The Bangladeshi caretaker government might require to spend around 12 percent of its upcoming fiscal budget on subsidies for fuel, fertilizer and food, putting a serious pressure on the country's macroeconomic stability.
"We need to set aside at least 12 percent of our budgetary expenditure on subsidies in fertilizer, fuel and food in the next fiscal budget which starts from July 2008," a senior finance ministry official told Xinhua on Monday, who declined to be named.
"In current fiscal year (July 2007 to June 2008), the government exchequer is under huge pressure due to increased prices of fuel, food and fertilizer in the international market and therefore the government has to provide huge subsidies in order to keep these prices at acceptable levels," Uttam Kumar Dev, an expert with the Center for Policy Dialogue (CPD), a think tank in Bangladesh, told Xinhua Monday.
They made the comments after the government said the revised spending on subsidies shot up by 93 percent in the current fiscal to 116 billion taka (about 1.66 billion U.S. dollars) from the originally projected 59.99 billion taka (about 857 million U.S. dollars).
A 200 percent hike in fertilizer prices and almost 100 percent hike in food and fuel prices led to the record government spending in subsidies in the ongoing fiscal, as it sells the items far lower in the local market than the international prices.
However, some multilateral agencies such as the International Monetary Fund and the Asian Development Bank have long been pressing the government to shed its subsidy burden, warning that the country's fiscal management is now under threat because of high borrowings to finance subsidies.
Source: Xinhua
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