Home ›› 06 Apr 2023 ›› Front
Subsidy allocation in the next budget will be Tk 1,10,000 crore, which will be 2.2 per cent of the GDP, while the size of the budget is estimated to be Tk 7,55,000 crore.
The government is preparing to deal with the big challenge of subsidy allocation in the FY24 budget amid the global economic crisis.
The decision was made at a virtual 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 chaired the meeting. It was the second meeting of the two committees in FY23.
As part of the $4.7 billion loan programme for Bangladesh, the International Monetary Fund (IMF) has given conditions to reduce subsidy spending in various sectors. That is why the government is under pressure to reduce subsidies.
Although the price of fuel in the international market is gradually decreasing, expenditure on subsidies for energy and power in Bangladesh will not decrease in the next budget.
This is because additional subsidies have already been spent in the power and energy sector in the current fiscal year, which will have to be adjusted next year. That is why a special allocation has to be made for subsidy in this sector in the FY24 budget.
Agriculture usually gets the highest subsidy, followed by energy and power. Subsidies of around Tk 17,000-18,000 crore will be allocated for agriculture in the next financial year, and the amount may increase later. Agriculture subsidy was almost the same in FY23.
Wednesday’s meeting also decided the projected GDP growth rate will be 7.5 per cent for FY24 while inflation will be 6.5 per cent. Earlier in the first meeting in December last year, it was decided that the estimated GDP growth rate would be 7.5 per cent.
However, the growth prediction for FY24 was 7.8 per cent in the eighth five-year plan.
Meanwhile, Tk 1,30,000 crore will be allocated for social safety, which is higher than the current fiscal year’s allocation. Both the coverage of social safety and the amount of allowances will be increased in FY24, and that is why allocations will go up.
The revenue target for FY24 is Tk 5,00,000 crore while the National Board of Revenue’s (NBR) target is Tk 4,50,000 crore. The remaining amount will come from non-NBR tax and non-tax revenue income.
The calculation is being done by reviewing the overall economic situation of the current and the next financial years in the context of the progress in various sectors as well as the changes that already took place in the global and national economies.
In the next budget, Tk 2,60,000 crore will be allocated for the annual development programme (ADP) while the deficit will be Tk 2,55,000 crore, which will be 5.2-5.3 per cent of the GDP. However, it was decided at the meeting that the figure will not go above 5.3 per cent, sources said.
The government is planning to keep the budget deficit in line with the IMF recommendation to reduce deficit in order to meet the international standards.
The deficit will be met with funds from domestic and external sources. A 5 per cent deficit is considered the international standard.
There will be Tk 94,000-95,000 crore of foreign financing for ADP in the next budget. The total amount of foreign financing, including ADP and budget support, will be Tk 1,05,000 crore while the remaining Tk 1,50,000 crore will come from internal financing, including 20 per cent non-bank financing.
A finance ministry official attending Wednesday’s meeting said dealing with the challenges of subsidy in the next budget is considered a major issue.
“The demand for subsidy in the next fiscal year’s budget will be less than that of FY23. But the amount that was spent during the last 10-11 months in the power sector due to higher prices will have to be adjusted in FY24. That is why electricity subsidy cost will not decrease,” he said.
He also said, “In the FY24 budget, there will be a special allocation for subsidy to cover the extra expense that was required in the current fiscal year. Apart from this, a subsidy of Tk 17,000-18,000 crore will be allocated for the agriculture sector. But there will be adjustments later, if necessary.”
NBR Chairman Abu Hena Md Rahmatul Muneem told Wednesday’s meeting, “Revenue collection will be slightly less this month, but still the FY24 target can be achieved.”
Governor of the Bangladesh Bank Abdur Rouf Talukder told the meeting the current account deficit decreased in the last two months and will go down further in the future.
He said there were restrictions on opening letters of credit (LCs) between September and November last year.
“But now LCs can be opened for many sectors and more benefits have also been offered. LC opening will be fully normal from next year,” he added.
