The government may increase its allocation for incentive expenses for remittance in the next fiscal year as it looks to retain the surge of the flow of the cheapest source of foreign currencies for Bangladesh.
It had earmarked Tk 3,060 crore in the original budget of the fiscal year of 2020-21 to pay incentives to the beneficiaries of remittance. The allocation has been raised by 47.06 per cent to Tk 4,500 crore in the revised budget.
The government now plans to set aside Tk 4,000 crore for the next fiscal year to help the economy absorb the shock stemming from the coronavirus pandemic.
However, the expenditure allocation for subsidies, incentives, and cash loans may come down to Tk 54,925 crore compared to the revised allocation of Tk 56,303 crore in FY21.
The incentive expenses for remittance are increasing as the money sent by the migrant workers has been growing fast since the pandemic struck, defying grim forecasts.
The receipts went past the $20-billion mark in the first 10 months of the current fiscal year. Between July and April, Bangladeshi received $20.66 billion, up 39 per cent year-on-year.
Remittance inflow surged 89 per cent year-on-year to $2.06 billion in April as the migrant workers transferred a whopping amount of funds ahead of Eid-ul-Fitr.
The government has credited the 2 per cent cash incentive and the easing of procedures for the record flow.
The World Bank says a temporary shifting from informal to formal remittance payment channels amidst the travel disruption, additional transfer to help pandemic-hit families home as well as the transfer of accumulative savings by the overseas workers helped surge of remittance inflow.
The finance ministry forecasts that remittance inflow may swell by 20 per cent in FY22.
The proposal to set the allocation at Tk 4,000 crore has been made keeping the forecast in mind, said an official of the finance ministry. “If the inflow increases, the allocation will increase,” he said.
The government’s total subsidy spending may be set at Tk 25,800 crore, down from Tk 28,678 crore in the current fiscal.
The allocation will go to three sectors: food, power, and interest rate waiver on the loans extended under the stimulus packages and the purchase of liquefied natural gas (LNG).
The taxpayer-backed spending for the food sector may go up to Tk 6,500 crore in FY22, from Tk 6,178 crore in FY21, as the government has a plan to continue providing food support to the poor and vulnerable people affected by the pandemic.
The subsidy for the power sector may be set at Tk 9,000 crore, almost similar to the sum earmarked in the current fiscal year.
The government has to give a considerable amount of subsidy for the quick rental power plants, run mainly by diesel and furnace oil. The price of fuels is spiralling in the global markets.
The subsidy expenditure on the interest rates of the working capital loans under the stimulus packages and LNG import may be trimmed to Tk 10,300 crore from Tk 13,500 crore in the current fiscal year.
The incentive expenditure may total Tk 21,125 crore in FY22, up from Tk 19,825 crore allocated in the original budget in FY21.
The sectors such as agriculture, export, remittance and Jute goods receive incentives through budgets.
The government may keep the incentive spending for the agriculture sector unchanged at Tk 9,500 crore to maintain the growth in farm production and ensure food security.
The country’s food grain production was 4.15 crore tonnes in 2019-20, and it was estimated at 4.52 crore tonnes in 2020-21.
As of February, Tk 3,396 crore was spent as the incentive expenditure for the sector.
The export sector may get Tk 6,825 crore in FY22 in incentive, unchanged from FY21, as the government looks to help the exporters make a turnaround from the pandemic-induced slowdown.
Exports have been hit hard by the global crisis as the demand for goods collapsed in the developed countries.
Shipment from Bangladesh grew 8.74 per cent year-on-year to $32.07 billion between July and April, data from the Export Promotion Bureau showed.
The finance ministry projects that export earnings would grow by 15 per cent in the next fiscal year, the official said.
The incentive spending for jute goods has been proposed at Tk 800 crore for FY22, similar to the current year’s allocation.
The allocation for cash loan spending has been proposed at Tk 8,000 crore, up from Tk 6,000 crore in the revised budget.
The government provides cash credit to state-owned entities, including Bangladesh Jute Mills Corporation, Bangladesh Sugar and Foods Industries Corporation, and Bangladesh Road Transport Corporation. But the loan is seldom repaid.
The government earlier took an initiative to use money from the foreign exchange reserve for infrastructure development projects. And in its first-ever move, it lent Tk 5,417 crore to dredge a channel for Payra port.
It is now planning to provide the money as a cash loan from the budget in FY. An allocation has been proposed to this effect.