With the country's debts approaching 50% of gross domestic product (GDP), it has been estimated that interest payments will gobble up 11.90% of the Tk 2.95 trillion budget proposed for the coming fiscal year.
The proposed budget allocates Tk351.09 billion for FY2015-16 – up Tk52.44 billion from the current budget – to service domestic and foreign debts.
The proposed allocation for interest payments on government borrowing grew by 17.56% over the current budget.
This will add to concerns about fiscal management and the widening budget deficit.
In his budget speech, Finance Minister AMA Muhith admitted that the government would have to pay 11.9% of the budget outlay for the coming year to pay lenders and make savings instrument interest payments.
“We are trying to disburse foreign funds that are in the pipeline to cover the Tk866.57 billion budget deficit,” he said.
The allocation for foreign and domestic debt servicing was Tk298.65 billion this fiscal year.