Narrowest budget deficit in a decade as govt to curb expenses

As the government wants to lower expenses, it is likely to contain the budget deficit to 4.6 percent of gross domestic product in the next fiscal year, a level seen a decade ago.

The government usually keeps the budget deficit at around 5 percent.

During the political turmoil of 2013, ahead of the 2014 national election, the government placed the budget of which the deficit was 4.6 percent.

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The upcoming budget will be the first one of the current government. The political situation is stable now, but the economy is facing a prolonged crisis.

In the 2019-20 fiscal year, the government was in a difficult place because of the shutdown of the economy due to coronavirus restrictions. The Ukraine-Russia war also made a global impact on economies in 2022.

Economists now believe that the dwindling foreign currency reserves are the biggest crisis.

Finance ministry officials say they are finding it hard to maintain macroeconomic stability due to the low foreign currency reserves.

According to Ahsan H Mansur, executive director of Policy Research Institute, macroeconomic stability should be the first priority in the upcoming budget, which will be placed in parliament on June 6.

"Earlier, the policymakers were in denial, thinking they could overcome the crisis in a matter of months. At least, they have realised now that they have to do something," he said.

The International Monetary Fund also suggested lowering government expenditure and raising revenue collection.

In the current, 2023-24, fiscal year, the budget deficit is Tk 2,61,785 crore. In the coming one, the amount is likely to be Tk 2,57,000 crore.

This is a departure from the norm because the deficit amount usually rises year on year, officials say.

A budget deficit means the gap between the government's revenue income and the expenditure. The government borrows from the domestic and global development partners to meet the deficit.

Most of the time, the budget size increases by 12 to 14 percent compared to the previous year's budget. But this time around, the Tk 7,96,900 crore budget is likely to be just 4 percent bigger than the previous one.

An IMF mission agreed to set a target of tax revenue at Tk 4,78,050 crore by June 2025, a 21 percent increase compared to the current fiscal year's target.

A finance ministry official told The Daily Star that the Bangladesh Bank took several measures to increase foreign currency reserves, but the measures are not working.

"We are trying to accommodate those measures in the upcoming budget which might reduce the pressure on foreign currency reserves," he said.

The Annual Development Programme has incorporated the foreign loan and grants allocations at Tk 1,00,000 crore.

As a budgetary support, the government will get between $3 billion and $3.5 billion from the World Bank, Asian Development Bank and Asian Infrastructure Investment Bank. After debt servicing, the net borrowing will stand at Tk 1 lakh crore.

The rest of the Tk 1,57,000 crore deficit will be met by borrowing.

Economist Ahsan H Mansur said the government has already tightened its monetary policy.

"There are many ways to reduce the expenditure. It will impact positively on the balance of payment," he said. "We should try to bring back the days when we had macroeconomic stability."