Govt plans to keep budget deficit at 5.2%

The government is planning to keep the budget deficit at 5.2 per cent of the gross domestic product (GDP) for FY2023-24 in line with the International Monetary Fund’s (IMF) recommendation to reduce the deficit to meet the international standard.

The deficit will be met with funds from domestic and external sources, according to Finance Ministry sources.

A 5 per cent deficit is considered the international standard.

Proposals in these regards will be placed and finalised at a meeting of the Coordination Council on Finance, Currency and Currency Exchange Rate and the Budget Management and Resources Committee on Wednesday.

Finance Minister AHM Mustafa Kamal will chair the meeting, which will be held virtually. This will be the second of its kind to be held in FY2022-23.

A Finance Division official said that after the FY24 budget’s size is decided at Wednesday’s meeting, the finance minister will discuss the budget with Prime Minister Sheikh Hasina and reach the final decision between May 5 and 9.

For the ongoing FY23, the government initially aimed to keep the budget deficit at 5.5 per cent, which was later lowered to 5.1 per cent in the revised budget. In FY22, the deficit was 6.2 per cent of the GDP.

Finance Ministry sources said that as per the proposals, the overall budget deficit for FY24 is estimated to be Tk 2,64,194 crore, up from Tk 2,45,064 crore in FY23.

In FY22, the deficit was Tk 2,14,682 crore, which was later lowered to Tk 2,04,500 crore or 5.1 per cent of GDP in the revised budget.

The size of the FY24 budget is estimated to be Tk 7,55,000 crore, which is 11 per cent bigger than the FY23 budget and 14 per cent more than the revised budget for FY23.

Of the estimated budget, the Annual Development Program (ADP) will account for Tk 2,60,000 crore, up from Tk 2,46,066 crore in FY23, while management and other sectors will be allocated Tk 4,95,000 crore.

Instead of making an expansionary or contractionary budget, the Finance Ministry is planning for a medium-sized budget for the next fiscal.

The size of the national budget for FY23 was Tk 6,78,064 crore. Out of this, a total of Tk 4,31,998 crore was allocated to other sectors including management and Tk 2,46,066 crore went to the ADP.

According to sources, authorities initially planned to formulate an expansionary budget for FY24. The Finance Ministry planned to increase the budget size by 13.5 per cent to Tk 7,69,602 crore, compared to FY23.

However, in reality, the government lacks the money to formulate such a big budget even with the current fiscal year nearing its end. On top of it, with the national polls set for next year, the tariff increase will be as low as possible. This means it will not be possible for the National Board of Revenue (NBR) to provide large budget funds.

Hence, the Finance Ministry is looking to finalise the work of formulating a medium-sized budget proposal for FY24. The decision will be taken at Wednesday’s meeting.

The finance minister is expected to present the budget proposal for FY24 in parliament on June 1.

Meanwhile, the GDP growth for FY24 is pegged at 7.5 per cent, the same rate set for FY23.

The estimated revenue collection target for FY24 is expected to be set at Tk 4,86,000 crore. Out of this, the NBR will have to collect about Tk 4,50,000 crore.

The revenue target for FY23 is Tk 4,33,000 crore. Of the total revenue, NBR has been tasked to collect Tk 3,70,000 crore, of which, it has to collect at least Tk 3,39,000 crore to meet fund demand.

In line with IMF recommendation, from FY24, NBR’s revenue collection obligation will be set at Tk 4,30,000 crore. This has put the government agency in a dilemma as it is under pressure to give duty exemption in the election year, all the while increasing the revenue.

The agenda of Wednesday’s meeting also includes the review of the Medium-Term Macroeconomic Framework (MTMF) for FY23 in the context of the progress in various sectors of the economy and the changes in the global economy. In addition, the meeting will discuss and approve the MTMF indices projection for the period FY23-FY26.

Commerce Minister Tipu Munshi and Planning Minister Abdul Mannan are expected to attend the meeting, among others.

In the Coordination Council meeting, Finance Department Senior Secretary Fatima Yasmin will present an overall picture of the FY24 budget and the macro economy of the country. Also, Bangladesh Bank Governor Abdur Rauf Talukder is expected to speak on some other issues, including the country’s currency market.