Govt's desperate search for funds to tackle crisis

As part of a desperate attempt to weather the ongoing financial crisis, the government has launched an initiative to collect all cash available in government offices and institutions and deposit it to the treasury.

In separate letters last month, the Finance Division instructed ministries, departments, and deputy commissioners to promptly deposit these funds to the treasury, said officials involved in the process.

They said the government is in the process of reclaiming unspent funds held by various state institutions, non-tax revenue accumulated by public organisations, and dividend payments from institutions in which the government holds equity or has financing.

Furthermore, the Finance Division has implemented changes in the fund release system for autonomous institutions to mitigate the potential misuse of funds.

According to Finance Division officials, the government has taken the initiative to bring down borrowing and interest expenses. In addition, these initiatives aim at effective management of government funds.

Sources said as of 20 August, around Tk1,500 crore of unspent funds had been returned from various deputy commissioners' offices, deputy directors' (local government) offices, and various government offices at the upazila level. Government offices and companies have also started depositing non-tax revenue and dividends, respectively, to the government coffers.

Mohammad Altaf-Ul-Alam, additional secretary (Treasury and Debt Management) at the Finance Division, told The Business Standard that these initiatives have been taken to increase the government's own financial resources.

Officials engaged in the process have expressed concerns that the revenue collection target may not be attained this year due to the upcoming parliamentary elections and the global situation. Revenue from imports and exports is expected to be lower as well.

In FY23, revenue from customs stood at 83.54%, from value-added tax (VAT) at 91.55%, and from income tax at 92.83% of the targets set for them. These figures reflect the impact of import restrictions and a foreign exchange crisis.

In the first month of FY24, the National Board of Revenue collected a revenue of Tk20,561 crore, falling short of the target by Tk2,000 crore.

Now the government finds itself in a dilemma over borrowing from domestic sources. Banks are grappling with a liquidity crunch, and borrowing from the central bank comes with the potential risk of exacerbating inflation.

Meanwhile, the prices of several essential commodities have risen, and individuals are facing increased expenditures on various services. Given such circumstances, the government is hesitant to take any measures that could potentially raise the cost of living, especially in an election year.

Instead, the government is making all possible efforts to rein in inflation. This is why the government is trying to spend its own funds. The average inflation rate stood at 9.69% in the previous month of July.

In the latest move, the government on 20 August borrowed Tk6,700 crore through treasury bills with maturities of 91, 182, and 364 days, bearing interest rates varying from 6.95% to 8.39%. Due to such high interest rates, the government's liabilities are on the rise.

Instructions to refund unspent amount

In mid-July, the Finance Division, in a letter, instructed all the deputy commissioners and deputy directors (local government) to find the unspent money under the operation and development budgets in the last fiscal year or before and deposit it in the government treasury.

As the letter noted, government funds for development and operational expenses by deputy commissioner offices and related departments are deposited in bank accounts. However, at the conclusion of the project period or the end of the financial year, those funds remain in banks instead of being transferred to the government treasury. Consequently, unspent money remains dormant for an extended period of time.

Officials at the Finance Division said that usually, at the end of the financial year, various departments and organisations send the unspent money back to the government treasury. But in fiscal 2019-20, due to the closure of offices, absenteeism of officials and illness, the field offices could not return the unspent money on time. Since then a lot of money is lying in various offices.

On a visit to Chattogram and Jashore last month, Finance Division officials found that a significant amount of money was unspent in the revolving fund of various government departments at the upazila level as well as multiple banks managed by the deputy commissioner and deputy director (local government). In view of this, they feel that such unspent money is lying in the accounts maintained by other district administrations as well.

The Annual Development Programme (ADP) is not implemented as per target due to various reasons, including inefficiency, land acquisition and development-related complications, and litigation. Every year, the expenditure is less than the budget allocation. Even in some cases, it is not possible to spend the money released.

Several deputy commissioners told TBS that there is more or less unspent money in all districts. In some districts, the amount is 10–15% of the released amount. However, most of the deputy commissioners said they had deposited unspent money.

Instructions to deposit dividends against govt equity

The government has capital or equity in various autonomous, semi-autonomous, and public-sector corporations. In the case of equity, companies pay dividends to the government, which is non-taxable income for the government. Recently, the institutions that have such equity in the government have been asked by the Finance Division to deposit the income till 31 December 2022, and the dividend as per the audited accounts of fiscal 2022-23 in the government exchequer.

Initiatives to increase non-tax revenue collection

Besides, many government institutions collect various fees for providing services to the public. The money earned from these fees has been asked to be promptly deposited in the government treasury.

Apart from this, the Finance Division has also suggested increasing fees in various sectors. According to sources, the Office of the Registrar of Joint Stock Companies and Firms, the Office of the Chief Controller of Imports and Exports, various departments and offices under the shipping ministry, and the roads, highways, and bridges divisions have meanwhile increased their service fees.

A new system to release funds for autonomous institutions

A new system of releasing funds has been introduced for autonomous institutions. A personal ledger (PL) account has been created for each autonomous organisation. Henceforth, government allocations for autonomous institutions will be given in these accounts. So far, cheques have been given by the government. Institutions withdraw money by taking cheques and depositing them in their accounts.

From now on, the money will be deposited directly from IBAS++ to the ledger accounts. Later, the government will have information about who is withdrawing the money.

According to Finance Division sources, PL accounts for 82 autonomous institutions have been opened so far. Among them, it has been decided to release the fund for the July-September quarter in the accounts of 33 institutions in the current fiscal year. Money will be released to the remaining accounts in phases.