Govt suspends vehicle buying, foreign trips on public funds for FY27

The government has suspended spending on the purchase of all types of motor vehicles, watercraft and aircraft under both the development and operating budgets for the fiscal 2026-27 to ensure prudent use of limited public resources, bring inflation down to a tolerable level and maintain macroeconomic stability.

In a circular today (8 July), the Finance Division also announced that interest-free special loans for government employees to purchase vehicles will remain suspended.

Infographics: TBS

The circular further states that all foreign travels funded by the government for training programmes, seminars, symposiums and workshops have been halted. However, officials may still travel abroad to pursue master's and PhD programmes under scholarships or fellowships offered by development partners, universities, institutions or foreign governments.

It also allows participation in overseas training programmes financed by foreign governments, institutions or development partners. The overseas components of mandatory foundation and essential training programmes may also be conducted at appropriate universities or institutions abroad.

The restrictions will apply to the operating and development budgets of all government ministries and agencies, autonomous bodies, state-owned enterprises, statutory organisations, public sector corporations, state-owned companies and financial institutions.

The circular also states that no funds allocated under lump-sum provisions in the operating budget may be spent during the current fiscal year.

Although purchases of all types of motor vehicles, watercraft and aircraft under the operating budget have been suspended, exceptions will be allowed for replacing vehicles that are more than 10 years old. Newly established government entities may also purchase vehicles with prior approval from the Finance Division.

It adds that except for ambulances and vehicles used for security purposes, all replacement or newly purchased SUVs and cars must be fully electric vehicles.

No new residential, non-residential or other buildings may be constructed using operating budget funds. However, projects that are at least 70% complete may be finished with the approval of the Finance Division.

The Division also barred spending from the operating budget on land acquisition.

The circular similarly prohibits vehicle purchases under the development budget, although projects approved before the issuance of this circular may be exempted from this restriction.

Land acquisition under the development budget will be permitted only after completing all legal formalities and obtaining approval from the Finance Division.

Funds reserved under the Planning Commission's "Special Development Assistance" allocation may be spent only with prior approval from the Finance Division.

For pre-shipment inspections (PSI) or factory acceptance tests (FAT) under both the operating and development budgets, overseas travel will be considered only for experts or technically certified officials where the products are highly specialised or where PSI is mandatory.

In such cases, the finance ministry has instructed agencies to give priority to testing through internationally recognised institutions.

For all other expenditures, the ministry directed government agencies to ensure the best use of public funds and achieve value for money.

Asked about the total allocation for the expenditure categories now subject to restrictions, and how much the government expects to save through these austerity measures, Mohammad Zakir Hossain, deputy secretary at the finance ministry and signatory to the circular, said he was unable to provide the figures immediately.

Fahmida Khatun, executive director of the Centre for Policy Dialogue (CPD), told The Business Standard that the government's decision appeared to be a positive one in light of the current economic situation, marked by high inflation and weak revenue mobilisation.

She said the economy could not afford additional spending under the present circumstances and that there was no room for wasting even a single taka. Spending on unproductive sectors would only fuel inflation further, she said, stressing that public expenditure should instead be directed towards productive sectors to boost investment, employment and people's incomes.

"Although the government has announced an expansionary budget, it is also trying to exercise great caution in its spending. At the same time, it plans to implement a new pay structure for public sector employees at a substantial cost. In doing so, the government is having to make trade-offs in public spending to fulfil some of its political commitments," she added.