The budget deficit in the next fiscal year would cross 5% of gross domestic product (GDP) as the development expenditure has been set high at Tk80,314 crore, Finance Minister AMA Muhith said yesterday.
He, however, made it clear the total budget outlay for the fiscal 2014-15 would not go beyond Tk250,000 crore.
The minister was talking to reporters after a meeting of the cabinet committee on public purchase at Bangladesh Secretariat as he shared about the extent of fiscal deficit in the next fiscal.
The government as well as the business and industries always remain skeptical about the deficit financing as they think increased deficit would mean increased borrowing from the banking system and thus crowding out the private sector.
The approved ADP for the next fiscal is 22% higher than the Tk65,872 crore original outlay and 34% more than the revised allocation of Tk60,000 crore for the outgoing fiscal.
Usually, the deficit remains below the 5% level, but this time it would cross the mark, said finance ministry officials.
Records show that there was only one case in last two decades when the budget gap exceeded 5% of GDP.
The wider budget gap is expected to increase the government’s borrowing from the country’s banking system. Total budget deficit is expected to be Tk68,083 crore, which is 5.08% of GDP.
Next fiscal year’s total GDP is estimated to be Tk13,39,500 crore.
The country’s budget deficit usually remains at around 4.5%. In the current budget, the deficit target was 4.6%, but after the budget was revised and reached 5%.
“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, creating a crowding out impact of the private sector.
According to finance division sources, the expected bank borrowing will be Tk27,000 crore in the next fiscal year, which might be increased further as a result.
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.
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.
