Austerity Measures: Development projects now on the back burner

The government has decided to step back from new development projects and cut public spending in a broad austerity drive, as it seeks to conserve state resources and manage rising pressure on fuel supply and distribution.

It has also announced several steps, including a 30 percent cut in fuel use for the official vehicles of the prime minister, ministers, and state ministers, the phased removal of old vehicles from roads, and a halt to interest-free car loans for some civil servants.

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In the meantime, the Power Division has set a target to save around 3,100MW of electricity a day to help reduce pressure on the power and fuel sectors.

The decisions were made as part of a wider effort to prepare for possible strain on the economy and the energy sector in the coming months as the US-Israel war on Iran escalated.

Officials indicated that the government wants to keep more money in hand so that it can respond quickly if the external situation worsens and creates deeper pressure on imports, transport, power generation, and public expenditure.

According to the Cabinet Division, the government will not go ahead with any new development project for the time being. The move is meant to slow fresh spending commitments and help preserve funds for urgent national needs.

Officials added that spending on land acquisition would be reduced by 100 percent.

A Cabinet Division officer, wishing anonymity, said that a 100 percent reduction in land acquisition costs means that ongoing projects requiring the acquisition will remain halted.

At the same time, the government will not undertake any new projects needing land acquisition, at least in the current fiscal year, he added.

Another officer said it is a very tough decision for a new government.

“This is because not taking such projects will effectively create a major stagnation in development work, which will decrease the government’s popularity.”

The measures announced by the government cover fuel use, electricity consumption, transport, office hours, official travel, training, and a range of other state expenditures.

The government has also stopped giving interest-free loans to officials for buying cars until further notice.

Under the 2020 policy, officials from deputy secretary rank and above were allowed to take interest-free loans of up to Tk 30 lakh to purchase vehicles.

Sources said all government-funded foreign training programmes would remain suspended until further orders, while spending on domestic training would be reduced by 50 percent.

In addition, hospitality costs at meetings and seminars will be cut by 50 percent, seminar and conference expenses by 20 percent, and travel expenses by 30 percent.

As part of the new measure, the 30 percent reduction will apply to the use of fuel, electricity, and gas across all public offices, meaning ministries, departments, and other state institutions will be required to scale back their routine consumption of energy to reduce overall government demand.

Meanwhile, the government has also ordered cuts in expenses on beautification work.

Expenditure on the beautification of residential buildings will be reduced by 20 percent, while spending on non-residential buildings will be slashed by 50 percent.

Over the power saving target, the Cabinet Division said importance would be given to irrigation for agricultural land, fertiliser production, fertiliser storage, and proper distribution.

It added that fuel supply to industries would continue on a priority basis so that factories can keep running and economic growth is not badly affected.

Sources in the Prime Minister’s Office said that while the government wants to cut waste and reduce non-essential energy use, it does not want the austerity plan to hurt farming, fertiliser supply, or industrial output, all of which are closely linked to food production, jobs, and market stability.

The government has also revised office and business hours. Government and private offices, as well as banks and financial institutions, will operate from 9:00am to 4:00pm, while banking services will be available from 10:00am to 3:00pm.

Except for emergency services, all office buildings, shopping centres, and commercial establishments must close by 6:00pm.

The government also approved a proposal allowing registered educational institutions to import brand-new electric buses without duty.

In other cases, such buses may be imported at a total duty of 20 percent. The decision appears intended to encourage cleaner transport and lower long-term dependence on conventional fuel.