Budget deficit to touch all-time high at 5pc
Courtesy New Age 9/6/09
Asif Showkat
The Awami League-led government is going to place a budget of much higher deficit next fiscal year to translate pre-polls pledges into budgetary measures and also to offset the negative impacts of the prevailing global recession.
The deficit in the draft budget to be placed in parliament on June 11 has been shown at Tk 34,347 crore, which is Tk 9,397 crore or 38.58 per cent higher than the revised deficit figure in the current budget, highly placed sources in the government told New Age.
According to experts such a deficit means that if the government can properly utilise budgetary resources in the next fiscal year, it should manage to get the amount [Tk 34,347 crore] by means of borrowing from banking and non-banking domestic sources and foreign financing in addition to the expected revenue earning.
The projected budget deficit for the 2009-10 fiscal year will touch 5 per cent of the gross domestic product for the first time in
‘This deficit has been projected in order to fulfil the pledges that the ruing party made in its elections manifesto and also to offset recession,’ said a senior official of the finance ministry.
Experts have already raised questions about the government’s ability to spend money in spite of presumably higher allocations, and said the higher budget deficit might thwart the investment initiatives by entrepreneurs in view of sluggish revenue earning.
However, the deficit in the revised budget of the current fiscal year stands at Tk 24,960 crore or 4.06 per cent of the GDP, thanks to the historic trend of failure to achieve the budgetary goals and especially non-utilisation of the Annual Development Programme.
The gross domestic product, which is the aggregate of the annual value of goods and services, for the next fiscal year has been projected to be Tk 6,86,730 crore or $98.1 billion, while the figure in the revised official estimate stands at Tk 6,14,943 crore or about $88 billion.
Officials of the finance ministry, who are responsible for tailoring the budget, have estimated the deficit after projecting the size of the annual outlay for 2009-2010 to be Tk 1,13,918 crore, which the finance minister, AMA Muhith, is likely to discuss during his budget speech next Thursday after its endorsement by the cabinet.
The outlay of the next budget is going to be 21 per cent higher than the revised budgetary figure although the finance and planning adviser to the interim government, AB Mirza Azizul Islam, had devised a budget of Tk 99,962 crore in June 2008.
‘The government machinery neither has the capacity to accumulate nor to spend the money. The biggest challenge is to effectively utilise the resources to be earmarked for various purposes,’ Mirza Aziz told New Age.
Explaining the implications of the higher budget deficit, Selim Raihan, an associate professor of economics at Dhaka University, said the higher deficit might lead to the government borrowing more and more from the banks, which will reduce loans to the private sector at a time when the country needs massive investment to make the economy vibrant and enable it to cope with the global recession.
Appreciating a higher deficit, Akbar Ali, a former financial adviser and finance secretary, pointed out that the government was embarking on a higher budget deficit in line with similar policies shaped by many countries in times of dire need.
‘But the most crucial factor is how the government manages the deficit money, making massive public investments in the productive sectors,’ he said when he was asked whether the higher deficit was a prudent measure.
In the coming year, the total development expenditure will be raised to Tk 34,290 crore from the revised figure of Tk 25,696 crore while the government’s non-development expenditure will also be increased to Tk 77,240 crore from the revised figure Tk 67,125 crore.
The total revenue earning of the government has been estimated at Tk 84,091 crore in the next fiscal year, substantially higher than the revised amount of Tk 74,109 crore.
The government is likely to borrow Tk 16,754 crore from banking sources at home and the net borrowing from banks is expected to be Tk 10,631 crore at the end of the current fiscal year. Foreign funding in the form of grants has also been projected to be Tk 5,130 crore, somewhat higher than the grants of Tk 4,929 crore available this year. And the country’s net foreign debt will increase significantly to Tk 8,673 crore next year from Tk 5,833 crore this fiscal year.
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