Spending Halt Ordered on Tk1.21tn in Block Allocations Amid Financial Crisis

❐ Staff Reporter

The government’s financial management has been tightened further. The Finance Department has ordered not to spend any of the bulk allocation in the current 2026-27 fiscal year operating budget. The allocation for this sector is Tk 1,21,511 crore. In addition, it has been decided to stop the purchase of new motor vehicles, watercraft and aircraft, tighten restrictions on foreign travel and training with government funds, and limit spending on construction of new buildings and land acquisition.

The circular issued by the Finance Department on July 8 said that these decisions have been taken to ensure proper utilization of limited resources, keep inflation at a tolerable level, and maintain macroeconomic stability.

This directive will also apply to government, autonomous, state-owned and statutory institutions, public sector corporations, state-owned companies and financial institutions.

According to the circular, no money from the bulk allocation in the operating budget of the current fiscal year can be spent. At the same time, the allocation of Tk 7,444 crore for the purchase of motor vehicles, watercraft and aircraft has also been suspended. However, the opportunity to seek approval from the Finance Department has been kept for the replacement of vehicles older than 10 years and the purchase of vehicles required by new institutions.

Conditions have also been imposed on the purchase of new or replacement jeeps and cars. Except for ambulances and vehicles used for security purposes, these vehicles must be fully electric.

Participation in government-funded training, seminars, symposiums and workshops abroad has also been banned. However, this ban will not apply to training organized by foreign governments, institutions or development partners, and travel abroad under scholarships and fellowships.

Construction of new residential, non-residential and other buildings has also been suspended under the operating budget. If any ongoing construction work is more than 70 percent complete, it can be completed with the approval of the Finance Department. Instructions have also been given to limit expenditure on land acquisition.

The government’s decision to cut spending came at a time when the budget for the new fiscal year is Tk 9.38 trillion, while the revenue target is Tk 6.95 trillion.

As a result, the budget deficit has stood at Tk 2.43 trillion, which is 3.6 percent of the gross domestic product (GDP). The government plans to borrow from domestic and foreign sources to meet the deficit.

The government’s financial pressure has also been raised in the Finance Minister’s recent statement on the current state of the economy. At an event at the Bangladesh University of Engineering and Technology on August 16, Finance Minister Amir Khosru Mahmud Chowdhury said that the economy was in a difficult situation when the government took office. In his words, ‘There is no money, now we have to start from minus.’

The Finance Minister also mentioned the major crisis in the banking sector, stock market, and government financial management at that time.

The issue has gained new importance with the issuance of a circular imposing new restrictions on government expenditure in the space of a few days. On the one hand, a budget of about 9 lakh 38 thousand crore taka, and on the other hand, an order not to spend a large part of the allocated money – raising questions about the real pressure on the government’s revenue and expenditure management.

Economists’ fears are also not very comforting. At a seminar on the economic situation at the Dhaka Chamber of Commerce and Industry on August 22, Professor Mostafizur Rahman, Honorary Fellow of the Center for Policy Dialogue (CPD), said that Bangladesh is ‘gradually moving towards a risky debt situation’.

He suggested adopting new strategies to overcome this situation and ensuring more transparency in budget management.

The government also faces a major challenge in terms of revenue collection capacity. The revenue collection target for the new fiscal year is Tk 6.95 trillion. Of this, the target for collection through the National Board of Revenue (NBR) is Tk 6.4 trillion. Amid the slowdown in the economy, pressure on business and trade, and structural weaknesses in tax collection, the big question is how feasible this target will be.

Analysts say that it is not possible to manage the government’s financial pressure in the long term by simply cutting spending. In addition to increasing revenue collection, the quality of government spending must be ensured. Along with cutting unnecessary spending, initiatives to increase production and investment are also needed. Because the government’s excess debt can put pressure on private sector borrowing.

It may not be right to call the government’s austerity measures a direct ‘proof of financial hardship’. However, the spending freeze on the lump sum allocation of Tk 1,21,511 crore, the suspension of new vehicle purchases, restrictions on foreign travel and training, and the ban on the construction of new buildings – all of which have created caution and pressure in the management of government finances are clear.

The question is, despite the large size of the budget, how much money does the government actually have to spend? According to the Finance Minister, when the economy is at the stage of turning around from ‘minus’, these decisions to cut spending along with the large budget are bringing that reality to the fore.