Govt now plans to keep FY25 budget under Tk8 lakh crore amid challenges
GDP growth rate target likely to be set at 6.75%, which was 7.5% a year ago
The outline for next fiscal year's budget, prepared by former finance minister AHM Mustafa Kamal last December, is being further streamlined by his successor Abul Hassan Mahmood Ali, who finds it more "realistic".
The former finance minister projected that the budget for the fiscal 2024-25 will be Tk8,05,000 crore. But the current finance minister wants to downsize it to Tk7,98,000 crore amid challenges in meeting up its revenue collection target and the government's policy to continue austerity measures to control surging inflation.
To reconcile income and expenditure, officials at the Finance Division are setting targets to reduce borrowing from foreign sources while increasing loans at higher interest rates from banks and additional borrowing from savings certificates.
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The Budget Monitoring and Resources Committee and the Economic Coordination Council on Fiscal, Monetary, and Exchange Rate Policy are scheduled to hold a meeting today to finalise the outline of the next fiscal budget and analyse the current economic situation and future trends in the country. The finance minister will preside over the meeting.
However, officials at the Finance Division are doubtful about how much control can be maintained over inflation by reducing the size of the budget. They, while talking to TBS, argue that there is not much scope for experimentation in the fiscal policy to control inflation. Nevertheless, the size of the budget is not being increased for the new fiscal year to maintain control over government spending, they said.
Currently, the inflation rate is over 9%. However, for the upcoming budget, a target of a 6.5% inflation rate is being set. Despite multiple announcements by the Ministry of Finance and the Bangladesh Bank to bring down the average inflation rate to 7.5% by the end of the current fiscal year, it has had no impact on the market.
The budget size for FY24 was set at Tk7,61,785 crore. However, it was later downsized to Tk7.14 lakh crore.
For the past one and a half decades, the size of the budget has been increasing at a certain rate each year. If it had continued at the same pace, the budget for the upcoming fiscal year would have been Tk8.12 lakh crore.
However, considering the real situation of revenue collection and the need to reduce inflation, the size of the budget is being reduced this time to control government spending, said an official of the Finance Division.
In the current fiscal year, the GDP growth rate was projected at 7.5%. However, in the revised budget, it was reduced to 6.5%. For the upcoming fiscal year, the GDP growth rate is being projected at 6.75%, said the officials.
The total revenue collection target in the current fiscal year's budget was Tk5 lakh crore. For the new fiscal year, the target is being increased by an additional Tk40,000 crore, the officials said.
The budget deficit for the upcoming fiscal year is expected to stand at Tk258,000 crore. Of the amount, an estimate of Tk98,000 crore is projected to be borrowed from foreign sources, which is Tk4,000 crore less than the estimate for the current fiscal year, according to the officials.
On the other hand, for the new fiscal year, a target of borrowing Tk1.6 lakh crore from banks and savings certificates has been set, which is nearly Tk5,000 crore more than the estimate for the current fiscal year
