Budget deficit likely to go up by 14%

The projected deficit in the national budget for the 2018-19 fiscal year is likely to widen by 14% but is expected to remain within 5% of the country’s GDP in line with the recommendation of the country’s development partners. The budget outline for 2018-19 fiscal year was approved in the fiscal coordination council meeting on Sunday presided over by Finance Minister AMA Muhith. According to the budget outline, the current deficit of Tk1,12,275 crore is estimated to rise by Tk15,149 crore to Tk1,27,425 crore in the budget for the next fiscal year. A Finance Division official told the Dhaka Tribune that around 13.51% of this deficit is estimated to be caused by an increase in the development programme outlay. “Because of the estimated hike in the budget deficit, the government is expected to borrow more money from the banking sector and bring in more financial assistance from foreign countries,” the official said. A document provided in the fiscal coordination council meeting and obtained by the Dhaka Tribune reveals that the total GDP for 2018-19 is forecast to be Tk2,547,100 crore, up from Tk2,223,600 crore in this fiscal year. Bangladesh’s development partners strongly recommend that the country’s budget deficit does not rise to above 5% of GDP at any given time in a fiscal year. The finance ministry’s calculations leaves little room for manoeuvre around this benchmark: the projected budget deficit for FY 2018-19 of TK1,27,425 equates 5.002% of the anticipated GDP figure.

Estimated budget for next FY at a glance

The total amount for the next budget is estimated to be Tk4,68,000 crore – 14.47% higher than the current fiscal year’s budget of Tk4,00,266 crore. “This is a figure for us to start thinking, and the actual process will begin in February,” Finance Minister AMA Muhith said following the fiscal coordination council and budget monitoring committee meetings on Sunday. In the meeting, it was also decided that the economic growth target will be set at 7.6% in the 2018-19 fiscal year. In the current fiscal year, the growth rate reached 7.4 %, despite damages and losses caused by flash floods across the country. The government expects that the country’s economic sector will face no major disruption due to political unrest in the next FY, despite the upcoming 11th general polls due to be held by early 2019. “There will be nothing new or innovative in the budget as this is the last budget of our government’s tenure,” the finance minister said. “But as we are optimistic that we will form the government again, we want that budget to be implemented.” Muhith pointed out that the next fiscal year revenue collection growth rate will be 13%, while in this fiscal year it is only 11%. The size of the Annual Development Programme fund is likely to be Tk 178,296 crore in the next fiscal year, an increase of Tk24,945 crore (16.28%) on the outlay this fiscal year. The government plans to source 72.08% or Tk91,845 crore of the new budget deficit by borrowing from local banks and by using savings instruments. The amount of borrowing from local resources is estimated to be at Tk52,900 crore. The budget of 2017-18 fiscal year set the target at Tk60,252 crore.