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Budget FY21: Deficit will be 6% of GDP

  • Published at 06:18 pm June 11th, 2020
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The finance minister has proposed a national budget of TK568,000 crore for the next fiscal year

The government has forecast that the overall FY2020-21 budget deficit will be Tk190,000 crore, which is 6% of the GDP.

“It is to be noted that deficit stood at 5% in the last fiscal year,” said Finance Minister AHM Mustafa Kamal, while proposing a national budget of TK568,000 crore — which is 17.9% of GDP — for the next fiscal year in parliament on Thursday.

Total allocation for operating and other expenditures is estimated at Tk362,855 crore, while the allocation for the Annual Development Program (ADP) is Tk205,145 crore, he said.

Out of the total deficit, Tk80,017 crore will be financed from external sources, while Tk109,983 crore from domestic sources — of which Tk84,983 crore will come from the banking system and Tk25,000 crore from savings certificates and other non-bank sources, said the minister.

However, economists opined that it could be 7% to 8% of GDP as the government will have to meet additional expenses, especially for the social safety net to feed the poor.

“In the backdrop of the revenue collection, the government’s non-development expenditure will go up sharply to meet the expenses created by the extra pressure of the new poor under the social safety net,” Selim Rahin, the executive director of SANEM, told Dhaka Tribune.

As a result, he said, the budget deficit will go up. “I don’t mind if it is 7% to 8% for the next two fiscal years to fight the fallout of the Covid-19 pandemic.”

The finance minister told parliament that the budget deficit for the current fiscal year was estimated at Tk145,380 crore. “However, the deficit in the revised budget has been set at Tk153,513 crore, which is 5.5% of GDP.

“Against the original budget deficit, the estimation for external financing was Tk68,016 crore, which has been reduced to Tk56,163 crore in the revised budget. From domestic sources, the estimation of financing from the banking system is Tk82,421 crore.”