Debt servicing pushes up charged expenditure

Dhaka,  Wed,  23 August 2017
Published : 17 Jun 2017, 00:20:53

Debt servicing pushes up charged expenditure

Payments come to Tk 1.53 trillion in outgoing fiscal
Jasim Uddin Haroon

Government's charged expenditure has risen significantly in recent years, mainly for an alarming increase in domestic debt servicing.

Official documents show the amount of such spending at Tk 1.53 trillion in the outgoing fiscal year (FY) 2016-17.

The expenditure is set to rise to Tk 1.64 trillion in the next financial year, beginning July 01, according to budget documents of demands for grants and appropriations for financial year 2017-18.

It was Tk 1.4 trillion in 2013-14.

Charged expenditure is mainly meant for payment for salaries of the members and employees working under constitutional bodies. The expenditure also consists of debt servicing both for domestic and external borrowings.

The charged expenditure along with total spending is to be presented in the Jatiya Sangsad later this month by Finance Minister AMA Muhith. And no voting is required on charged expenditure. The Members of Parliament can only discuss the expenditure in the House.

Of interest payments, the government has estimated to pay interests worth Tk 395.11 billion against domestic debts for the next financial year to June 30, 2018. The interest amount on account of external borrowings is estimated at Tk 19.41 billion.

The revised figure for domestic interest payments for the outgoing financial year is Tk 334.95 billion and Tk 18.63 billion for foreign sources.

However, according to the documents, the finance division made most payments that accounted for approximately Tk 1.53 trillion.

On the other hand, charged expenditure for the next financial year for the office of President has been estimated at Tk 210 million, Parliament's charged expenditure at Tk 2.98 billion, Election Commission secretariat at Tk 3.08 billion, the Public Service Commission at Tk 467 million, the Supreme Court at Tk 1.65 billion and the Anti-Corruption Commission at Tk 813 million.

People familiar with the developments at the finance division told the FE that the trend had been on the rise in recent years and that this is due nothing but to increased payment of interest and principal of the domestic debts.

They said the volume of foreign interest payments is much lower as their rates of interest are low. "We are bound to pay interests and principals against borrowing as our Constitution has made the payment obligatory," an official at the budget wing of the finance division told the FE.

According to constitution's article 88, the following expenditures shall be charged upon the Consolidated Fund--(a) the remuneration payable to the President and other expenditures relating to his office (b) the remuneration payable to the Speaker and the Deputy Speaker; the Judges of the Supreme Court;    the Comptroller and Auditor General (iv)    the Election Commissioners and (v) members of the Public Service Commission.

Economists view that the rising trend in the charged expenditure will fall if there be downward yields on the borrowing tools named national saving schemes.

They said this rising trend is causing a burden on government's shoulders and they are paying it from taxpayers' money.

They believe the charged expenditure should have had a slow rise as the salary and pension payments and other obligatory payments for the employees of the constitutional bodies are more or less same over the years, unless new pay scale is executed.

Dr Ahsan H Mansur, executive director of PRI, said this is causing government burden and they are paying from the taxpayers' money for domestic borrowings.

"To my mind, the charged expenditure will remain static or expand slowly if the rate of domestic borrowing becomes low," he told the FE.

However, the government also estimated receipt of Tk 301.50 billion from the national saving schemes in the next financial year although the amount is Tk 450 billion in the revised budget for the current fiscal year.

In the meantime, finance minister AMA Muhith in the post-budget press briefing told the reporters that the government from now on would review yield rates of savings certificates annually to minimise its gap with competitive banking interest rates on deposits. And he hinted that the first review would take place within a couple of months.

"The yield rates of the borrowing tools will be higher in comparison with the market-based interest rates, but gap like 7.0 per cent in commercial banks and 11 per cent in national savings certificates [must] go," the finance minister told the reporters.

Editor : A.H.M Moazzem Hossain
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