Bangladesh Bank Governor Atiur Rahman on Friday said bank borrowing under the proposed budget for the fiscal year 2013-2014 will not affect inflation.
He was speaking at a press conference on national budget, which was placed in the parliament on Thursday. Finance Minister AMA Muhith was also present at the press conference.
The governor said question arose that due to increased bank borrowing showed under the budget, inflation would spiral out of control. However, the government’s borrowing remains below the target in the current fiscal year. Till now it has borrowed Tk124bn, less than half from the target of Tk263bn.
“We expect that it will not cross the limit during the rest couple of days. In this view next target of Tk250bn for fiscal year 2013-14 is very restrained,” said Atiur.
The current economic trend is very stable. Inflation index came in discussion mostly surrounding the bank borrowing, said BB governor.
He pointed out, inflation rate in Bangladesh is quite reasonable compared to India where now retail inflation rests at over 9 point. So, there is no reason to become anxious over inflation. At this moment there is no possibility of increasing the price of imported products. So, we will be able to keep inflation under control along with our fiscal year policy.
Talking about Bangladesh’s GDP growth, he said, it stands at above 6% until now, which is not disappointing compared to neighbours India and Pakistan, where the GDP growth is respectively 5% and Pakistan 3%. There is little to worry about.
Considering import and export growth, Bangladesh can be optimistic about the target GDP growth in the new budget.
On May, export growth increased by 10.6% while capital machineries import growth increased by 27% on April. Besides, foreign direct investments have also increased, as in the last one year Bangladesh brought above Tk1bn worth foreign private loan.
So based on all economy indices, it is possible to obtain the target growth’s projected by the finance minister, said the governor.
Bank borrowing has been proposed Tk260bn for fiscal year 2013-14 to meet the budget deficit which is 13% more than previous.
According to the proposed budget, the overall deficit will be Tk550.32bn which is 4.6% of GDP. Of this amount, Tk210.68bn (1.8% of GDP) will be financed from external sources and Tk339.64bn (2.9% of GDP) from domestic sources. Of the domestic financing Tk259.93bn (2.2% of GDP) will come from the banking system and Tk79.71bn (0.7% of GDP) from savings certificates and other non-banking sources.
