State-owned Autonomous Institutions: Govt to utilise ‘idle money’
12:00 AM, September 03, 2019 / LAST MODIFIED: 12:49 AM, September 03, 2019

State-owned Autonomous Institutions: Govt to utilise ‘idle money’

Law on the cards to use the surplus amount for development purposes; 68 organisations now have over Tk 2 lakh crore in banks

The cabinet yesterday approved a draft law that would allow the government to use “idle funds” of state-owned organisations for development work.

There are 68 state-owned autonomous organisation which have Tk 2,12,100 crore deposited in banks, said Cabinet Secretary Mohammad Shafiul Alam after the meeting chaired by Prime Minister Sheikh Hasina. 

Among the 68 organisations, Bangladesh Petroleum Corporation (BPC) has the highest Tk 21,580 crore of idle money deposited in banks followed by Petrobangla Tk 18,204 crore, Dhaka Power Distribution Authority Tk 13,454 crore, Chattogram Port Authority Tk 9,913 crore, and Rajuk Tk 4,030 crore. 

“This money is not being used for good purposes. So, the government policy is to bring the money to the national exchequer and spend it on public welfare related activities,” Shafiul said.

The cabinet secretary said once the law is enacted, the 68 organisations would deposit their excess funds to the exchequer. They would, however, keep their operational costs, unforeseen expenditure which would be no more than 25 percent of their operational cost, and money for pension and provident funds. 

The draft mentioned that the government needed the money to finance ongoing development projects and that the money belonged to the people and should be spent on their welfare. 

The cabinet decision, however, evoked reaction from bankers who fear the law would hit the cash-starved banking sector hard. 

Syed Mahbubur Rahman, chairman of the Association of Bankers, a platform of the managing directors of private banks, said the ongoing liquidity crisis would worsen if the government transferred the money from banks to the national exchequer.

State-owned banks would be hit hard as most of the money was with them, he said.

“State banks are now lending at 9 percent. But they may be unable to offer this rate as they will have fund shortages following the withdrawal of so much money,” said Mahbubur, also managing director of Dhaka Bank.  

Zahid Hossain, former lead economist at the World Bank Dhaka office, said, “The draft law has pros and cons. On the positive side ... The SOEs [state-owned enterprises] are not known for their efficiency in managing idle funds. There are also allegations of abuse of authority over idle funds as banks compete for getting deposits.

“If the government used this idle money to finance high-priority development projects, which would have otherwise been financed from expensive domestic sources, such as National Savings Certificates, it will be able to create fiscal space without cutting essential expenditures. 

“However, if this idle money is used for taking up politically motivated low value projects or say vanity projects, it could be wasteful. 

“Also, the government will have to define clearly what is idle money. After all, the SOEs need to have some cash for their day-to-day operational needs and this balance cannot be the same irrespective of the type of SOEs.” 

He said which state-owned enterprise would be allowed to keep how much must be well defined. 

A senior official of the finance division said the government decided to spend the idle money of enterprises that are making profits. 

For instance, the BPC used to incur huge losses. Every year the government paid to cover the losses. Now the BPC is making profits but it is depositing the money in banks, the official said.

The government is planning to spend the surplus money of such enterprises for development projects. In many countries, laws do not allow government-owned enterprises to keep their own additional funds.

The government would be making rules, after the law is enacted, specifying the operational expenses and other matters, the finance division official said.

Ahsan H Mansur, executive director of the Policy Research Institute Bangladesh, said some banks, which depend on government funds to operate, would be in trouble if the government transferred the money suddenly.

He suggested that the government implement the decision gradually, allowing the banks time to adjust their liquidity position.

Mansur said the organisations might also face problems in expanding their activities. For instance, Chittagong Port Authority usually carries out its expansion programme with its own money, he said.

Some organisations might spend money unnecessarily fearing that their money would be going to the government, he added.

Stay updated on the go with The Daily Star Android & iOS News App. Click here to download it for your device.

Type START <space> BR and send SMS it to 22222

Type START <space> BR and send SMS it to 2222

Type START <space> BR and send SMS it to 2225

Leave your comments

Top News

Top News