Interest payments on government borrowings exceeded the allocation by Tk 35.69 billion in the last fiscal following debt buildups over past few years for spendthrift development expenditure, officials and economists say.
The interest payments were yet higher by Tk 61.65 billion than budgetary allocation in the previous fiscal year (FY2022), Ministry of Finance (MoF) officials said Wednesday.
A staggering amount of Tk839.44 billion was spent from the last fiscal budget for paying interest only in debt service to local and foreign lenders, they said.
The original allocation was Tk 403.75 billion on this head in the national budget for the fiscal year 2022-23, some Tk 60.69-billion lower than the upwardly revised allocation of Tk 901.13 billion, MoF official data showed.
Economists and officials say since the government is borrowing higher funds from internal as well as external lenders, its year-on-year debt-service liabilities are growing above the set marks.
According to the MoF data, the government repaid Tk 777.79 billion in interest against loans in the previous FY2022 against the revised budget allocation of Tk 712.44 billion.
The government usually borrows from the domestic bank and non-bank systems and also from external development partners, including the World Bank, the Asian Development Bank, Japan, the International Monetary Fund, and China, for minimising its budget deficit stemming from income-expenditure gap.
In the past FY2023, government's revised budget deficit was estimated at Tk 2.27 trillion out of its total Tk6.78-trillion national budget.
A senior MoF official has said the interest payments could even be higher than the above- mentioned expenditure in the last fiscal if the government agencies should implement cent percent of the national budget.
However, the government couldn't execute even the revised budget fully in the FY2023--it spent 86.15 per cent of the total outlay, MoF data showed.
Government ministries and agencies spent Tk 5.65 trillion, or 86.15 per cent of the total Tk 6.56-trillion revised budget outlay in the last fiscal.
The government drew hefty funds from domestic resources, especially from the banking system, for deficit financing.
Net government borrowing from the banking system in the FY2023 was Tk 1.18 trillion, some Tk 426-billion higher than that in the previous FY, the MoF data showed.
Besides, the gross borrowing from external resources was worth Tk 937.16 billion, Tk153.47- billion lower than in the previous FY2022.
Chairman and CEO of Policy Exchange Bangladesh (PEB) Dr Masrur Reaz told the FE that the higher spending on interest payments against the lower expenditure of the overall budget is challenging for the economy.
"Actually, this is the consequence of the country's tight financial trajectory with lower revenue growth over the last one and a half years and government's higher debt-laden development approach," he says.
The government has borrowed a lot over the last few years from the banking systems as well as from the foreign lenders, which has been reflected in the fiscal management over the last couple of years, Dr Reaz observed.
"On the other hand, the budget spending with growing borrowing has also been affecting the consumer price index (CPI) and fueling inflation," the PEB chairman said, indicating one cause of high prices on necessaries.
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