Kazi Zahidul Hasan :
The government is going to borrow a big chunk of fund from internal and external sources in order to cover up budget deficit projected for the upcoming fiscal year.
In the fiscal year 2021-22, the size of total expenditure is estimated at Tk 6,03,681 crore, including Tk 2,25,324 crore allocation for the Annual Development Programme (ADP).
The total revenue income for the next fiscal is likely to be projected Tk 3,89,078 crore. Out of this, Tk 3,30,000 crore would be collected through the National Board of Revenue (NBR), while Tk 43,000 crore would be collected from non-tax revenue, according to Finance Ministry.
Subsequently, the overall budget deficit in the fiscal year (2021-22) would reach Tk 2,14,681 crore or 6.2 per cent of the GDP.
Out of the total deficit, the government has planned to borrow Tk 1,13,453 from internal sources, while Tk 97,738 crore from external sources.
Of the domestic borrowing, Tk 76, 452 crore would be taken from banking system and Tk 32, 000 crore through the sales of savings certificates.
“Borrowing is the most common way to finance the fiscal deficit. But the borrowing must be done carefully to avert adverse economic consequences,” Dr Ahsan Mansur, Executive Director of Policy Research Institute (PRI), Bangladesh, told The New Nation.
He said the government should go for low cost internal and external borrowings so that it can maintain debt sustainability level. Costly borrowing may push up the government’s expenditure to the head of interest payment and thus it can push the nation’s debt to an unsustainable level,” “The government has no alternative but to borrow funds in order to finance the budget deficit amid a big shortfall in domestic revenue collection,” said Dr Mansur, adding, ” If it can mobilize the expected foreign fund as low cost loan, it would be helpful for us”.
The revenue authority faced a Tk 51,000 crore tax collection shortfall until March of the current fiscal year against its target due to sluggish economic activities amid the Covid-19 pandemic.
When asked, Dr Mansur, a former Senior Executive of IMF, said, “There will be no major issue even if the budget deficit exceeds eight per cent of the GDP during this pandemic situation. Running a higher budget deficit is necessary to increase government spending to help protect lives and livelihood, and revive the economy which has been severely battered by the ongoing Covid-19 pandemic.”
He also urged the government to ensure transparency in its budgetary spending and borrowing saying that the process should be done without any financial fudging. “Besides, the next budget should focus on measures to face Covid-19 challenges and recover the economy,” he added.
The budget for the next fiscal year will be placed in the Parliament on Thursday (June 03).
Finance Minister AHM Mustafa Kamal unveiled the budget for the current fiscal year, last June during the first wave of the pandemic, focused on ‘economic transition and pathway to progress’.
During the first six months of the fiscal year 2020-21, the government has borrowed Tk 64,000 crore from internal sources, and 90 per cent of the borrowing was covered by banks, savings certificates and bond and treasury bills, according to the central bank.
It should be noted that the overall deficit has been projected at Tk 1,90,000 crore or six per cent of the GDP in the budget for outgoing fiscal year (2020-21).
Out of the deficit, Tk 80,117 crore has been targeted to borrow from external sources and Tk 1,09,983 from domestic sources, of which Tk 84,983 crore will come from banking sources and Tk 25,000 crore from national savings certificates and other non-bank sources.
“Like other developing nations, the government of Bangladesh also requires domestic and foreign borrowing to meet the budget deficit. It is not unusual as the government needs to spend big amount to shore up future economic activities,” Dr Zahid Hussain, former lead economist of the World Bank’s Dhaka office, told The New Nation.
He said right now the member of deficit does not matter when the coronavirus pandemic has severely affected the national economy, livelihood of tens of thousands of people and thousands also died from the virus by this time.
“In this situation, saving lives and livelihood is the utmost priority for the government, not the budget deficit,” said Dr Zahid.
When asked, he said, “Bangladesh economy is in a slowdown owing to pandemic containment measures. In this situation, the government intends to run a higher fiscal deficit to keep the public spending high which is necessary to push up aggregate demands, create jobs and stimulate the economy.”
