Deficit could reach 5.7 per cent of GDP

FY’21 budget

FHM Humayan Kabir | June 02, 2020 Financial Express 


The deficit in the upcoming budget is likely to hit a new high of 5.7 per cent due to the government’s “expansionary” fiscal approach aimed at weathering the coronavirus effect on the economy, officials say.

If that happens, the government’s budgetary deficit will surpass the traditional 5.0 per cent band of the GDP, according to available data.

The Ministry of Finance officials said on Monday that nearly half of the deficit would be financed from overseas assistance and the rest from domestic borrowing.

The ministry has been drafting the national budget for fiscal year 2020-21, which will be announced on June 11 in parliament.

The size of the national budget could be around Tk 5.60 trillion, up by Tk 368.10 billion or 7.0 per cent higher than Tk 5.23 trillion outlay of the outgoing fiscal.

A senior finance ministry official said that they were going to take an expansionary expenditure approach in the next fiscal to cushion the impact of COVID-19 on the economy.

“The budget deficit target will not be under 5.0 per cent of GDP (Gross Domestic Product) mark in the next fiscal. The deficit could go up to 5.7 per cent of the GDP,” he said requesting anonymity.

The official said they need to offset the economic losses and maintain the growth momentum of the last decade.

In the outgoing fiscal, the government set a Tk 1.45 trillion budget deficit target, equal to 5.0 per cent of the GDP.

According to the ministry, it will opt for borrowing low-cost funds from different bilateral and multilateral development partners to minimise the gap between income and expenditure for the next national budget.

“We expect around 50 per cent of the total gap financing will be bankrolled from external resources and the remaining 50 per cent from domestic borrowing,” said another finance ministry official.

He said out of domestic borrowing, some 60 per cent of the fund is likely to come from the commercial banks while the remaining 40 per cent from the non-banking sources.

Meanwhile, the government in the first six months (Jul-Dec) of FY2020 spent Tk 1.47 trillion from the Tk 5.23 trillion budget.

Out of the expenditure, it had a deficit of Tk 257.36 billion during the first six months of the current fiscal as revenue income was lower than expected.

In the same period, the government’s budget deficit stood at Tk 109.75 billion.

According to the National Board of Revenue or NBR, tax collection fell short of the target of Tk 450 billion set for the first eight months of the current fiscal year.

Until February of this fiscal, the NBR earned Tk 1.45 trillion of taxes against the target of Tk 1.90 trillion, the board data showed.

Meanwhile, the World Bank has recently said Bangladesh’s deficit might swell to 7.7 per cent of the GDP in the current fiscal, highest in the last one and a half decades.

The deficit in FY2021 will explode to 9.8 per cent of the GDP, the Washington-based lender has forecast.

kabirhumayan10@gmail.com

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