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The Financial Express

Budget deficit swells in five months

Bank borrowing could hit Tk 1.0tn, predicts economist


JASIM UDDIN HAROON | Published: March 15, 2020 10:21:03 | Updated: March 15, 2020 11:26:53


Budget deficit swells in five months

The country's budget deficit reached Tk 359 billion in the first five months to November, a 37 per cent jump over the same period last fiscal, the ministry of finance data show.

During the period, total expenditure amounted to Tk 1,357 billion, compared with revenue receipt of Tk 998 billon.

Furthermore, between July and November, the government received a total of Tk 10.72 billion in external funding to execute the budget, almost half the amount it secured in the year-earlier period.

The deficit financing from domestic sources was Tk 370 billion (net), most part of it came from the banking system, nearly Tk 300 billion (net).

The non-bank borrowing, mostly through saving schemes, was Tk 70 billion (net) during the period under review.

The borrowing from savings tools during the same period a year earlier was Tk 220 billion (net).

Analysts have warned that as a result of Covid-19, the deficit might go up further in the months to come.

They said policymakers should contain unnecessary expenditure as they believe that there are still many subsidies.

Dr Zahid Hussain, a former economist at the World Bank, told the FE: "There is definitely an impact of coronavirus on our economy and many will seek support to survive."

"So the deficit financing will increase significantly in the months to come," he added.

Deficit financing means generating funds to finance the imbalance, which results from the excess of expenditure over revenue. The gap is being covered by borrowing from  the public by sales of bonds or other means.

Dr Hussain feared dwindling external funding could push up deficit as well.

"The government's recurrent expenditure has been on the rise in recent period and this funding is hardly met by foreign financing," he said.

The recurrent expenditure, mostly used for wages and salaries of the government employees, was Tk 852 billion during the period.

The recurrent expenditure during the same period a year earlier was Tk 740 billion, according to government statistics.

The expenditure on development activities was Tk 310 billion, up by 38 per cent over the same period a year earlier.

Dr Ahsan H Mansur, executive director at the Policy Research Institute of Bangladesh, or PRI, a private think-tank, told the FE the revenue shortfall will deteriorate further as a result of the coronavirus pandemic.

The revenue from Chattogram Port and Chattogram Customs House might also decline.

"Less container traffic was recorded in recent period in Chattogram port as a result of the coronavirus and the trend will continue in the next few months," Dr Mansur argued.

"Ultimately, the domestic borrowing will go up significantly," he said.

Dr Mansur predicted: "My assessment is that the net bank borrowing will hit the Tk 1.0-trillion mark at the end of the fiscal year."

The government placed a budget of Tk 5.23 trillion for the current fiscal year recording a deficit of Tk 1.4 trillion.

The government has planned to borrow Tk 773 billion from domestic sources, while Tk 638 billion will come from the external front.

Jasimharoon@yahoo.com

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