DHAKA (AFP) — Bangladesh's government on Monday unveiled huge subsidies and welfare measures in a 14.6 billion dollar budget it hopes will shield the poor from soaring food and other key commodity prices.
Finance Minister A.B. Mirza Azizul Islam announced the budget for the 2008-09 fiscal year, beginning July 1, in a pre-recorded speech broadcast on television and radio.
The military-backed emergency government's second budget since taking power in January last year would see some 30 percent of the 999.62 billion taka (14.6 billion dollars) budget being spent on subsidies and social protection measures, Islam said.
"In the backdrop of the negative impacts of international price hikes of oil, food and fertiliser, together with internal shocks, an expansionary fiscal policy to protect the poor and the low-income group of the community has become essential," he said.
The minister said the government would spend 20 billion taka to create jobs that would give two million unemployed people 100 days of work.
In an effort to help Bangladesh's poor in the wake of rapidly rising food costs, the government will buy at least 3.2 million tonnes of grain from both within the country and overseas.
Three million tonnes of rice -- double the amount from the previous year -- will be distributed for free or sold at a subsidised rate.
"The impact of the global food shortage has fallen on the poor and the lower middle classes. The government is fully conscious about the need to provide social security so that their living standard does not deteriorate further," he said.
Islam said some 58.3 percent of the proposed budget would be spent on "direct and indirect poverty reduction programmes."
The monthly stipends for the poor, destitute women and disabled have been increased substantially while the government's nearly one million employees have been given a 20 percent increase in salaries.
The overall budget deficit will shoot up to five percent of gross domestic product or around 300 billion taka -- financed from external aid and domestic borrowing -- due to the massive increase in subsidies and the expansion of welfare.
The government has trimmed its annual spending on infrastructure, education and health by at least 3.3 percent to 3.7 billion dollars to make more money available for subsidies and welfare measures.
In previous years, the government set aside between 35 and 50 percent of the budget for developing infrastructure such as roads, power plants and gas lines, but this year the amount will be around 25 percent, he added.
Food prices have almost doubled in Bangladesh due to a shortfall caused by two major floods last summer and a devastating cyclone in November.
Inflation on food has spiked to about 10 percent since the floods last year.
Bangladesh is home to 144 million people, 40 percent of whom live on less than a dollar a day. More than 70 percent of people live in rural areas and depend on farming for their livelihoods.
The interim finance minister announced a slew of fiscal incentives, including a sharp cut in corporate taxes and import duties and made agro-processing, farming and software development industry tax-free to boost economic growth.
The government has targeted 6.5 percent GDP growth in the next fiscal year, up from an estimated 6.2 percent in the current year, he said.
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