While the purchasing power of people is constantly decreasing under the pressure of runaway inflation, the government's revenue income is not showing a positive trend and the foreign exchange reserves are dropping continuously.
This will make it difficult for Finance Minister Abul Hasan Mahmood Ali to meet import expenses and find new sources of income. As a result, the government will have to pay more attention to dealing with the various challenges in the upcoming financial year of 2024-25.
Ahead of this situation, the finance minister is set to present a Tk 7,97,000 crore budget proposal for FY25 before the nation in parliament on Thursday, with the aim to build a prosperous, developed and smart Bangladesh. However, of this, the deficit amount is Tk 2,56,000 crore.
For the first time in a decade, the size of the upcoming budget will be only 4 per cent higher than the current fiscal year's budget. But usually, such size is 13-14 per cent bigger.
If the economy is considered to be growing at 7 per cent and inflation is nearing 10 per cent, then the budget size should be 17 per cent higher but the upcoming budget is shrinking by more than 12 per cent at constant prices.
A huge deficit
Sources at the finance ministry said that the proposed FY25 budget’s size will be Tk 7,97,000 crore with a Tk 2,56,000 crore deficit, which is 4.6 per cent of GDP.
The size of the budget for FY2023-24 was Tk 7,61,785 crore, but it was later revised to Tk 7,14,418 crore.
For deficit financing, the government is more depended on internal sources compared to external sources. Of the internal ones, the banking sector is the key source.
The government is set to borrow Tk 1,37,500 crore from the banking sector in FY25. Of that, long-term debt will be Tk 72,682 crore and short-term debt will be Tk 64,828 crore. For FY24, the government’s bank borrowing target was Tk 1,32,395 crore.
On the other hand, the government aims to gather Tk 1,27,200 crore from foreign sources in FY25 to tackle the deficit. In FY24, the amount was Tk 1,27,190 crore.
To meet the deficit, Tk 15,400 crore will come from the National Savings Certificates. In FY24, the amount was Tk 7,310 crore. Also, Tk 8,000 crore will come from other sources in FY25, which was the same in FY24 budget.
Revenue income
The government will earn revenue of Tk 5,45,400 crore to implement the new budget. In the current financial year, this figure stands at Tk 5,03,900 crore. The NBR will be responsible for generating almost the full amount of revenue.
For FY25, the NBR will be given a revenue target of Tk 4,95,000 crore. An additional Tk 15,000 crore will be generated from non-NBR sources, and a target of Tk 46,000 crore is set for non-tax sources. Foreign grants have been fixed at Tk 4,400 crore for the upcoming budget.
GDP growth
The gross domestic product (GDP) is estimated at Tk 55,97,414 crore for FY25, with a growth rate fixed at 6.75 per cent. In FY24, the GDP target was set at Tk 50,06,782 crore with a growth rate of 7.5 per cent, but it was later revised to 6.5 per cent.
The World Bank predicts that GDP growth in the current financial year could be a strong 5.6 per cent. The International Monetary Fund (IMF) projects the same GDP growth for Bangladesh.
Revenue expenditure
The government may fix a revenue expenditure of Tk 5,06,971 crore for the upcoming budget. Out of this amount, current expenditure is estimated at Tk 4,68,983 crore, which is usually spent on salaries and allowances for government officials.
Interest payments on domestic debt are set at Tk 93,000 crore in FY25, compared to Tk 82,000 crore in FY24. Additionally, interest on foreign debt is projected to be Tk 20,500 crore, up from Tk 12,376 crore in the current financial year.
Government capital expenditure is set at Tk 37,989 crore for FY25, slightly lower than the Tk 39,034 crore allocated in FY24. Tk 119 crore will be allocated as food subsidy, down from Tk 502 crore in FY24.
Development expenditure
The government has fixed development expenditure for FY25 at Tk 2,81,453 crore. Of this, Tk 2,65,000 crore will be allocated for the annual development program (ADP). The initial amount set for FY24 was Tk 2,63,000 crore, but it was later revised to Tk 2,45,000 crore.
Outside of the ADP, the allocation for special projects in FY25 will be Tk 7,627 crore. Within this, Tk 2,884 may be allocated for food programmes, while Tk 5,943 crore will be allocated for various government schemes.
