To ease pressure on the budget, the government asks the ministries to utilise foreign fund first, otherwise local allocation will be cut.
Taking a stern stance, the Finance Division yesterday said ministries and divisions will not get local fund if they fail to utilise foreign aid in their projects under this fiscal year's budget.
The ministries go for the local grants as various strings, including that of transparency, are attached to the donor money, a finance ministry official said.
Of the foreign aid, the government in the first six months of this fiscal year spent only 17 percent -- lowest in the last four years, Implementation Monitoring and Evaluation Department (IMED) stats show.
While it spent 35 percent of the allocation from the local fund, highest over the same period.
The Finance Division yesterday issued a notice saying unutilised foreign fund will be deducted from the revised Annual Development Programme (ADP).
The government has taken the step in line with IMF conditions to cut expenditure, the official said.
The lending agency advised the government to issue a circular to the ministries concerned by January this year indicating that shortfalls in the externally-funded ADP budget will not be substituted with taka funding.
This year, subsidies on fuel import for rental power plants have exerted huge pressure on budget.
As the price of fertiliser, food grains and fuel oil went up in the international market, expenditure on subsidy and interest payment for these items increased to exceed the projection in the original budget, the notice read.
Over the rest of the current fiscal year, expenditure in these sectors is likely to increase further. It compels the government to allocate additional fund for these sectors.
The finance and planning ministries have already discussed with different other ministries the amount of foreign funds they can use in the current FY. They estimated this time the use of foreign funds will not only fall below the projection but also decrease compared to the previous year.
Finance Minister AMA Muhith at a meeting of the Metropolitan Chamber of Commerce and Industries (MCCI) last week said, in the last fiscal year local funds were allocated to substitute foreign funds but this year it will not be possible.