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Dhaka Tribune

Budget deficit gets wider in FY15

Update : 21 May 2014, 06:23 AM

The government is going to face a budget deficit of more than 5% of gross domestic product (GDP) as the total annual development programme outlay has been set at Tk80,315 crore.

Usually, the deficit remains below the percentage, but this time it would cross the mark, said finance ministry officials after the National Economic Council (NEC) meeting yesterday.

Records show that there was only one case in last two decades when budget gap exceeded 5% of GDP.

The wider budget gap is expected to increase the government’s borrowing from the country’s banking system.

“Larger budget deficit may prompt the government to borrow more from banks,” said Dr Zaid Bakht, research fellow of Bangladesh Institute for Development Studies (BIDS).

Finance Ministry officials also feared the same thing saying the budget deficit will force the government to increase domestic borrowing.

According to finance division sources, the expected bank borrowing will be Tk27,000 crore in the next fiscal year, which might be raised further.

Initially, the target was to keep the budget gap within 5% of GDP and the finance ministry proposed Tk79,032 crore ADP for the upcoming fiscal year.

The figure was decided after meeting between finance ministry and planning ministry. But the NEC meeting decided to raise to Tk80,315 crore for the year which begin from July 2014.

“Political reasons were behind the increased ADP,” said Zaid Bakht.

Total budget deficit is expected to be Tk68.083 crore, which is 5.08% of GDP.

Next fiscal year’s total GDP is estimated at Tk13,39,500 crore.

The country’s budget deficit usually remains around 4.5%. In the current budget the deficit target was 4.6%, but after the budget was revised, it reached 5%.

Now there is no IMF condition on budget deficit. The lender has imposed any such condition under the Extended Credit Facility (ECF) loans.

As the deficit is now crossing 5%, finance ministry officials feared that the IMF would impose condition again in this regard under the ECF loans.

Official data showed as of March 2013 the net domestic borrowing stood at Tk18,419 crore, which is almost double the figure the government borrowed till December last year.

As of December, the government borrowed Tk9,881 crore from domestic sources. The borrowing till March is 54% of the total budgetary estimation of borrowing for the current fiscal year.

The current budget had set domestic borrowing target at Tk33,964 crore and foreign loan of Tk23,729 crore to meet budgetary expenditure.

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