Bangladesh’s economic pointsman may have to walk a tightrope managing a paradox of austerity and growth ambition as the government is set to announce a bigger budget tomorrow (Thursday) with wider deficit for next fiscal.
A preview of the national budget for the forthcoming financial year (FY) shows that the government of Prime Minister Sheikh Hasina that faces general election in months aspires to spend Tk 7.61 trillion in the FY 2023-24 to drive the country on an incremental economic-growth trajectory matching Bangladesh’s LDC-graduation process.
But the aggregate earning is estimated to be Tk 5.0 trillion in tax and non-tax revenues, leaving a wide deficit of Tk 2.61 trillion set to be met through borrowing from internal and external sources amid scepticism in the context of the lingering crunch time on both fronts.
Experts and policymakers in pre-budget talks take exception to crafting a “growth-centric” budget in time of variegated internal and external challenges —soaring inflation and forex dearth being the nagging pain in the neck.
Finance Minister AHM Mustafa Kamal would present in parliament the budget — the last one of the ruling Awami League government in its consecutive third term.
The experts and policymakers say the budget for the next fiscal year may be “exceptional one in that the ongoing war in Ukraine that broke out in February last year has already cast an adverse domino impact on the global economy that troubles the domestic economy as well”.
Due to the global economic crises the country’s export earnings are showing downturns while remittance inflow is also falling with the consequences of fall in foreign-currency reserves. The balance- of-payments deficit is continuing to widen, further shrinking forex reserves.
The government, thus, is forced to harshly curtail imports amid dollar crunch, which is severally hindering industrial production for short supply of raw materials while power plants are forced to stop electricity generation failing to get requisite coal and electricity.
Keeping high rate of inflation under control has come as a major challenge for the government as the price spiral of essential commodities has forced the lower-and middle-income groups of people to run towards the trucks that are selling goods at subsidised rates.
In the next fiscal year the government will remain under tremendous pressure to meet the conditions set by the International Monetary Fund (IMF) while granting US$4.7 billion loans to Bangladesh to help lower pressure on balance of payments.
The government will have to enhance revenue collection by 0.5 per cent of GDP every year, keep forex reserves to a certain level, calculate net reserves, and lower subsidy spending, among others, as part of IMF lending terms.
Like in the current fiscal year the government wants to maintain austerity measures and contain unnecessary imports to lower spending as much as possible in the next year, according to finance officials.
Attuned with the concept of ‘Smart Bangladesh’, the next budget will focus on creation of smart manpower to cope up with the impacts of Fourth Industrial Revolution (4IR) that moves the globe at an unforeseen faster pace.
Mr Kamal, in the estimated Tk 7.61-trillion budget, has earmarked Tk 4.75 trillion as operating expenditure and Tk 2.77 trillion for development spending. In the next fiscal year the government will spend Tk 820 billion for payment of domestic interest and Tk 123 billion as interest on foreign loans.
Some Tk 390 billion will be spent as capital expenditure while Tk 5.02 billion will go for food-sector spending while some Tk 84.02 billion will remain earmarked as loans and advances.
The 2023-24 budget will have Tk 2.63 trillion for financing annual development programme (ADP), Tk 79.86 billion for non-ADP special project, Tk 28.28 billion as non-ADP food-for-works recipe and transfers, and Tk 37.68 billion for schemes which includes some development programmes that are financed from own source revenue but not included in the ADP.
In the next fiscal the government targets to generate Tk 5.0 trillion as revenue of which Tk 4.5 trillion will come as tax-revenue and Tk 500 billion as non-tax revenue. The National Board of Revenue (NBR) will be given a task to realise Tk 4.3 trillion while non-NBR tax is targeted at Tk 200 billion.
The government estimates that Tk 39 billion will come as foreign grants.
The overall deficit of the budget may stand at Tk 2.61 trillion or 5.2 per cent of the gross domestic products (GDP) which the government plans to finance by borrowing Tk 1.02 trillion from abroad, Tk 1.32 trillion from banking system, Tk 230 billion from non-bank sources of which Tk 180 billion will come from national savings schemes.
In next year the government plans to borrow Tk 865 billion as long-term and Tk 458 billion as short-term loans from banking sector.
The size of GDP is estimated at Tk 50.06 trillion and the GDP growth 7.5 per cent for the next fiscal year. The government aims to contain the galloping inflation within 6.5-percent bracket.
The government plans to set aside Tk 1.19 trillion for social safety net aiming to expand the safety-net coverage while allocate Tk 1.10 trillion for subsidy and incentives.
syful-islam@otlook.com