ADP faces 12pc cut | The Daily Star
12:00 AM, December 04, 2011 / LAST MODIFIED: 12:00 AM, December 04, 2011

Subsidy Burden

ADP faces 12pc cut

The government may reduce the fund for annual development programmes by 12 percent or Tk 5,400 crore due to pressure of subsidy on the budget and its failure to implement projects under ADP.
The ADP allocation may be cut down to Tk 41,600 crore, as per the primary estimate of the finance ministry.
A revised policy has already been issued by the planning ministry on how to cut the ADP size.
The revised ADP will be finalised next month and at that time, according to a finance ministry official, the ADP cut may be more than the primary estimate due to increasing expenditure on subsidy.
The current fiscal year's ADP size was highly ambitious in the context of the government's capacity for expenditure and mobilising resources.
As per the planning ministry statistics, in the first four months of the current fiscal year only 15 percent of the total ADP allocation-- 21 percent of the local component and 7 percent of the foreign funding-- has been spent.
Though the implementation of ADP projects is low, the government's bank borrowing has been increasing day by day. The government in about five months until November 29 borrowed Tk 19,866 crore from banks, which is around Tk 1,000 crore more than the target set for the whole year.
And about 60 percent of the total borrowing was from the central bank, which caused an increase in inflation in recent times.
A high-level meeting with Finance Minister AMA Muhith in the chair last month agreed to stop financing low priority projects.
In the circular issued last month, the planning ministry said that in the revised ADP, the number of projects has to be kept limited. It also suggested dropping low priority projects.
The circular said the revised ADP would have no unapproved projects without any allocation on its list. The limitation of local resources will have to be considered while finalising the revised projects, it added.
Besides the ADP, the Finance Division has identified some other sectors where the government can cut expenditure. The finance minister may sit with Prime Minister Sheikh Hasina today to discuss this issue.
If she gives her consent to the proposal for expenditure cut, decisions like reducing expenditure on new recruitment and subsidy will be taken, said the finance ministry official.
He said the government had been trying hard to get $1 billion loan from external credit facility to ease the pressure on Balance of Payment (BoP).
A mission of IMF (International Monetary Fund), meanwhile, started discussions with the government from November 30, which will continue for two weeks.
The finance ministry official said one of the main conditions of the IMF mission would be the budget deficit under no circumstances would exceed 5 percent of the GDP (Gross domestic product).
But the finance ministry projected that if the ministries do not cut their demands the budget deficit may cross 6 percent.

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