The budget deficit for the current fiscal year would go beyond the target, forcing the government to borrow more from the banks and crowding out the private sector.
The apprehension over the increased bank borrowing, which might reach to 5% of GDP, was expressed at a meeting at the finance ministry yesterday, officials attended the meeting said.
Usually the country’s budget deficit remains around 4.5% and for the current budget it was set at 4.6%.
The officials said the new deficit estimate was based on revenue shortfall so far as well as the revised expenditure on annual development programme (ADP), which has been set higher than the rational level.
The meeting between Finance Minister AMA Muhith and members of Planning Commission considered that the revised ADP of Tk60,000 crore is higher by Tk5,000 crore than what it should have been set.
“The most part of the increased deficit would come from the bank borrowing,” Planning Commission member Shamsul Alam told the Dhaka Tribune.
He, however, defended it would be better to borrow from the banks as little amount of money has so far been taken from the banking system.
As per the finance division data, bank borrowing stood at Tk8,730 crore at the end of December 2013, compared to Tk7, 213 crore from the same period a year ago.
Sources said finance ministry officials tried to convince a visiting IMF review mission last week that the government would reduce the bank borrowing target to Tk24,000 crore from the Tk25,993 crore target set under the current budget.
Shamsul Alam said the big church of the extra Tk5,000 crore in the revised ADP would go to the local government and cooperative divisions, water resources ministry, power and energy division, and agriculture ministry while the remaining amount would go to 17 other ministries and divisions.
Concerns have been raised within the finance ministry that the bank borrowing might exceed Tk40,000 crore in the current fiscal year because of a shortfall in revenue earning and an increase in the revised ADP, officials said.
The country fought all odds and prolonged political unrest to maintain a sound macro and fiscal economic situation during the last couple of years, but the strong position of the country might become weak this time, said one of them, seeking anonymity.
He said local business and trade might face difficulties in getting bank loans over the next four months because of the extra government borrowing of around Tk15,000 crore.
