Budget deficit to be Tk2,61,785cr

The proposed budget for fiscal year 2023-24 will have a deficit of Tk 2,61,785 crore which is 5.2 per cent of the Gross Domestic Product (GDP), said Finance Minister AHM Mustafa Kamal.

The finance minister revealed the figure while placing the proposed national budget of Tk 7,61,785 crore for fiscal year 2023-24 in the parliament on Thursday.

This figure indicates that the budget deficit in FY24 could increase by Tk 16,721 crore when compared year-on-year. The deficit in FY23 was estimated at Tk 2,45,064 crore. However, the deficit was estimated at Tk 2,27,507 crore after revision.

Notable, in the last budget, the deficit was 5.5 per cent of GDP.

The deficit will be financed from domestic and external sources. The government will meet nearly 60 per cent of the estimated budget deficit from domestic sources in the upcoming fiscal year 2023-24.

To meet the deficit, the government will collect Tk 1,55,395 crore from internal sources. Of the internal sources, Tk 1,32,395 crore will be taken as loan from the domestic banking system, including Tk 86,580 crore in long-term loans, and Tk 45,815 crore in short-term loans.

In addition, Tk 23,000 crore is expected to be sourced as non-bank loans, including Tk 18,000 crore from national savings tools and Tk 5,000 crore from other sectors. Moreover, a net foreign loan of Tk 1,02,490 crore is expected to cover the budget deficit. The total foreign loan is expected to be Tk 1,27,190 crore, of which Tk 24,700 crore will be used in debt repayment.

Executive Director of Policy Research Institute Ahsan H Mansur told The Business Post, “The huge budget deficit will put more pressure on the country’s ongoing inflation rate. To meet the huge deficit, the government has increased bank borrowing in the proposed budget which ultimately would increase the inflation pressure on the people.”

About the budget deficit, former lead economist of the World Bank’s Dhaka office Dr Zahid Hussain said the budget deficit is almost equal to the government’s annual development programme (ADP) expenditure in the next fiscal year.

“From that it can be understood how big the deficit is. So, from whatever point of view we look at it, it is an expansionary budget. It is not consistent with reducing the inflation,” he added.

“How the deficit is financed will determine the course of inflationary pressure. The pressure will increase,” he also said.

The inflation rate slightly declined to 9.24 per cent in April this year. In budget, the government has set a target of 6 per cent average inflation rate for the next fiscal year.

“Continuing borrowing from the central bank will surely create a higher flow of money supply and hence, result in inflationary pressure,” said CPD Executive Director Fahmida Khatun recently.

The continuous borrowing from the central bank would further deteriorate the macroeconomic discipline, Fahmida added.

The government borrowed Tk 82,056.91 crore from the banking sector in the first 10 months (July-April) of this fiscal year. Of this, Tk 74,393.08 crore came from the central bank, the banking regulator’s data shows. The government borrowed only Tk 7,663.83 crore from commercial banks.

The government borrowing during these 10 months was 138.02 per cent higher than that in the same period of the last fiscal year.