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Download PDF Despite a strong revenue growth, budget deficit in current fiscal year may reach Tk 33,073 crore, 11 percent higher than the original estimate, and the government will have to take loans from banking sector to meet a large amount of the shortfall.
Huge subsidies in the petroleum products, fertiliser and food are the major reasons for such a high deficit, finance ministry sources say.
The government had a plan to adjust prices of petroleum products to minimise huge losses resulted from under pricing, said a finance ministry official. But the government did not adjust the prices considering possible public sufferings for price hike of fuel, he added.
The official said subsidies in petroleum products in the next fiscal year would increase more as fuel prices are witnessing an increasing trend in the international market.
MK Mujeri, chief economist of the Bangladesh Bank (BB), is against pulling out of subsidies entirely from the petroleum products right now. He said such a decision would have adverse impact on the country’s economy.
“We have a good Boro harvest, but that is not the end. We need to continue giving incentives to farmers in coming Aush and Aman season for better production,” Mujeri told The Daily Star.
“So, this is not the right time to take such a decision [withdrawing subsidies of petroleum products] which can affect agricultural production negatively.
“What we need to ensure is that there will be no leakage in the subsidy chain. It’s for the poor and they should get it absolutely thus making their lives easy,” Mujeri added.
The original budget of the current fiscal estimated a total deficit of Tk 29,836 crore or 5.6 percent of the GDP, which included Tk 7,523 crore liabilities of Bangladesh Petroleum Corporation (BPC).
But the revised estimate of the current fiscal budget showed that the deficit is increasing by Tk 3,237 crore and would reach Tk 33,073 crore, which is 6.2 percent of the GDP, finance ministry sources say.
The sources add that the government prepared plans to meet the budget shortfall and Tk 17,490 crore would be taken from the banking sector as loans in this purpose, while the original budget had estimated to take Tk 14,780 crore from the banks.
Budget shortfall is regular as revenue income is lower than the expenditure and the government takes domestic and foreign loans to meet the deficit.
Revenue income target in the current fiscal year was Tk 57,300 crore and the revised budget shows a strong revenue growth. The government has increased its revenue income by Tk 3,240 crore and set a target of Tk 60,540 crore.
On the other hand, the government has curtailed the development budget by TK 4,000 crore and set it at Tk 22,500 crore from the original Tk 26,500 crore. The development budget was cut due to slow pace of implementation amid price hike of construction materials.
In the revised Tk 22,500 crore Annual Development Programme (ADP), the World Bank assured to provide $300 million (Tk 2,070 crore). “If the World Bank doesn’t provide the loan, total budget deficit in the current fiscal may increase further,” said a planning ministry official.
Asked about the deficit increase despite a strong revenue growth and cut of the development budget, a finance ministry official said, “We got additional demand of around Tk 16,000 crore from different ministries after formulation of the current fiscal budget.” The demand came following price hike of fuel, food and construction materials as well as natural calamities, he said.
He however said the finance ministry did not meet all the additional demands by ministries and tried to continue discipline in the original budget. “Actually, we went in between the lines of the ministries’ demands and budget discipline,” he added.
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