Govt in great pickle over next fiscal year’s budget

Finance Minister AHM Mustafa Kamal plans to unveil the national budget for next fiscal year on June 11 amid deepening uncertainties brought on by the deadly coronavirus.

Earlier this week, he proposed two dates to the prime minister for presenting the budget for fiscal 2020-21. The premier chose June 11 over June 4.

The finance minister has also kept the coronavirus situation in mind as he prepares the budget for the next fiscal year. The final decision about the size of the budget, targets and modes would be taken in the first week of May.

Although the whole country has been on lockdown since March 25 owing to the rising cases of the novel virus, the finance ministry's budget formulation team has been working to prepare it in June.

The core teams of the budget formulation committee are going to the office as usual.

Kamal discussed alternatives with the prime minister if the pandemic makes the situation in Bangladesh even more complex.

One of the alternatives might be to unveil a temporary budget for three months in line with a provision of the constitution. Alternatively, a temporary budget for two months may be presented under the presidential ordinance.

During the period of the temporary budget, the finance ministry would polish off the full fiscal year budget.

Last year, ahead of the polls, India had announced an interim budget.

Another option is to present the full-year budget and revise it after a quarter or so.

COVID-19, which has brought the economy to its knees, is not the only cause for concern for the finance minister.

Deficits and public borrowings were already on the rise for the past year-and-a-half amid sluggish revenue generation before coronavirus hit.

The size of the national budget was initially planned at more than Tk 600,000 crore, in keeping with the growth seen in the last decade.

But it may be Tk 580,000 crore in the end, which would still be an increase of about 11 per cent from the amount earmarked for fiscal 2019-20.

With revenue receipt growth remaining sluggish, the government has to rethink the size of the next budget to keep the deficit within a tolerable level, said a finance ministry official.

Budget deficit is already set to be about 6 per cent of GDP this fiscal year, which is above the recommended 5 per cent, and it may go up to 7 per cent in fiscal 2020-21 because of increase in expenditure to counter the rampage of coronavirus and sluggish revenue generation.

Initially, the government had thought that the revenue generation by the National Board of Revenue (NBR) would face a collection shortfall of Tk 52,000 crore in the fiscal year ending on June 30. But now it seems the deficit may be Tk 100,000 crore.

However, the government is hopeful that the economic activities would get momentum in the next fiscal year. And the International Monetary Fund (IMF) has also given such signal.

On Tuesday, the crisis lender forecasted that the GDP would grow only by 2 per cent in 2020, but it would make a sharp recovery in 2021, reaching its highest-ever 9.5 per cent.