Bangladesh News

The caretaker government yesterday proposed a budget of Tk 87,137 crore for the fiscal year 2007-’08, making it 30 percent bigger than the revised budget for the current fiscal, relying heavily on massive increase in domestic borrowing and foreign assistance.
The new budget has received the boost largely to bail out Bangladesh Petroleum Corporation (BPC) of its outstanding debt of Tk 7,523 crore to national commercial banks.

Without taking into account the amount needed to bail out BPC from the debt, the budget proposal of Tk 79, 614 crore is nonetheless 19 percent bigger than the revised budget of the current fiscal.

The last fiscal’s proposed budget was also 14 percent bigger than the previous fiscal’s revised budget.

Out of the projected domestic borrowing of Tk 19, 276 crore for the next fiscal, the government will issue Tk 7,523 crore worth of bonds just to bail out BPC of its outstanding loans.

Sources said the government has resolved to improve BPC’s financial situation through various reforms to at least ensure that the corporation reaches a break-even point in its accounts.

As part of the initiative, the government recently hiked up the prices of petroleum goods and it will install a pricing formula opening up local petroleum pricing mechanism to global market forces.

The initiative to finance BPC’s loan repayments by issuing bonds will go on simultaneously with the reform programmes to improve its finances.

To pay for such a significant increase in expenditure, the government is depending heavily on domestic borrowing and assistance from donor countries and agencies, rather than banking on its own revenue earnings.

The inflow of foreign grants is expected to rise by 98 percent compared to the current fiscal’s revised budget, while the net foreign loan is expected to rise by 22 percent.

The government has targeted a 92 percent increase in domestic borrowing for the next fiscal setting the amount at Tk 19, 276 crore, compared to the target of Tk 10,031 crore domestic borrowing in the current fiscal’s revised budget.

Although revenue growth has been low in the current fiscal, the government expects a 15.82 percent rise in revenue earning in FY2007-’08.

In the economic analysis of the proposed new revenue budget, interest payments on government borrowing constitute an alarming 20.5 percent, which is nearly 3 percent higher than what was in the current fiscal’s original budget.

THE NEW BUDGET
Total expenditure for the coming fiscal has been fixed at Tk 79, 614 crore, which is Tk 12,778 crore or 19.11 percent higher than the expenditure projected in the revised current budget. The total expenditure in the current fiscal’s revised budget has been set at Tk 66,836 crore while the original projection was Tk 69,740 crore.

Within the total expenditure, Tk 52,900 crore has been allocated for revenue expenditure, which is 18.86 percent higher than what is in the current fiscal’s revised budget.

Annual Development Programme (ADP) has been allocated Tk 26,500 crore, which is 23 percent higher than what is in the current fiscal’s revised budget.

Non-ADP development expenditure has been allocated Tk 1,558 crore for the coming fiscal, which in the current fiscal’s revised budget is Tk 1,577 crore.

Expenditure for interest payments on domestic borrowing has also been increased to Tk 9,464 crore in the new proposed budget, while the current fiscal’s revised budget has allocated Tk 7,854 crore for the purpose, increasing it from the original projection of Tk 6,298 crore.

The projected total revenue earning for the coming fiscal has been raised by 15.82 percent compared to the current fiscal’s revised budget, making it Tk 57,301 crore. The NBR portion of it has been increased by 16.99 percent putting it at Tk 43,850 crore, and the non-tax revenue earning has been raised by 12.10 percent making it Tk 11,463 crore.

In the NBR tax portion, VAT is expected to contribute 36.24 percent, import tariff 21.33 percent, income tax is expected to make up 24.72 percent, supplementary duties to bring in 16.35 percent, and other tax revenues are expected to bring 1.37 percent.

Expected foreign grant in the coming fiscal’s budget has been set at Tk 4,255 crore, up by 98 percent.

The overall deficit, excluding grants and including BPC liabilities, has been set at Tk 29,836 crore, which is 5.6 percent of the GDP.

CURRENT FISCAL’S BUDGET REVISED
Total expenditure in the revised current budget has been fixed at Tk 6,836 crore, which is 5.84 percent less than what was set in the original one. The projected revenue expenditure has gone up by 5.24 percent putting it at Tk 44,504 crore.

Total development expenditure has been reduced by 17.57 percent in the revised budget for the current fiscal putting it at Tk 23,460 crore, while the ADP portion of the expenditure has been reduced by Tk 4,400 crore putting it at Tk 21,600 crore.

Total revenue earning in the current revised budget has been reduced by 5.84 percent from the original, making it Tk 49,472 crore. The NBR portion of the earning has been reduced by Tk 3,576 crore bringing it down to Tk 37,479 crore. Non-tax revenue earning has been raised by Tk 598 crore putting it at Tk 10,225 crore.

The overall deficit, excluding grants, in the original budget of the current fiscal was set at Tk 17,198 crore, the revised one has pushed the projected deficit up to Tk 17,364 crore, which is 3.7 percent of the GDP.