Quasi-fiscal expenditures likely to add to budget deficit

The numerous quasi-fiscal expenditures in support of coronavirus-affected businesses and people may have an effect on the budget for the next fiscal year.

An official of finance ministry said the huge financial burden of stimulus loan packages is now with the banks, but the burden may fall on the government’s shoulder in future as a major portion of the loans provided by the state banks may be defaulted.

And the government will be the last resort as it has provided guarantees against the loans, he added.

The quasi-fiscal items are subsidised lending, credit felling, bailout packages, exchange rate guarantees, charging less than commercial prices, provision of non-commercial purposes.

The official said the quasi-fiscal expenditures will not create any impact on the ongoing fiscal year’s budget deficit which is within a limit of 5% of GDP.

But in the upcoming budget, the deficit will be 5.8% of GDP or Tk1,60,000 crore in terms of money, he added. 

In 2013, the government had incorporated Bangladesh Petroleum Corporation’s loss of Tk5,934 crore in the national budget, leading to budget deficit.

To overcome the economic shocks, the government earlier announced Tk100,000 crore stimulus packages. Of the total, Tk79,590 crore or 82.04% is loan. The remaining 17.90% fund is fiscal incentive which will directly impact the upcoming budget.

Sources in finance division said it has already disbursed more than Tk1,400 crore for procuring rice and wheat, providing subsidies for 10-taka rice programme, and providing funds to different forces engaged in enforcing lockdown across the country.

The division has also allocated Tk3,000 crore for providing subsidised interest rate under the different fiscal stimulus packages.

Moreover, the government has allocated Tk1,260 crore cash support for 50 lakh families. Finance division sources also said the allocation of incentive and insurance for doctors and health professionals will amount to Tk860 crore. Another Tk500 crore will be allocated for providing special benefits to doctors and nurses.

All these will leave an impact on the upcoming budget.

However, during announcement of incentive packages, Finance Secretary Abu Rouf Talukdar earlier said banking sector has enough liquidity to provide loan to coronavirus-hit businesses.

If more fund is needed for incentive packages, the fund can be provided from the fiscal instrument, he added.

But Dr Ahsan H Mansur, executive director at the Policy Research Institute of Bangladesh, told The Business Post: "The government’s rescue operations mostly by the inefficient state-owned banks…will increase the amount of default loans.”

The burden of default loans will fall on the government’s shoulders, leaving an impact on the economy in the long run, he observed.

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