Continuous growth in the government's borrowing from internal sources has been a grave concern for the budget of the fiscal 2001-2002. Such an increasing trend in government borrowings is definitely a violation of fiscal discipline.

Noted economist Dr. Debapriya Bhattachraya made this remark Friday. He was giving his own analysis to journalists on the new budget at the Centre for Policy Dialogue (CPD) office in the city. Prof. Mustafizur Rahman, Director (Research) was sitting beside him supporting the analysis. Executive Director of CPD, Dr. Debapriya, however, said he and Prof. Mustafiz came out with their own and independent analyses and these do not represent the CPD's opinion.

Both Dr. Debapriya and Prof. Mustafiz said the main weaknesses of the budget are increasing trend in the revenue expenditure and fiscal deficit, declining trend in the foreign resources and dependence on the import-related revenue income. The two distinguished economists feared the interim caretaker government might face some troubles like low flow of cash and pressure on balanced of payments. They made some suggestions as remedy to overcome the weaknesses of the new budget. These include "a need for fiscal consolidation" and curtailment of non-development budget. The economists, however, said there are four positive aspects in the new budget. These are: budget was prepared on broad based perspective, figuring low inflation, setting social safety net programme and targeting a GDP that is above the historical performance.

Dr. Debapriya said there is nothing to be done in the area of revenue income rather than in the management of the expenditure side. Only a faithful implementation of the new budget can help achieve targeted growthin the next fiscal. He said nearly six billion US dollar is in the pipeline and the government has to ensure utilisation of the fund.

Expressing concern over the increasing trend in budgetary deficit, the economist said in the last fiscal this was, targeted at 6.2 per cent growth. But it was revised to 6.9 per cent and in the new fiscal; it was targeted at 6.2 per cent. He said it is alarming that the portion of the foreign financing is declining in meeting the fiscal deficit which means a continuous pressure on internal sources is increasing. In the new fiscal, the internal sources share 58.3 per cent of the development budget against 50.1 per cent in the current fiscal. In one sense, reduction of foreign dependence in the development budget is good. But, on the other hand, it has been a grave concern as the foreign fund mobilisation for the development programmes is being reduced. It will create pressure on foreign exchange reserves as well.

Dr. Debapriya said the government has planned to borrow Tk 37.05 billion from the internal sources in the new fiscal against Tk 35.29 billion origina1 borrowings. But it targeted Tk 24 billion. The government made the borrowing and planned the new borrowing from the savings certificates which is costlier than the borrowing from the banking system. It will be better for the government to borrow from the banking system rather than from the saving instruments due to former's lower interest rate, he said adding borrowing from the banking system is available as banks are running with surplus liquidity.

Increasing trend in the payment of interest has been another concern for the new budget, Dr. Debapriya said, in the current fiscal, the government had to pay 16.1 per cent of the revenue budget as interest against the planned 5.5 per cent. In the new fiscal, it was planned to pay 20.7 per cent of the total revenue expenditure as interest, he pointed out. He said faster growth in salaries and allowances of the government employees is also a growing concern. In the current fiscal, it was targeted to increase by 1.28 Nr cent growth, but it had been increased to 4.1 percent and in the new fiscal it was planned to increase by 3.2 per cent growth, he said.
The total revenue expenditure has increased with 12 per cent growth against the targeted six per cent in the current fiscal and in the new fiscal it will maintain the same trend, he said. He said the NBR-related revenue income has increased with 14.04 per cent growth from the targeted 12.05 per cent in the current fiscal. But such a growth is an extraordinary one. If such trend continues in the new fiscal, then it will contribute a lot to the revenue earnings. Otherwise, it will create problem for achieving the targeted growth in the revenue budget.

Dr. Debapriya termed the over six per cent GDP growth in the last fiscal as the highest one. In the incremental growth of GDP, agriculture and industry sectors jointly share 44.6 per cent while physical infrastructure sector shares 26.61 per cent, social sector 8.2 per cent and the rest shares 21.1 per cent. He said, in the last fiscal year, the per capita income achieved an increased growth of Tk 4.7 in taka terms and 1.6 in dollar terms. The per capita income reached 369 US dollar. But it is stil1 the lowest in South-Asian countries.