Poor revenue collection in the first quarter of FY2015-16 is causing anxiety to the Finance Ministry who must foot the bill for the eighth National Pay Scale that will shortly be officially announced, an official source said.
The Finance Ministry official, asking not to be named, said: “We have no choice but to take loans. Bangladesh Bank is preparing to borrow money to implement the 8th pay scale.”
With an added burden of Tk6,500 crore to cover basic salaries and five months’ arrears under the new pay scale looming, the National Board of Revenue’s (NBR) weak Q1 performance has got the Finance Ministry rushing to secure funds.
The NBR said collection in Q1 of FY2015-16 was the lowest in 10 years.
After the conclusion of an extended credit facility by the International Monetary Fund (IMF) that saw the disbursement of $258.3 million to Bangladesh, the global lender now wants to know how much money will be required to meet the immediate needs of the new pay scale, officials said.
The Article IV Consultation Mission of the IMF is scheduled to arrive in Bangladesh on November 4 to assess the country’s overall economic performance, according to Finance Division sources.
A source in the division said: “We have no outstanding compliance obligations with the IMF, but they are concerned about macroeconomic stability as the exchequer prepares to foot the massive pay scale bill.”
According to IMF documents, the mission hopes to get an estimate of the funds needed in FY2015-16 for the new pay scale as well as information on the costs of paying public servants’ allowances in FY2016-17.
State Minister for Finance and Planning MA Mannan told Dhaka Tribune: “We have allocated a huge fund in the current fiscal year to execute the 8th pay scale within our planned time frame.”
According to budget documents, the Finance Division has allocated Tk26,927 crore for the payment of the salaries of civil servants, teachers and educational staff who fall under the Monthly Pay Order system.
Finance Minister AMA Muhith recently expressed dissatisfaction with the NBR’s poor revenue collection last quarter, saying: “I have asked the NBR chairman to make an effort to raise revenue collection in the rest of the fiscal year.”
According to NBR data, Q1 tax collection was Tk5,803 crore short of the target for the July-September period, although collection rose by 9.5% year-on-year to Tk30,905 crore.
The budget has set the revenue collection target for this fiscal year at Tk176,370 crore.
The government will spend an additional Tk15,904.24 crore for the payment of salaries and allowances under the new pay scale, according to a report to cabinet.
Only the implementation of the proposed salary increases, which took effect on July 1, 2015, will be executed this year. Allowances will be paid out from next fiscal year.
