Finance Minister Abul Hassan Mahmood Ali will present next fiscals budget in parliament on June 6, with a deficit of Tk 255,200 crore, slightly less than 5 per cent of the total gross domestic product (GDP).
In the outgoing fiscal the deficit was estimated at Tk 257,885 crore, which was 5.2 per cent of the GDP.
The deficit in next fiscals budget has been reduced by about Tk 3,000 crore or 1.16 per cent compared to the outgoing fiscals budget.
In the next fiscals budget the net debt from abroad will be Tk 115,000 crore and domestic debt -- Tk 165,000 crore of which Tk 145,000 crore would be borrowed from banks and Tk 20,000 crore will raised by selling savings bonds and other sources.
According to the provisional estimates in January the GDP size of Bangladesh was Tk 50.48 lakh crore, which is expected to increase slightly by the end of the fiscal year.
To meet the deficits in fiscal 2023-24 the government had set the target to borrow Tk 127,190 crore from overseas sources and from grants024. In the next fiscal the government plans to increased borrowing from overseas sources to the tune of Tk 131,300 crore and expects to receive grants worth Tk 4,300 crore, up from the outgoing fiscals Tk 3,900 crore.
Borrowings from overseas sources is thus set to increase by 3.23 per cent in the next fiscal.
Economists said this trend of putting pressure on the countrys economy has been going on for years.
Due to the governments increased borrowings banks faced liquidity crisis from time to time, leading to hindrance in increasing investments by the private sector, said economists.
They repeatedly said that growth of credit to the private sector has been under pressure.
However, as the government has to fund the budget by accepting such a cycle of huge deficit of income and expenditure. In this context, as an alternative to borrowing from banks, economists advised reducing the governments expenditures reduce leakage in revenue collection, reduce unnecessary expenditures and subsidies in order to balance the income-expenditure in the budget.
To get out of the cycle of deficits, economists advised the government to bring changes and reforms in its revenue collection policy and improve management of expenditures in budget for the next fiscal.
Dr Abdul Mazid, former chairman of National Board of Revenue (NBR), said, "If the budget deficit is high, it increases the pressure on the economy. In order to maintain the development activities of the government, foreign loans must be taken on better terms, because no one wants to provide loans to Bangladesh on easy terms.
"Because Bangladeshs reserves are low. Every year this deficit means that the debt burden on the economy increases. Be it domestic or foreign, servicing debts will eat up the bulk of the budget. So there is a need to balance the budget," he said.
Dr Mostafizur Rahman, distinguished fellow at the Centre for Policy Dialogue (CPD) said that due to low revenue collection, the entire development budget has to funded by loans. A part of the collected revenue is spent on debt servicing. If you have to take a loan of around Tk 150,000 crore from the bank and pay 14 per cent interest, the burden of interest will increase a lot in the next fiscal year."
Mostafizur Rahman also said, "If the government takes more loans from banks, the banks ability to give loans to the private sector decreases, and if the central bank takes loans, inflation increases. Although the central bank has moved away from printing new money due to a contractionary monetary policy, we have to be careful in the next fiscal year whether the loan money is being used appropriately and economically and whether the private sector is being encouraged or not. Otherwise, employment will decrease and inflation will increase, with a negative impact on the people."
Economists said its bad for the government to borrow more from banks as borrowing from commercial banks reduces the ability of banks to lend to the private sector. And taking loans from the central bank leads to inflation, the burden of which ultimately has to be borne by the consumers, the people. A significant part of the debt from the banking system is settled by the government by getting money printed by the central bank.
Economists pointed out that printing money increases the supply of money in the market, which results in inflation.
According to Bangladesh Bureau of Statistics (BBS) data, overall inflation rate stood at 9.74 per cent in April.
As a result, inflation has been above 9 per cent for 14 consecutive months. An official of the finance division said that no matter how high the inflation is, the government has no alternative to borrow from banks.
The size of the main budget for fiscal 2024-25 is expected to be Tk 796,900 crore, which will be 4.62 per cent more than Tk 7,61,785-crore the budget size of fiscal 2023-24.
The possible target of growth is 6.5 per cent. Achieving growth is less important than controlling inflation, said economists.
