Government's overall budget deficit may widen to more than 6.0 per cent of gross domestic product (GDP) this fiscal year (FY) largely for some extra-budgetary spending against lower revenue receipts.
Economists raised their fear about higher fiscal deficit due to low-rated budget implementation amid nationwide unrest and higher spending than the original allocations to some areas.
First comes the 'possible big shrinkage' in the mobilisation of both tax and non-tax revenues for disruption of economic activities by the ongoing violent politics.
The calculations came up during revised budget preparation being done by the finance division in the light of the ground situation.
The government had earmarked 4.5 per cent budget deficit (including grants) for the current financial year.
But if the budget deficit goes beyond 6.0 per cent of the GDP, this will be highest in more than two decades. And this substantial shortfall would lead to rise in borrowing from the expensive national saving tools and banks.
People familiar with the budget revisions said the deficit might rise to nearly Tk 820 billion. It was estimated at Tk 613.46 billion in the original budget 2014-15.
They said the high-ups at the ministry of finance (MoF) are not in favour of cutting down the allocations made in the original budget. The size of the original budget is Tk 2.5tn.
Rather, they want upward revisions for some ministries, including the ministry of home affairs. The latter needs additional money to pay for extra duties being done by the law-enforcing agencies these days.
Finance Minister AMA Muhith in the latest briefing to journalists at the government secretariat had hinted that the allocations for the law-enforcing agencies would rise.
He, however, did not mention the amount required for additional allocations for the next four months of the current year.
In the meantime, the ministry of planning in a letter to the MoF has requested the finance authority not to cut any allocation earmarked for the annual development programme (ADP).
There is a practice that the MoF informs planning ministry about revised figure and then prepares the revised ADP.
"We all know that the ADP will not fully be implemented this year for the political programmes -- blockade coupled with frequent hartals," said an official at the finance division.
"Despite the fact, they (planning ministry) want full allocation," he said.
The finance division is set to finalise revised budget allocations sometime this month (February).
Before that they will meet with the NBR and some key stakeholders in non-tax revenue (NTR). According to the provisional figures available with the National Board of Revenue (NBR) the revenue collection for the national exchequer suffered an aggregate Tk 20-billion shortfall in the first half of the FY'15.
Three wings of the board netted Tk 584.49 billion in tax in the July-December period. The target was Tk 604.53 billion.
Officials said many organisations quoting lower profits by citing the volatility on the country's political front.
They said mobile-phone companies, including the state-owned Teletalk, expressed their intent to pay less than they had earlier pledged.
The phone companies under the Bangladesh Telecommunications Regulatory Commission in addition to their tax revenue contributions are also the biggest contributors of the non-tax revenue. Their shares account for more than one-third of the total NTR amounting to Tk 276.62 billion.
However, economists appeared sceptical about the expected level of expenditure in the current FY amid the blockade-hartal double bind that has already squeezed economic activities.
Dr Zahid Hussain, lead economist for macro and fiscal management at the Dhaka Office of the World Bank, said: "I've doubt whether the ADP will fully be implemented under the prevailing situation that is tantamount to stagnation of the economy."
If it happens, he says, the government has two sources to borrow: national saving certificates and the banks.
The government wanted Tk 312 billion from the banking system in its original budget to make up for the deficit, but it remained in the negative territory. Two reasons are assigned: the net sales of NSD surged significantly and, on the other hand, the ADP was implemented up to 32 per cent.
Dr Zaid Bakht, director (research) at the Bangladesh Institute of Development Studies, struck similar tone as Dr Zahid Hussain's on the state of finance and budget. He also cited ADP implementation being affected by the waves of political turbulence.
"We must have revenue shortfall this year but we will not be able to spend all the resources," said Dr Bakht, also chairman of a state-owned commercial bank -- Agrani Bank.
The price fall of oil on the international market was believed to be blessing for getting rid of subsidies, but higher payments in subsidy for the Bangladesh Power Development Board are offsetting the relief.
The government earmarked PDB subsidy at Tk 60 billion. The largest private independent power plant (IPP) situated at Meghnaghat has been laid shut for long, resulting in purchase of quick-rental electricity at much higher rates.
For this reason, the government exchequer has to pay a minimum of 20 per cent higher subsidy to foot the bill for such costly power purchase.
jasimharoon@yahoo.com
Budget deficit may go beyond 6.0pc this FY
Jasim Uddin Haroon | Published: February 14, 2015 00:00:00 | Updated: November 30, 2026 06:01:00
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