Fiscal risks get special attention

In the time of global economic crisis, the government is paying special attention to dealing with risks in preparing the budget for the next financial year.

The Ministry of Finance has planned to allocate Tk 4,000 crore for the management of unexpected expenses in the budget for the next fiscal year 2023-24 to deal with financial risks.

At the same time, a new allocation of Tk 100 crore will be kept in the next budget for the innovation, research, and development sector for the young generation in the hope of building a Smart Bangladesh, according to finance ministry sources.

The sources said to deal with international economic instability created due to the Russia-Ukraine war and unexpected risks caused by natural and man-made disasters, and climate change, the special allocation in the upcoming budget is being increased. Tk 3000 crore allocation was proposed to this sector in the current financial year, which in the revised budget was reduced to Tk 2000 crore. It is going to be proposed to double the allocation for financial risk in the next budget to Tk 4000 crore. During the Covid-19 pandemic, an allocation of Tk 2500 crore was earmarked for this sector in the fiscal year 2021-22.

The government is going to propose the election year budget keeping in mind various risks including the global economic instability, the severe inflationary pressure caused in the domestic economy, the responsibility of meeting the additional cost of huge arrears of subsidies, and natural calamities.

In such a situation, Finance Minister AHM Mustafa Kamal is likely to propose a budget of Tk 7,61,785 crore for the next financial year 2023-24. The budget for the new financial year will be presented in the budget session of the National Parliament at 3pm on Thursday next (June 1).

The Gross Domestic Product (GDP) has been estimated at Tk 50,60,720 crore. In the budget of the current financial year, it was Tk 44,49,959 crore. The budget expenditure for the next financial year is equal to 15.2 per cent of GDP, which is Tk 83,721 crore more than the main budget of the current financial year.

The government’s “Vision 2041” will be outlined in the next financial year’s budget. This vision of “Smart Bangladesh” is the future of the country after achieving the “Digital Bangladesh” target. There will be four main strategies – Smart Citizen, Smart Economy, Smart Government, and Smart Society. Apart from this, the budget will also focus on Smart Education, Smart Healthcare, Smart Agriculture, Smart Trade, and Smart Transportation System. There are about 40 mega projects for the Smart Bangladesh Master Plan in the budget.

The title of the upcoming budget may be “Towards a Smart Bangladesh after a Decade and a Half of Development Progress”. In the budget, the finance minister will highlight various challenges to building a “Smart Bangladesh”, said finance ministry sources.

The budget deficit for the next financial year has been estimated at Tk 2,61,785 crore. The amount is 5.2 per cent of GDP. To meet the huge budget deficit, the borrowing (neat) target from the banking system has been set at Tk 1,32,395 crore which was Tk 1,06,334 crore in the budget for the current fiscal year. As a result, the government’s borrowing from banks will increase by Tk 26,061 crore, or 24 per cent, within a year.

According to sources, GDP growth is estimated at 7.5 per cent in the next budget. The growth target for the current fiscal was also the same. But in the revised budget, it was reduced to 6.03 per cent. On the other hand, the inflation target has been set at 6.5 per cent in the next budget. In the revised budget for the current fiscal year, the inflation target was raised to 7.5 per cent.

According to Finance Ministry sources, the total revenue target for the next financial year has been set at Tk 5,00,000 crore. Of the amount, Tk 4.30 lakh crore will come from the National Board of Revenue (NBR). Non-NBR revenue will be Tk 20,000 crore and non-tax revenue (NTR) will be Tk 50,000 crore.

The size of the Annual Development Program (ADP) for the next financial year has been fixed at Tk 2.63 lakh crore. Out of this, Tk 1.69 lakh crore (64.26 per cent) will be in local currency and Tk 94,000 crore (35.74 per cent) will come as aid from foreign projects.

It is hoped that a huge amount of foreign loans will get in the next budget as the net foreign loans have been estimated at Tk 1,27,019 crore in next budget. Apart from this, another Tk 3,000 crores will come as grants. But the net foreign loan target for the current financial year was Tk 95,458 crore.

In the next FY 2023-2024, the target of borrowing from the bank is estimated at Tk 1,32,395 crore and most of these loans will be short-term loans. However, the target of borrowing from the sector in the current fiscal was Tk 1,06,334 crore.

Tk 23,000 crore net borrowing from savings certificates is proposed in the next fiscal year. It was Tk 35,000 crore in the current fiscal.

The saving certificates sales have come down largely due to the imposition of restrictions on the sale of the savings certificate as the target of borrowing from the sector has been set at Tk 25,000 crore in the revised budget.

Apart from this, the expenditure for the salaries and allowances of government employees is fixed at Tk 80,000 crores. But the amount of the expenditure was Tk 74,266 crores in the current fiscal.

Meanwhile, the government will spend a total of Tk 1,10,987 crore in the subsidy sector in the next budget. A major part of the subsidy will be spent on electricity and it is estimated Tk 35,000 crore, Apart from this, Tk 17,000 crore allocated to agriculture, Tk 7,825 crore for export subsidy, and Tk 6,200 crore on incentives while another Tk 25,000 crore subsidy will be spent on other sectors.

Like the previous years, the next fiscal year will also see a major portion of the government spending on social safety programs as Tk 1,26,272 crores allocation is proposed for the social safety program in the next budget. It is 16.57 per cent of the total budget expenditure and equal to 2.52 per cent of GDP. But the allocation was Tk 1,13,576 crore in the sector in the current fiscal year.