Govt eyes Tk 17,000cr in budget support next fiscal year

The government has set a target to mobilise Tk 17,000 crore in budget support from development partners in fiscal 2020-21 to meet its additional financing need owing to the coronavirus pandemic. 

The budget support being sought is way higher than the Tk 2,100 crore set in the original fiscal plan for this year and Tk 56 crore in the previous one.

Although the government had aimed to collect a huge sum in the original budget for fiscal 2019-20, it did not include any funds in the budget support segment in the revised budget in the outgoing fiscal year although the pandemic began to spread alarmingly in the last quarter.

The budget support for the next fiscal year accounts for 18.31 per cent of the Tk 92,837 crore external borrowing target set.

It would largely come from the development partners such as the World Bank (WB), the Asian Development Bank (ADB), the Asian Infrastructure Investment Bank (AIIB) and the Japan International Cooperation Agency as well as the crisis lender International Monetary Fund (IMF).

The IMF has already sanctioned $732 million in emergency funding to meet the urgent balance-of-payments and fiscal needs arising from the coronavirus outbreak in the country.

The ADB has approved $500 million and the AIIB sanctioned 250 million. The WB may approve $250 million by this month.

This means, the government is on track to mobilise funds from the development partners.

Although the funds from the development partners have been approved in the current fiscal year, they would be spent in the fiscal 2020-21's plan. If needed, the government may borrow from the ADB and the IMF in the next fiscal year as well. 

The government is being compelled to seek additional financing from abroad amid a plunge in revenue generation, exports and remittances because of the fallout of the pandemic at home and abroad.

At the same time, extra money is needed to feed the vast majority of the people who have lost jobs and slid below the poverty line.  

The budget deficit for the current fiscal year was estimated at Tk 145,380 crore and it was pushed upwards to Tk 153,513 crore in the revised budget, which is 5.5 per cent of GDP.

The overall budget deficit will be Tk 190,000 crore in fiscal 2020-21, which is 6 per cent of GDP, said Finance Minister AHM Mustafa Kamal in his budget speech.

Bangladesh would receive Tk 4,013 crore in grants in fiscal 2020-21, up from Tk 3,454 crore in the revised budget. Of the grants, Tk 613 crore would come in the form of food support and Tk 3,400 crore in project assistance.

Of the external financing, Tk 88,824 crore will come in the form of loans, which was Tk 63,659 crore in the revised budget. The support for loans includes Tk 67,102 crore in project assistance. 

The pandemic is severely impacting the Bangladeshi economy.

Two major sources of external financing, namely export of garment and remittance inflows, are projected to decline rapidly.

Exports are projected to contract by about 18 per cent in fiscal 2019-20 and decline further by 1 per cent in the following year as demand from major trade partners remains weak.

Remittance inflows dropped off 14 per cent year-on-year to $1.50 billion in May on the back of the global coronavirus pandemic.

Continued remittance weakness in the coming months will slow fiscal 2019-20's growth to 1.4 per cent and lead to a 7 per cent fall in fiscal 2020-21, the IMF said recently.

Revenue collection crashed more than 55 per cent in April and the National Board of Revenue may end up facing a shortfall of Tk 100,000 crore in the current fiscal year.

The government has unveiled various stimulus packages amounting to $103,117 crore, which is 3.7 per cent of the country's gross domestic product, to help people, businesses, entrepreneurs, farmers, industrialists and exporters counter the impact of the pandemic.

The stimulus packages are the second-highest among the peer countries in Asia.