Worrying volume of interest payment in the next fiscal

Allocation for interest payment in the government budget is expected to cross Tk40,000 cr in the next fiscal, mostly due to an estimated payment of interests on savings instruments. The total interest payment expenditure is likely to rise by 29.82% compared to the revised budget, officials of the Finance Division familiar with the process told the Dhaka Tribune on Saturday. The ceiling of payment of interest expenditure will be increased by Tk9,801 cr over the revised budget for 2017-18 fiscal year, to an amount of Tk42,664 cr. Interest payment in the revised budget outlay for 2016-17 fiscal year stands at Tk32,863 cr while the allocation was Tk39,951cr. Finance Division officials said the next budget paints a troubling picture as the payment of interest expenditure is 30.95% of the budget deficit. Taxpayers would be paying more in interest than they would be for education or defense, an official said. A document obtained from the recent budget management committee meeting reveals that the government has planned to increase the payment of interest by Tk9,801cr or 29.82% over the revised budget outlay. The government is likely to reduce the interest rate on savings instruments and predicts that owing to that move, there may be a surge in encashing of those instruments. Most savings instruments have a rate of 11-13% and are open tab, meaning there is no limit to how much will be sold to the public. This has resulted in massive debt. In the last nine months, the government has sold Tk33,000 cr worth of savings instruments against a target of Tk19,610cr. Finance Minister AMA Muhith has said that the government plans to take more loans from the banking system for cheap funds to meet the next fiscal deficit. According to the next fiscal year's budget estimation, the deficit will be Tk129,020 cr. Economist AB Mirza Azizul Islam told the Dhaka Tribune this was a major fiscal management failure of the government. “Government loan from saving instruments is definitely out of control. State agencies need to fix the amount of loans from national saving instruments,” he said.