The finance minister in a meeting with secretaries to different ministries on implementation of annual development projects last week hinted the government move, a planning ministry source said.

The government is considering cutting expenditures on travel, car purchase, telephone, electricity etc mainly in the supplies and services sectors.

The current budget has earmarked Tk 39,110 crore for the non-development projects, of which Tk 3,340 crore is allocated for the 53 items of supplies and services.

While talking to journalists earlier this week, Finance Minister M Saifur Rahman said he had tasked the finance secretary to work out how and in which non-development sectors the government can reduce expenditure.

A finance ministry source said the ministry has initiated the process and already taken some steps. With this aim in view, the government has curtailed the ministries' authority to spend foreign aid on their own.

A circular of the Finance Division last month directed all ministries if import of goods for any government development project or revenue budget goes beyond $2 million, it will require approval of a selection committee headed by the Bangladesh Bank governor. Previously, the ceiling was set at $5 million.

The finance ministry source said a step has been taken to defer import of goods not essential at this moment to help reduce pressure on the reserve.

To bring down inflation and ease pressure on forex reserve, the Bangladesh Bank yesterday decided to raise the statutory liquidity ratio (SLR) against deposit by two percentage points and cash reserve requirement (CRR) by 0.5 percentage points.

Bankers and economists agreed that the move will help reduce the pressure on the country's balance of payment, and thus the forex reserve also.

However, they were not convinced of its effectiveness in scaling down the inflation, saying for this the government will have to scrap non-development expenditure. They also suggested reducing bank borrowing by the government.

The government borrowing rose by 15.51 percent in FY05 and by 13.84 percent in FY04 while the bank loans taken by various government agencies and institutions rose by 24.44 percent in FY05 and by 18.88 percent in FY04.

In the current fiscal too, the government has borrowed Tk 877 crore from July 1 to August 20.

However, there is doubt if the government's desire to cut non-development cost is really avhievable.

Last year too, the government took some austerity measures following the devastating floods, such as cutting cost in the supplies and services sectors by 10 percent. But, except for a handful of ministries, most others failed to rein in their expenditure in these sectors. The overall expenditure in supplies and services rather increased from the original budget by 13 percent in the revised budget.

While Prime Minister's Office brought down its expenditure from Tk 17 crore to Tk 12 crore and Finance Division from Tk 45 crore to 32 crore, the expenditure rose from Tk 577 crore to Tk 769 crore in home ministry, from Tk 71 crore to 90 crore in foreign ministry, and from Tk 4 crore to Tk 7 crore etc in commerce ministry.

Further rise in oil price
The government is going to increase the prices of octane, petrol, diesel and kerosene very soon against the backdrop of ever-increasing price hike of these items in the global market.

An energy ministry source said the prices of diesel and kerosene per litre may be raised by Tk 4-5 and that of petrol and octane by Tk 6-8.