where the money goes?
Razu Ahmed
July 12, 2008 where the money goes?
In the global context, the studies suggest that, predictably, there are three factors that are unduly burdening many budgets: defense spending, debt payments and untargeted subsidies. The total military expenditure of governments across the world has fallen in the 1990s compared to the 1980s. However, the absolute burden of defense expenditure remains high in many countries. Contrary to the global trend, defense expenditure in
The above table reveals the fact that the government is spending more on external debt servicing than education or health. In 2006, the country had to pay 16% (2.4% of GDP) of total public spending for external debt servicing while the figure was around 15% (2.3% of GDP) and 7% (1.06% of GDP) for education and health sector respectively. The water and sanitation sector takes out very meager amount money (just 0.8%) from the total allocation pie. A frustrating picture can be seen if one looks at the issue from the window of the Revenue budget. It clearly demonstrated that
According to the official statistics published by the GOB, overall external debt servicing rose from $892.7 million in 2001 to 1457.6 million in 2006 showing almost 63% increase during the last 6 years. Servicing for Medium and Long-term Debt (MLT), borrowed mostly from multilateral and bi-lateral donors costs $678.1 million in 2006 while the figure was $596.6 for the year 2001. Due to the increasing rate of exports during the last one and a half decades, the EDT/XGS (Total External Debt/Exports of goods and services) ratio has gone down from 388.5 in 1990 to 116.8 in 2006. Same trend can be observed in TDS/XGS (total external debt servicing/exports of goods and services) ratio: 20.9 in 1990 to 8.8 in 2006.
If one takes into account the domestic debt servicing, the overall public debt servicing (external and domestic) picture for the year 2006 would be seen as frightening one consuming almost 13% (2.04 for external and 10.25 for domestic) of revenue expenditure for interest payment only.
However, the economic analysis of revenue expenditure (2008) of the GOB reveals that expenditure on account of major three heads, “salary and allowances”, “subsidies and transfers” and “interest payments”, which is set to account for 82.2 per cent in the total actual revenue expenditure, will grow by 4.9 per cent, 16.7 per cent and 17.8 per cent respectively in FY08. It may be noted that the domestic debt servicing liabilities are on the rise. Share of Debt service Liabilities-DSL (domestic) in revenue expenditure was 18.2 per cent in FY07 which is projected to be 19.0 per cent in FY08 (CPD: 2008).
Widespread poverty, powerlessness and lack of basic services mean that demand for public spending is high. Therefore, the challenge for the government is to contain wasteful public spending and orient it towards priority sectors. Public expenditure should promote pro-poor growth; basic services, such as education, health, sanitation and housing, should be a priority. However,
(This article is a part of a research report jointly prepared by Monowar Mostofa and Razu Ahmed)
Tags: Bangladesh , External Debt , Money
