Next fiscal year, the budget will break with years of practice and allow the deficit to exceed 5% of the gross domestic product, as the government focuses on winning voters’ hearts ahead of the general election.
Finance Ministry officials told the Dhaka Tribune that it was a decision from government high-ups to keep the budget deficit above 5% of GDP with major funds coming from the banking sector to address the gap.
With an estimated GDP of Tk22,24,300 crore in 2017-18, the deficit of 1,12,275 crore will be 5.04% of GDP.
Official sources said Prime Minister Sheikh Hasina asked the authorities concerned not to take any steps in the fiscal year 2017-18 budget that could tarnish the image of the government ahead of the national elections.
It is unlikely that the deficit will grow to be 5% of GDP, given that the budget implementation rate is so low, AB Mirza Azizul Islam, a financial sector analyst and ex-adviser to the caretaker government, told the Dhaka Tribune.
“But if it reaches this level, it will cause inflation in the economy,” he added.
He said, in this scenario, the creditworthiness of the country would be in trouble.
“Greece is a big example of uncontrolled budget deficit,” he added.
Finance Minister AMA Muhith is going to place his 11th national budget in parliament later today.
The size of the next fiscal year’s budget is likely to be Tk400,266 crore — the highest in the country’s history and yet another milestone for the current Awami League government.
When the government assumed power in 2009, it set a record by setting a budget of Tk110,524 crore in the FY2009-10 — the highest then.
According to budget documents, the next fiscal year’s projected deficit is going to be Tk1,12,275 crore.
This is Tk5,595 crore or 5.24% higher than that of the revised budget for FY2016-17.
The revised budget deficit is Tk1,06,680 crore but the announced budget deficit was Tk97,850 crore. The projected total GDP of the FY2017-18 is Tk22,24,300 crore.
To meet the deficit, the government will borrow Tk48,960 crore from banks. The other part of the deficit will be met by funds from foreign sources, according to the documents.
Total earning of the government will be Tk2,88,000 crore in the next fiscal year with a total ADP expenditure of Tk1,53,000 crore.
The size of the current year’s budget is Tk340,605 crore, but it was downsized to Tk317,180 crore in the revised budget.
