Interest payments consuming most part of govt budget

Interest payments on government's domestic and foreign borrowings emerge as the highest actual expenditure as percentage of budget spending in the first half of this fiscal year, coming to Tk 625.6 billion.
Official statistics show the July-December 2024 interest payments by the government, totalling Tk 625.6 billion, account for over 55 per cent of the total allocation for this purpose for the entire fiscal year 2024-25 ending next June 30.
This amount of interest payments represents a 27-percent increase compared to the same period in FY2023-24.
The data show that domestic interest payments accounted for Tk 535.38 billion, nearly 58 per cent of the annual allocation, while foreign interest payments stood at Tk 50.22 billion, covering 44 per cent of the annual estimate.

Other major expenditure categories included salaries and allowances for government employees, operational costs, and subsidies.
With the country facing rising debt burdens from both domestic and foreign sources, interest payments have become the largest expenditure during the period under review in terms of percentage of budget for fiscal year 2025.
Several factors have driven the sharp rise in interest costs. First, some megaprojects are nearing completion, increasing debt-service obligations. Second, yields on treasury bills and bonds have surged, leading to higher interest expenses.
The big-size projects sapping budget funds include the Padma multipurpose bridge, Rooppur nuclear power plant and Padma rail-bridge project.
Currently, government treasury- bond yields stand at around 11 per cent while treasury bills-typically maturing in less than a year-have exceeded 10 per cent.
Central bank officials say that yields on the treasuries were even higher some weeks back at a time when there was strong government compulsion for borrowing.
However, yields have declined in last few weeks as many big banks shifted their funds into these instruments, given the slow disbursement of credits to the private sector amid business sluggishness. Even some banks have invested by borrowing short-term credits from the central bank to these risk-free sovereign securities.
Amid rising global prices, the government has also allocated a substantial amount for subsidies while clearing outstanding dues, further straining public finances.
However, the total revenues - NBR and non-NBR revenue, increased during the first six months by less than one per cent to Tk 1.6289 trillion or as percentage of budget nearly 33 per cent during the period.
But the non-tax revenue that typically comes from fees, levies and penalties by different government agencies increased by nearly 31 per cent to Tk 324.97 billion during the six months from July to December.
The total expenditure stood at Tk 2.2581 trillion during the period under review, resulting in a deficit of Tk 295.27 billion.
jasimharoon@yahoo.com