Finance ministry disagrees with IMF terms on social security spending

Industry Desk: The finance ministry has not agreed on the International Monetary Fund’s term to exclude pension and savings certificate interest payments from the social security budget.
“We have not agreed to accept the IMF’s condition to separate the allocation for social security from the allocation for pension and savings certificates interest. Even without separation of the two accounts, our social safety net budget is well in proportion to the GDP, as per the IMF’s advice,” said an official of the Finance Division, who was present in a meeting with a visiting IMF mission in Dhaka.
However, the officials of the finance ministry informed the lending agency about the plan to increase the scope of the social security sector in the upcoming budget.
The visiting mission of the IMF discussed social security and subsidies in a meeting with the Finance Division officials in the last two days. During the talks, the organisation has asked to increase support for the real poor by reducing subsidies and increasing allocation to the social security sector.
Besides, the IMF has also called on Bangladesh to expand the use of Ibas++ software to ensure transparency in government spending.
An eight-member IMF delegation has been on a visit to Dhaka since Tuesday to review the progress in fulfilling the conditions of the $470 crore loan assistance given to Bangladesh. The delegation also held a meeting with the officials of the Economic Relations Division (ERD) at Agargaon in the capital on Thursday.
Officials of the Finance Division informed the IMF delegation that in the social security sector, 735,000 elderly, widows and differently-abled persons will be brought under the allowance in the next 2023-24 fiscal year. Besides, the amount of old-age and widow allowances will be increased after almost a decade.
The monthly allowance of old-age allowance beneficiaries is being increased from Tk500 to Tk600. Besides, the amount of monthly allowance for widows and deserted wives is being increased by Tk50 to Tk550. Overall, Tk130,000 crores will be allocated for this sector in the next budget, increasing by about 17% compared to the current financial year, said the Finance Division official.
However, data suggests that Tk 113,576 crores have been allocated for 115 programmes in the current fiscal year 2022-23, which is 2.55% of the GDP. Of this, Tk28037 crores have been allocated for the pension of retired government employees and their families, which is 24.68% of the total social security programme allocation, meaning one fourth of the total allocation will be spent in this sector.
Besides, Tk7,907 crores have been earmarked as social security premium on the interest rate of savings bonds.
The visiting IMF delegation also held a meeting with ERD Secretary Sharifa Khan at the latter’s office on Thursday, where they asked to know whether any development partner’s loan instalments were outstanding amid the foreign exchange reserve crisis in Bangladesh.
“In the meeting, the IMF representatives asked about the database related to foreign loans. The delegation has been informed about this… Our repayment is clear till date. We have not failed to pay any debt so far,” Sharifa told.
However, the beneficiaries of government employees’ pension scheme and savings certificate interest are not poor. Therefore, the IMF has stipulated that the allocation of the two sectors should be separated from the allocation of the social safety net. Besides, the organisation has also determined the amount of money to be allocated to the social security sector in proportion to GDP.