15 to finalise various policy documents.

The policy documents are a memorandum of economic and financial policy of the government, a letter of intent, a technical memorandum of understanding and a memorandum of understanding.

While the IMF is satisfied with the interim government's various reform initiatives, it will impose specific conditions for the next loan tranches, the officials said.

This time, IMF is giving more emphasis on revenue collection, reducing the subsidy for power, energy and fertiliser sectors and banking sector governance.

In case of increasing revenue collection, the IMF wanted to know the government plans regarding tax exemption in the next fiscal budget.

Besides, the IMF may impose a condition to separate policy and administration at the National Board of Revenue and reduce the multiple VAT rates.

In the case of the central bank and banking sector, the IMF could impose various conditions for the amendments of the Bangladesh Bank Order, the Bank Company Act, and Bankruptcy.

The IMF could also give a condition for bringing down arrears in government subsidy and price adjustment.

As of June, the government's arrear was about Tk 60,000 crore. However, after taking charge, the interim government brought the amount down significantly, according to finance ministry officials.

The finance ministry is aiming to clear the arrears by half by June next year and the rest in the next fiscal year.

In case of price adjustment, the IMF has suggested raising the electricity tariffs further.

However, the interim government is unwilling to adjust the price this fiscal year because it could fuel inflation further.

The government, however, will cut expenditures of power plants in a bid to reduce subsidies, the finance ministry officials said.

A closing meeting of the IMF mission will take place on December 17 with the finance adviser.​

 

[Saif]

ADB approves $600m loan for structural reforms in Bangladesh

The Asian Development Bank on Wednesday said that it approved $600 million ‘policy-based loan’ to Bangladesh...

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ADB approves $600m loan for structural reforms in Bangladesh
United News of Bangladesh . Manila 11 December, 2024, 17:43

Logo of Asian Development Bank. | Collected photo

The Asian Development Bank on Wednesday said that it approved $600 million ‘policy-based loan’ to Bangladesh.

The loan will be used for bringing structural reforms supporting domestic resources mobilisation, enhance efficiency of public investment projects, developing private sector, reforming state-owned enterprises, and promoting transparency and good governance, according to a release by the Manila-based multilateral lender.

ADB’s policy-based loan promptly responds to Bangladesh’s immediate development financing needs following the political transition, said the lender’s regional lead economist Aminur Rahman.

This particular loan programme of the ADB has been developed in close collaboration with the International Monetary Fund, World Bank, and other multilateral lenders after the interim government led by Muhammad Yunus sought extra funds from them to tackle the lingering economic crisis, mostly left behind by the Awami League regime ousted on August 5 amid a student-led mass uprising.

Reportedly, the Finance Division also expects to receive another around $1.5 billion loan as budget support from the International Monetary Fund and World Bank by the next two months.

The ADB said that Bangladesh had been struggling with revenue mobilisation, as it possessed the world’s lowest tax-to-gross domestic product ratio at only 7.4 per cent.

This loan will help Bangladesh to introduce key policy actions with the aim of increasing domestic resource mobilisation, while improving transparency and accountability, according to the release.

The ADB loan programme includes digitalisation and green initiatives, rationalisation of tax incentives and exemptions, and measures to assist taxpayers to boost tax morale.

Improved transparency and efficiency of public investment projects through increased digitalisation is another key objective of the loan programme.

The loan will promote private sector development and foreign direct investment by streamlining regulatory environment and creating a level playing field.

To simplify business creation and operations, over 130 services have been made available in an online integrated platform. These are complemented by improved governance and performance monitoring of state-owned enterprises and streamlined foreign direct investment approval processes, according to the release.​

 

[Saif]

Consumer financing slows amid economic hardship, uncertainty

Consumer financing has slowed as people are adopting a go-slow strategy for taking loans, considering the increasing trend of interest rates amid ongoing inflationary pressure.

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Consumer financing slows amid economic hardship, uncertainty

Consumer financing has slowed as people are adopting a go-slow strategy for taking loans, considering the increasing trend of interest rates amid ongoing inflationary pressure.

Banks are also being very conservative in providing consumer credit amid the uncertainty surrounding the recent political changeover, industry insiders said.

As of September this year, the percentage of consumer credit out of total loans stood at 8.62 percent, down from 8.86 percent the previous year, according to the latest data from the Bangladesh Bank.

Total outstanding loans in the banking sector stood at Tk 1,619,917 crore as of September this year, of which Tk 139,613 crore is consumer financing.

The percentage of consumer credit out of total loans was 6.81 percent in the same period of 2020, 7.67 percent in 2021 and 8.44 percent in 2022.

Consumer credit, or consumer debt, is personal debt taken on to purchase goods and services. For instance, a credit card is one type of consumer credit in finance.

Industry insiders said people take consumer credit mostly for lifestyle and luxury product purchases.

However, they have been forced to cut their spending on luxury products in the face of economic hardships. Still, some people are taking consumer loans to meet their monthly expenses, they added.

From September last year to September this year, banks disbursed Tk 9,103 crore as consumer credit, down from Tk 17,993 crore in the same period of the year prior, central bank data showed.

Bank Asia is continuing to expand its retail loans or consumer financing, said its managing director, Sohail RK Hussain.

Home loans, personal loans, automobile loans and credit cards are the major areas of retail loans.

Credit growth in the retail segment is not substantial and is still insignificant compared to the total loans in the banking sector, said the Bank Asia MD.

People of middle-income and upper middle-income are mainly taking consumer credit, he said, adding that professionals are mostly taking those types of loans.

The housing and automobile sectors were adversely impacted last year due to the exchange loss of the local currency, taka, against the US dollar, Hussain said, adding that the 100 percent letter of credit (LC) margin on luxury products impacted retail loans.

Hussain also said consumer credit or retail loans are expanding on the increased earning capacity of people and changing lifestyles.

From September last year to September this year, banks disbursed cash for purchasing consumer goods, apartment purchases, credit cards loan and salaries, central bank data showed.

Banks are also lending for educational expenses, medical treatment, marriage expenses, travel or holidays, professional loans, transport loans, loans against provident funds, personal loans against deposit premium schemes (DPS), personal loans against fixed deposit receipt (FDR) and more.

M Khurshed Alam, deputy managing director of Eastern Bank, said consumer financing has slowed because of inflationary pressure.

Inflation in Bangladesh hit a four-month-high of 11.38 percent in November this year and has stayed above 9 percent since March of last year.

Alam said Bangladesh Bank is trying to curb inflationary pressure by hiking the policy rate, which pushes up the lending rate. As a result, people are avoiding loans.

Keeping pace with the interest rate of general loans, the central bank recently increased the maximum interest rate on credit cards to 25 percent from 20 percent.

The hike in interest rate of loans against credit cards will impact the credit growth of consumer financing, Alam said.

Few banks are providing consumer credit, which is why this segment is yet to expand, said Syed Mahbubur Rahman, managing director of Mutual Trust Bank.

He said banks are allowed to lend a maximum of Tk 2 crore to each client as a home loan and a maximum of Tk 40 lakh as a personal loan.

Rahman, also the former chairman of the Association of Bankers, Bangladesh, said banks are now very conservative in giving consumer credit as defaulted loans in this segment have also increased.​

 

[Saif]

Revamping bond market for economic growth

The bond market in Bangladesh, despite its immense potential, remains largely unexplored. Several factors including weak corporate governance, lack of awareness and data transparency, investor-unfriendly tax structures, and inadequate enforcement of regulations contribute to the underutilisation. T

thefinancialexpress.com.bd

Revamping bond market for economic growth
FE
Published :
Dec 13, 2024 00:02
Updated :
Dec 13, 2024 00:02

The bond market in Bangladesh, despite its immense potential, remains largely unexplored. Several factors including weak corporate governance, lack of awareness and data transparency, investor-unfriendly tax structures, and inadequate enforcement of regulations contribute to the underutilisation. The absence of a sustainable bond market has placed undue pressure on the country's banking system as the primary source of financing. This growing reliance on banks enhances the risk of non-performing assets, threatening the overall stability of the financial system. A recent roundtable jointly organised by The Financial Express (FE) and Watermark Inc. highlighted these challenges and the unutilised potential of the bond market. Experts at the event emphasised the need for comprehensive reforms to unlock the economic benefits that a vibrant bond market could offer. Their suggestions included revamping the tax structure, consolidating all regulators and market intermediaries under a single authority, and updating regulations to align with global best practices. These measures, they argued, would help attract both domestic and international investors, including global impact investors.

The bond market, a financial marketplace where buyers and sellers exchange bonds as debt securities, plays a crucial role in the economy. It provides borrowers with a mechanism to finance large-scale projects and operations, while also offering savers and investors a way to diversify their portfolios. Furthermore, bond markets act as an economic barometer, with bond prices typically moving inversely to the stock market. When equity markets rise, bond yields tend to decline, and vice versa. This counter-cyclicality makes bond markets a reliable indicator of economic trends.

In Bangladesh, however, the bond market remains quiescent, and its potential impact on the economy untapped. The keynote speaker Managing Director of UCB Investment at the roundtable pointed out that the ratio of the corporate bond market to GDP in the country is only 0.19 per cent, the lowest among peer nations. He noted that while government treasury bonds offer high yields of 12-13 per cent, the risk-adjusted returns on corporate bonds should be more attractive to investors. To realise this potential, he stressed the importance of fixing the regulatory framework and aligning it with global standards. The development of both debt and equity markets in tandem is essential for a balanced financial ecosystem. A well-disciplined debt market can complement the equity market by providing a safety net for investors, who can offset potential equity losses with stable returns from fixed-income securities. The Editor of The Financial Express observed that bonds, which typically offer reasonable yields, are considered a safe investment by informed savers. He also highlighted the urgent need for a vibrant secondary market for the transaction of both government and private bonds.

With the interim government currently focusing on restructuring the country's financial management, revitalising the bond market should be a top priority. A robust bond market can significantly enhance capital mobilisation, reduce strain on banks, and provide a stable funding source for long-term projects. The time is ripe for Bangladesh to unleash the potential of its bond market aimed at ensuring its contribution to sustained economic development.​

 

[Saif]

Three Cs ruined credibility of data in AL regime

Collusive behavior, capacity deficit and coordination failure have been identified as the main reason for lack of credible data on key socio-economic indicators during the Awami League regime...

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Three Cs ruined credibility of data in AL regime
Shakhawat Hossain 15 December, 2024, 00:36

Collusive behavior, capacity deficit and coordination failure have been identified as the main reason for lack of credible data on key socio-economic indicators during the Awami League regime ousted on August 5 amid a student-people uprising.

Impacts of collusive behavior of politicians and public servants to distort data have been evident in all key metrics such as gross domestic product, inflation, labour force and poverty.

The other two Cs –– capacity deficit and coordination failure –– have also led to the systemic compromise of data integrity or data-related disarray in the country over the years, according to the White Paper on the State of Bangladesh Economy.

AL policymakers hardly paid attention to the call for maintaining proper methods in calculating data through out its unbroken tenure between January 2009 and August 2024, the white paper said.

Experts and economists found it difficult to present an objective state of economy and development in absence of reliable data.

Indicating various macroeconomic data, Policy Exchange Bangladesh chairman Masroor Reaz said that they were getting many data which were not available or delayed during the AL regime.

He hoped that the availability of data in the most reliable form would increase in the coming days.

When official statistics on key metrics such as the GDP, inflation, private investment or employment are unreliable, a disconnect between economic realities and policy responses is created, said the white paper.

Appointed on August 29, a 12-member committee headed by Centre for Policy Dialogue distinguished fellow and economist Debapriya Bhattacharya submitted the white paper to the chief adviser Muhammad Yunus on December 1.

The issue of reliable data has also been highlighted in at least eight of the 23 chapters of the white paper aiming to portray the mismanagements and irregularities of the AL regime.

GDP growth rate has been the centre of attention because of apparent disjuncture with other key indicators, including private sector credit, revenue mobilisation, import payments for capital machines, energy consumption, export receipts and employment generation.

Focusing on the issue, the white paper said that in the post-2013 period, the political policymakers took a special interest in GDP figures and surely made strong influences.

A collusive group in the Bangladesh Bureau of Statistics allegedly emerged to ensure that the economic performance of the country was maintained against all odds, be it only on paper, said the white paper.

During the post-2019 period, this collusive group was largely maintaining the act. Data producers might have felt pressured to present an overly optimistic view of development characterised by accelerated economic growth, especially since past estimates were repeatedly manipulated, added the white paper.

It highlighted the collusive behavior on inflation, one of the most talked about issues over the past two years.

The unusual delay and reluctance to release the Consumer Price Index in August 2022 and only 8.4 per cent inflation for gross rent, fuel and lighting components against the price hike of fuel oil by Tk 50 with a potential domino effect pushing up prices of food, transport and utilities, among others it stated.

The distrust of inflation data increased as the BBS made a revision in estimating inflation with an expanded commodity basket having 700 more items with the latest rebasing of 2021-22 CPI, creating an opportunity for the enumerators to use arbitrary judgements, said the white paper.

Many commodities included in the new estimation method are largely unavailable at many market points of the country.

Former World Bank Dhaka office chief economist Zahid Hussain, also a writer of the white paper preparation committee, said that suppression of inflation data below double digits in the past two years was linked to collusive behavior.

Now the BSS seems to be providing actual data, he said, calculating that the double-digit inflation prevailed in August, October and November out of four months of the interim government completed on December 8.

The white paper identified that discrepancies in standards and definitions had enabled the Bangladesh Bureau of Statistics to report an inflated employment rate to appease the regime regarding the overall labour force.

Poverty rates have been reduced to 18.7 per cent in 2022 from 26.5 per cent in 2016, but the poverty reduction rate does not go in parallel with a recent BBS study on Food Security Statistics 2023 that revealed that about 22 per cent of the households perceived themselves as moderate to severe food insecure.

The sharp decline in extreme poverty surely raised the eyebrows of analysts, said the white paper.

Recognising that political influences and priorities often guide statistical manipulations is crucial. This underscores the importance of accurate data as the backbone of effective policy making, the white paper said.

Manipulated data can lead to devastating consequences, making the need for reliable data even more urgent, it added.​

 

[Saif]

ADP cut prompted by changed situation

Adhering to the basic principles of flexibility and adjustability, the interim government is mulling over a substantial cut in the annual development budget for the current fiscal year by a big margin of Tk 500 billion from the local-resources part of the budgetary outlay. And that is thanks to the

thefinancialexpress.com.bd

ADP cut prompted by changed situation
Editorial
Published :
Dec 15, 2024 00:21
Updated :
Dec 15, 2024 00:21

Adhering to the basic principles of flexibility and adjustability, the interim government is mulling over a substantial cut in the annual development budget for the current fiscal year by a big margin of Tk 500 billion from the local-resources part of the budgetary outlay. And that is thanks to the nation's appalling economic condition left behind by the immediate past government. This is no doubt a deep cut in comparison with the reductions in the ADP allocations by Tk 190b and Tk 180b in FY 23 and FY 24 respectively. A pressing financial need and the traditionally poor project implementation capability of the feeble government agencies also prompted the action. It may be mentioned here that the actual ADP implementation rate sank to less than 8 per cent during the July-October period this year. According to a report published in this paper, the budget-trimming process as part of austerity measures will bring down the ADP allocation to Tk 2.15 trillion from the original Tk 2.65 trillion. A downsized but achievable ADP is much better than a robust one far beyond the existing financial and implementation capability. However, maximum efforts must be made for the successful execution of the revised plan. At the same time, causes behind poor implementation capacity should be found out and removed.

The amount to be saved through trimming of the allocation is likely to be used to pay the dues that the government owes to the local private and foreign power generation companies as outstanding and other charges for power purchase. The cut in the ADP allocation will make a revision of the development programme and resetting priorities in the changed situation necessary. While plan for infrastructural development and budgetary allocation for projects are integral parts of a government's yearly economic programme, revision of project plans and fund allocation adjustment to cope with prevailing circumstances are also regular exercises. This is particularly true in case of deficit financing due to failure of the revenue authorities to mobilise adequate funds from domestic sources. The annual development plan adopted by the deposed regime can no longer be implemented with the present weakened financial condition, which is the outcome of ruthless plundering of the national resources by the deposed regime. Revision of development programme and budgetary allocation is nothing wrong and unusual; in fact, it is done almost every year. Not just resource constraint, inclusion of many unnecessary and politically-motivated projects, recasting of ADP is a must do job. Such a budgetary modification should rather be viewed as a pragmatic way of doing things in a changed situation. If efforts are made to execute the unmodified version of the ADP in spite of financial constraint, the government will have to depend more on bank borrowing, leading to crowding out effect.

Besides, the rate of execution of development projects by government agencies, which was less than 8.0 per cent during the first four months of the current financial year is an issue that the government can hardly ignore. The execution rate was one of the poorest in recent years. So, while asking the agencies to concentrate more on raising their project execution rate, it would be more prudent to divert unused funds to meet some pressing needs including payment of arrear bills in the power sector.​