FY 2020-21: Subsidy outlay to cross Tk50,000 cr mark for first time


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FY 2020-21: Subsidy outlay to cross Tk50,000 cr mark for first time

The government’s subsidy outlay is likely to cross Tk50,000 crore mark for the first time in the next fiscal year in a bid to tackle the Covid-19 impacts. In 2020-21 fiscal year, finance division is going to allocate Tk52,838 crore in subsidies, mainly for food and fertilizer – up by 11.39% or Tk 5,405 crore from actual outlay of Tk 47,433 crore in the current fiscal.

The subsidy will account for 1.66 % of Gross Domestic Product (GDP) in the coming fiscal. An official of finance division, who is involved in budget procedure, said, “Oil prices in the international market have come down due to Covid-19 pandemic, lowering the government’s oil-importing cost. The government this time will be able to save the money otherwise spent on oil subsidies.

In terms of food subsidies alone, allocation has been increased to Tk5,953 crore next fiscal from Tk4,948 crore in the current fiscal, according to the latest budget document, which was presented to Prime Minister Sheikh Hasina on May 5 by the Finance Minister AHM Mostafa Kamal.

The subsidy will be required as the government plans to sell rice and wheat at lower prices in the upcoming fiscal year, as it is doing in the current one, said the official. Each kilogram of rice is being sold under the government’s Open Market Sale (OMS) programmer at Tk10 for low income people in urban and rural areas, while the government’s latest procurement price for rice is Tk 35 a kg. In the revised budget of current fiscal, the government set aside Tk8,000 crore incentive for the agriculture sector which is likely to be Tk9,500 crore in the upcoming 2020-21 financial year. Farm mechanisation will also include in that incentive outlay. However, the incentives allocation for the export-oriented industries, which have been witnessing plunge in incomes because of coronavirus-induced demand collapse in the export destinations, and remitters, who have been struggling in their host countries as many of them have lost jobs, will remain the same in the next budget. Meanwhile, power subsidy may reduce by Tk500 crore to end up at Tk9,000 crore in the upcoming fiscal. On the other hand, subsidy on gas and LNG import will be Tk9,000 crore. Cash credit for the government autonomous bodies will be increased to Tk6,000 crore from actual outlay Tk 4,000 crore this year, as per the budget document, adding that the government has a plan to give cash loan support to Bangladesh Jute Mills Corporation. Asked, finance adviser to a former caretaker government, Dr Mirza Azizul Islam, told The Business Post: “It is good to see that more funds are being allocated to subsidise food and fertilizer. But it is not logical to provide more subsidies to gas and LNG import during coronavirus pandemic.” In the running fiscal, the budget deficit is on course to hit 5.3 % of GDP, which is above the International Monetary Fund recommended 5 %. In fiscal 2020-21, it may go up to 6 % amid heightened expenditure to counter the rampage of coronavirus and sluggish revenue generation. Initially, the government thought that the collection from the National Board of Revenue would fall short by Tk52,000 crore this fiscal year. But now it seems the deficit may be Tk 100,000 crore. Finance Minister AHM Mustafa Kamal would also look to cut expenditure through, for example, slashing the allocation for foreign tours. So, the budget size would be between Tk 550,000 crore and Tk 560,000 crore, down from Tk 580,000 crore initially planned. On Tuesday, the Prime Minister approved the Annual Development Programme (ADP) worth Tk205,000 crore for the next fiscal year



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